June 4th - 2015

Legal Beat: Buyers will find out eventually

The sellers in this case experienced water damage at their property, a fact not disclosed during the real estate transaction. A lawsuit was launched after the buyers learned from their new neighbours about previous water and mould problems at the house.

Legal Beat

The sellers in this case experienced water damage at their property, a fact not disclosed during the real estate transaction. A lawsuit was launched after the buyers learned from their new neighbours about previous water and mould problems at the house.

Legal Beat

by Merv Burgard, Q.C

The sellers in this case owned a home and had experienced some water damage. They contacted their insurance agent who inspected it, but the damage was not covered under their policy. They did some remedial repairs on the home.

The buyers’ representative was looking for a home for his clients and this B.C. property seemed appropriate. The buyers submitted a $1 million offer which the sellers accepted.

The sellers did not tell the buyers about the previous water damage and even signed a disclosure statement that answered “NO” to the usual questions about structural problems, water problems and damage by water.

The buyers had a home inspection done but no serious problems were noted. After moving in, the buyers learned from the neighbours that there had been water and mould problems and insurance claims on the property in the past.

The judge discussed the important particular facts of this situation, the usual positions of caveat emptor, sellers’ disclosure obligations, concealment, disclosure statements and reckless non-disclosure. The judge ordered the sellers to pay $140,005 plus court costs. 

Sahamis v Lenz 2014 BCSC 2305

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MERV’S COMMENTS

Mervin Burgard Q.C.

Sellers of a property should admit problems they know about with a property and not lie in disclosure statements such as a Seller Property Information Statement (SPIS). The sellers should inform the buyers about known latent defects. If they don’t, the neighbours will. “Mommy, little Johnny says that there was a murder here, something about UFFI, and why my bedroom smells musty and makes me sneeze. Mommy, I like playing with Johnny and Susie but I don’t want to live here anymore.”

But didn’t the “no representations” clause help the sellers? NO. The buyers’ rep was thorough and careful, including the SPIS with the offer and adding the following clause: “There are no representations, warrantees, guarantees, promises or agreements other than those set out in this contract and the representations contained in the property disclosure statement if incorporated into and forming part of this contract, all of which will survive the completion of the sale.”

Some REALTORS® and lawyers will advise sellers not to complete an SPIS, and never to add it to the agreement of purchase and sale (APS).  However, the buyers’ REALTORS® will suggest that the SPIS be included and that the “no representations” clause be amended, as was done in this case. REALTORS® in a multiple representation (dual agency) situation would, of course, understand the conflict. They would be wise to advise both clients to get independent legal advice.

Mervin Burgard, Q.C.

June EDGE
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