Purchasing a home is the most significant financial commitment most people will ever make. In today’s red-hot real estate market, people have to put a high price tag on everything related to real estate. Putting the price aside, as a consumer you should get at least what you pay for. Unfortunately, this may not be so for many purchasers, especially when they purchase a resale home.
Many purchasers will find out, only some time after they move into their new home, that what they bought was different from what they expected. In a rainy day you may find a leak in the roof, or your basement is flooded, and then you discover a crack in the foundation. You move into a condo unit and understand the common elements fees include hydro, but two months later separate hydro bills arrive and you have to pay much more than you expected… Such unexpected costs to make the necessary repair or remedy may be overwhelming for many purchasers.
In such scenarios, chances are you may recover damages in civil court, particularly if the vendor had known such defects but did not disclose same prior to the purchase and sale. Not only are the vendors liable. Depending on specific circumstances, other agents may shoulder some responsibility as well.
Vendors’ Liability
In law, vendors are not liable for whatever defects in the resale home. Some defects are so obvious that they should be discovered by a purchaser and/or with the help of a home inspector. For example, if you see a giant hole in the family room wall and you do nothing with it, then you cannot sue the vendor on such a defect later on. A reasonable buyer should have observed such an apparent defect and raise related concerns. If you do nothing, it is assumed that you accept such a defect and all potential consequences.
Some defects were simply not known to either the vendor or the purchaser. Such latent defects are therefore not disclosed at the time of sale. If there is no evidence supporting that the vendor had knowledge of the defect, the vendor will not be liable for the resulting costs of repairs.
However, the vendor will become liable if they knew the defect that could not be reasonably discovered by a purchaser or inspector, and the vendor fails to disclose the defect prior to the completion of sale. Sometimes a vendor not only fails to disclose the defect, but attempts to conceal it. Say, the vendor may hang a huge picture and the giant hole in the family wall is covered. In such scenarios, the purchaser may most likely establish a case of negligent misrepresentation and hold the vendor liable for the repair costs.
Home Inspectors’ Liability
It is critical that, before the completion of the sale, the purchaser hire a competent home inspector to examine the property. This is a normal condition for resale home purchase and should not be waived without a diligent inspection. If a major defect was not identified by the inspector and was subsequently discovered soon after the move-in, you may rightfully question if the inspector was negligent in failing to identify the defect. If the answer is positive, a lawsuit can be lodged against the inspector for damages.
Normally a home inspector will have the purchaser sign a waiver releasing him or her from future claims in connection with their examination of the property. However, in a lawsuit such a release may not be helpful for the inspector, particularly when they were overwhelmingly careless and fell below their industry standards.
It must be understood, however, that while home inspectors are hired for their expertise and critical eyes, their probe may be constrained by a number of factors. In deciding whether you have a case against a home inspector, it is helpful to talk to a lawyer and refer to the Ontario Association of Home Inspectors Standards of Practice.
Partly for this reason, it is always recommended that you hire a certified inspector to conduct the examination of your future home.
Real Estate Agents’ Liability
Under certain circumstances, liability may also extend to the vendor’s real estate agent. In a recent Ontario Court of Appeal’s decision, Krawchuck v. Scherbak et al. 2011 ONCA 352, the agent for the vendor was found negligent and liable as she failed to exercise due diligence in reconciling misleading statements made in the Property Seller Information Statement (PSIS). Sometimes a house is used for lease but the physical structure of the house does not meet the corresponding municipal requirements. If such a defect is not disclosed by the agent or in the PSIS, it is likely that the real estate agent will bear some responsibility.
The Property Seller Information Statement is not a compulsory disclosure of purchase and sale agreements in Ontario. As such, many agents will not provide such a statement. In cases where it is provided, however, the PSIS can be extremely helpful for the purchaser’s case as it offers most reliable evidence on what was represented by the vendor before the purchase and sale.
To sue, or not to sue?
Now you discover major defects in your newly-purchased house. You have sound reasons to believe that someone, be it the seller, the inspector and/or the real estate agent, should be responsible. Do you start an action right away?
Not so fast. Before commencing a court proceeding, you should consider a number of factors, such as how much you may sue for, do you have sound proof (evidence) of your case, and how much legal fees you can spend? Once you start an action, you will have to spend considerable time, efforts and financial resources along the way, and there may be consequences if you fail or abandon your case in the middle. You should talk to a competent litigation lawyer before making such a decision.