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Posted on October 24th 2006 in Commercial Law

Caveat Emptor or Buyer Beware

Caveat Emptor or Buyer Beware

If you are in the market for a home then one of the most important things you should remember are the words Caveat Emptor! Despite the evolving nature of the law, one thing that has not changed is the rule of buyer beware. What this means, is that it is the job of the purchaser to properly inspect properties of interest.

While the law has expanded a vendor’s obligation to disclose defects in recent years, generally a vendor has no duty to point out patent defects i.e. defects that should be obvious to the purchaser. Indeed in many cases, the vendor may have no knowledge of a defect and if that is the case, there is of course no obligation to disclose it.

With respect to hidden or latent defects, a vendor must disclose any defects that would materially affect the purchaser’s decision to buy the property. In addition, a vendor cannot deliberately conceal either patent or latent defects.

While not common in the GTA, in some parts of Ontario, vendors typically complete a disclosure statement concerning the sale of property. Although a vendor must be careful not to mislead or misrepresent the state of the property, this document may not fully protect the purchaser. The best way to do that is to include in the agreement of purchase and sale, a condition of a satisfactory home inspection. It is important to then have the property inspected by a professional home inspector.

The following cases help illustrate the concept of Caveat Emptor.

The Cracked Wall
Groneau sought to purchase a 9-suite apartment building. Based on his observations of the exterior of the building, the hallways, the basement and the three suites he saw, he believed the building was in excellent condition. Following the close of the sale, Groneau discovered that the east wall of the building had developed a serious crack running from the basement to the roof. The only reliable remedy for permanently repairing the wall was by completely underpinning it at a very substantial cost. Groneau also discovered that the vendor had known about the problems and had ordered a patching job to be done with matching brick work. Groneau sought to rescind the agreement of purchase and sale. Was he successful?
Yes. The concealment of the crack amounted to a material misrepresentation with the result that Groneau received something completely different from what it was represented to be.

The Sloped Floor
Without conducting an inspection, Wood purchased a small bungalow from the Lautenbachs. Shortly after moving in, she noticed a marked slope in the kitchen and bedroom floors. She also discovered that the foundation walls were seriously compromised such that the house was ultimately declared uninhabitable by the municipality. Although the Lautenbachs were aware of the slope they believed it was readily observable. With respect to the foundation, they were unaware of the problems. Wood sought to rescind the agreement of purchase and sale. Was she successful?

No. The sloped floor was a patent defect in that it was readily observable by anyone who exercised reasonable care in inspecting the premises. The foundation was a serious latent defect, however the Lautenbachs were not aware of this problem and therefore were not liable.

The Bad Renovations
Morlani purchased a renovated home from the McCormacks. As part of the renovations, the McCormacks had applied sealant to damp walls in the basement. When completing the disclosure statement in connection with the sale, the McCormacks indicated that they were not aware of any latent defects in the home or any dampness in the basement. Following the completion of the sale, Morlani discovered defects related to the renovations and problems with water seepage in basement. She brought an action for damages. Was she successful?

No. The McCormacks were not aware that the renovations had been done poorly and they were not aware of an ongoing problem with dampness in the basement. The problems were latent defects, the risks of which were assumed by the purchaser. With respect to the disclosure statement, they believed the contents to be true and were not guilty of fraudulent misrepresentation.

Purchasing a home can be an expensive endeavour, but foregoing a professional home inspection is not the place to cut corners. If you are buying or selling a property, please contact Stan Landau or Howard Steinberg.