This article appeared in the Spring 2025 issue of the Montréal Association of Insurance Women (MAIW) newsletter.
In recent years, the real estate market has seen an increase in sales without a legal warranty. They sometimes include a clause stipulating that the sale is “at the buyer's risk.” The application of these clauses, including their impact on the chain of title, was addressed by the Court of Appeal in the recent decision Tremblay v. Immeubles Perron ltée.1
Summary of facts
In 2003, Les Immeubles Perron ltée (“Perron” or the “Respondent”) sold portions of land to Gercom Construction Inc., Régis Tremblay, and Marjolaine Tremblay. The latter became the owner of the entire property in 2004. In 2007, she sold the land to Régis Tremblay, this time without any warranty.
In 2015, Régis Tremblay sold the land to Danny Maltais and Émilie Tremblay (the “Plaintiffs”), who in 2019 discovered the existence of a right-of-way encumbering the land, acquired by expropriation in 1969. They then filed a claim against various intervenors, including Régis Tremblay, to (i) declare the expropriation notice unenforceable, (ii) strike off the registrations in the various indexes, and (iii) have the sale annulled on the grounds of title defects and damages.
At trial, the Superior Court, under the pen of the Honourable Martin Dallaire, declared the expropriation valid and enforceable.2 This ruling was not appealed.
In a second decision, also by Dallaire J., the court rejected Régis Tremblay's warranty claim against Perron as the previous seller of the land, finding that there was no legal basis for the claim.3 The court ruled that the chain of warranties had been broken when Régis Tremblay acquired the land without a warranty from Marjolaine Tremblay, even if it concluded that Marjolaine Tremblay was aware of the defect in the property. This judgment was appealed.
Court of Appeal decision
Régis Tremblay (the “Appellant”) argues that the trial judge failed to take into account the fact that Marjolaine Tremblay was aware of the defect in title and that she had deliberately concealed it from him. According to Mr. Tremblay, this knowledge should nullify the waiver of the legal warranty and have the effect of maintaining the chain of title of the previous sellers, including Perron.
Justice Sansfaçon dismissed the appeal on two grounds4, with which Justices Mainville and Beaupré concurred.
The Court of Appeal clarified that a non-professional seller who knows or cannot ignore a defect affecting the right of ownership and who does not reveal it to the buyer may, despite everything, exclude their liability when the buyer buys without a legal warranty and at their own risk, subject to the rules relating to fraud.5 In this regard, the Court noted that both (i) the waiver of warranty and (ii) the purchaser's declaration that they are exposing themselves to a risk, and that they are nevertheless taking the risk, must be included. Otherwise, the non-professional seller cannot claim exclusion of liability if they knew of the defect and did not disclose it to the buyer.
In this case, the Court of Appeal found that Régis Tremblay had not purchased at his own risk, as the deed of sale lacked clear stipulations to this effect. Article 1733 C.C.Q. must be interpreted narrowly.6 However, the Court concluded that the chain of title had been broken as soon as the warranty was excluded in the deed of assignment, thus precluding any recourse against the Respondent.7 Nevertheless, the Court noted that, at this preliminary stage of the case, the facts alleged in the warranty claim that Marjolaine Tremblay knew of the property defect must be taken as proven. It will be up to the trial judge to determine Marjolaine Tremblay's presumed knowledge.
Conclusion
In summary, the Court held that the seller's mere silence on the existence of certain defects cannot constitute fraud and cannot lead to the annulment of the sale on the grounds of error.8 However, the buyer's understanding of the principles of “at the buyer's risk” must be unequivocal. The Court also confirmed that this clause makes it possible to presume the buyer's knowledge of the existence of defects, which itself constitutes a cause of interruption of the warranty to the benefit of previous lay sellers.
This ruling highlights some key principles governing the waiver of legal warranty in real estate matters. The chain of title is broken as soon as a seller chooses to sell without a legal warranty, even if the seller was aware of a defect, as long as the buyer has accepted the associated risks. In such circumstances, the buyer cannot plead a defect in consent, except in the case of fraud. The Court therefore urges buyers to be extra vigilant in their pre-purchase due diligence to minimize the risks associated with such arrangements.9
Footnotes
1. Tremblay v. Immeubles Perron ltée, 2024 QCCA 719.
2. Maltais v. Saguenay Port Authority, 2021 QCCS 4811.
3. Maltais v. Saguenay Port Authority, 2022 QCCS 3750.
4. The second ground is a matter of prescription. The Court was of the opinion that the Appellant's recourse was prescribed, a ground raised only on appeal (Tremblay, supra note 1 at paras 34-38). We won't address that issue in this article.
5. Tremblay, supra note 1 at paras 21-22.
6. Tremblay, supra note 1 at paras 28-31.
7. Tremblay, supra note 1 at paras 25.
8. Tremblay, supra note 1 at para 24.
9. Tremblay, supra note 1 at para 28.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
