One of the questions that home sellers frequently ask me is what issues they should disclose when negotiating a sales contract.
Any discussion of a seller’s duty to disclose begins with the doctrine of Warning: buyer beware.
The law states that a seller is not required, in the case of a resale of a house, to disclose to a buyer if he is aware of any latent or latent defects that make the property unsafe or uninhabitable. And while a seller is not obligated to answer buyer’s questions about the property, neither is he allowed to lie in an answer.
This legal principle was clarified in 1979 in McGrath v. McLean of the Ontario Court of Appeal. In this case, the house was damaged after it was closed by a landslide and made uninhabitable for a month. The court dismissed the buyer’s claim for latent defect, finding that there was no evidence that the seller was aware of the possibility that the land behind the property was susceptible to a landslide.
The problem in today’s market is that it is often difficult to define exactly what a defect is and to prove whether a seller knew about it. A buyer should prove that the seller was aware of the latent defect, concealed it, or made reckless disregard for the truth or falsity of any statement made.
In Tony’s Broadloom in 1996, the buyer acquired a plot of land for residential redevelopment, only to find that the soil was contaminated. The Court of Appeal dismissed the buyer’s claim saying that although the contamination created a defect, it was easily detectable in advance.
In a case in British Columbia in 2003, buyers discovered before closing that the house was next to a nude beach. They refused to close, saying the beach was a flaw that should have been disclosed. The tribunal, in Summach v. Allen, ruled that the beach’s existence was neither a hidden defect nor an obvious defect.
In Cotton v. Monahan, the Ontario Court of Appeal dismissed buyers’ claims for major electrical, plumbing and structural repairs to the home. It ruled that the seller, who had carried out the work himself, was not aware of any defect in the work. The buyers did not put any guarantees into the deal and did not make the transaction conditional on a home inspection.
The industrial term for houses with defects is “branded”. Buyers may be concerned about Kitec plumbing, radon gas, native land claims, susceptibility to flooding, structural issues, faulty wiring, neighbor convicted of child molester, carpenter ants, termites, or background ghosts, murder or suicide on the property.
The best advice for buyers is to discuss these concerns with their agent or lawyer and carefully write the protective clauses in an offer to purchase.