Buying real estate is typically one of the soundest and most important financial decisions you will make in your life, but before you erect the white picket fence and plan your house warming party, it is important to do your homework before you buy your dream home. The recent Ontario Superior Court of Justice case of Brown v. Cassidy, 2016 ONSC 5446 serves as a good teaching tool for buyers of real estate. The Browns purchased a bungalow privately from the Cassidys in Forest, Ontario which turned out to contain an extensive amount of mold, water leakage problems and issues with the rear deck totaling more than $85,000 in damages. The Browns sued the Cassidys, but the Court dismissed the case citing the doctrine of caveat emptor otherwise known as “let the buyer beware”. Let’s look at what went wrong for the Browns and how you can avoid making the same mistakes.
First off, the Browns failed to carry out a proper inspection of the property. They relied on the honest representations made by the sellers, looked over the property themselves, but did not hire an experienced home inspector to carry out an inspection. The law puts the onus on the homebuyers to discover for themselves defects or issues which would be apparent following an ordinary inspection. These are called patent defects. If you do not perform a proper inspection of the property and you discover a problem after you purchase you cannot then complain about it. You are responsible and run a significant risk when you buy property without inspecting it first. If on the other hand there is a defect with the property that cannot be uncovered during a routine inspection then the seller could be held responsible. These are called latent defects, but you still have to prove that the seller knew about the latent defect, concealed the defect or made representations to you with reckless disregard to the truth. No easy task.
Secondly, the Browns claimed that the water leakage was a significant concern to them, but where they tripped up was they didn’t have a warranty clause included in the agreement of purchase and sale. Meaning the Browns could have required that the Cassidys make a declaration in the agreement assuring the Browns as to the condition of the home as it concerns water infiltration.
Third, the Browns didn’t retain a lawyer before they signed the agreement of purchase and sale. Had they retained an experienced real estate lawyer they might have been advised to include a warranty clause from the sellers regarding the condition of the property, or to make the offer conditional upon obtaining a satisfactory inspection report.
The cost to retain a lawyer before signing the agreement of purchase and sale is often very modest and pales in comparison to the legal fees that the Browns, or you, might incur if you have to sue a seller. Another benefit to both retaining a lawyer and obtaining an inspection report is that if your inspection reveals problems with the property you can use the report to negotiate a more favourable purchase price. A price that takes into account the expected costs to rectify the issues with the home. An inspection report obtained from an independent home inspector will also give you much more credibility in your negotiations with the seller to reduce the purchase price.
Remember to do the following to avoid an expensive lawsuit and being stuck with a home plagued with problems:
- Get an inspection report;
- If the seller assures you of something about the condition of the property, put it in the agreement; and
- Speak to a lawyer before you sign the agreement of purchase and sale.