The 2023 Ontario case of Bolduc vs. Legault involved a case where serious structural problems were discovered after the property had already closed.
In July 2014, the Buyer purchased a bungalow in Sudbury. The Buyer was a mason with construction experience and so he did the home inspection himself. A few months after the closing, a burst pipe in the basement bathroom led the Buyer to discover significant moisture and foundation damage in the basement which he claimed would cost over $400,000 to repair.
The Buyer then sued the Seller in the Superior Court for breach of contract and negligent misrepresentation. The Seller, however, denied knowledge of the defective foundation and moisture problems and denied all responsibility.
In deciding the case, the Court first looked at the nature of the defect. Defects in property may either “patent” or “latent”. Patent defects are obvious to see and don’t need to be disclosed to purchasers of property because they can just be seen for themselves. In contrast, a “latent” defect is one that is not obviously seen by a visual inspection.
The Court stated that the Seller is not responsible for a latent defect unless:
1. The Seller knows about the latent defect and hides it or covers it up so that it cannot be discovered; or
2. Even if not concealed by the Seller, the latent defect is known to the Seller and is such that makes the property uninhabitable, dangerous, or potentially dangerous; or
3. The latent defect is known to the Seller and he makes a representation (statement) about it in a reckless way that disregards whether the statement is true or false (in other words, lies about it).
The Court ruled that the foundation damage was a latent defect. After reviewing evidence, the Court found no evidence to suggest that the Seller knew about the foundation damage or the water moisture issue at the time of sale. A review of the photographs that came with the listing of the property showed a clean and well-maintained finished basement. There was nothing obvious to the Buyers or the real estate agent, either inside or outside of the home, that would lead them to believe there was a significant problem with foundation. The Court noted that although there was minor cracking or filling visible on the concrete walls in the laundry room area, those areas were consistent with the home’s age and would not have led a reasonable person to think there was a problem. As evidence, the Court noted the Buyer was an experienced mason and he did not detect any problems when he did the home inspection.
The Court ruled that since the Buyer didn’t know about the latent defects, he could not be held liable for breach of contract.
The Buyer also alleged that the Seller misrepresented the property by stating there were no previous instances of flooding, foundation leaks, or water issues. However, the court ruled that even if the Seller had made those statements, the APS (Agreement of Purchase and Sale), contained the following clause:
“This Agreement including any Schedule attached hereto, shall constitute the entire Agreement between the Buyer and the Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein.”
Thus, the Court ruled that the APS was a complete and final agreement and no promises, guarantees, side agreements or conditions could change the agreement unless it was included inside the APS itself. Thus the Seller could not be held liable for any statements not included in the APS.
The court expressed sympathy for the Buyer who did not expect to purchase a home with significant structural issues. However, in order to be entitled to damages they needed to prove that the Seller was more likely than not aware of the foundation issues and they failed to do so.
MORAL OF THE STORY: Hire a properly trained and experienced home inspector to conduct the inspection. It may be easier to sue the inspector for failing to detect a latent defect than proving the Seller knew about it or tried to cover it up.
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