February 12th - 2016

Legal Beat: Faulty septic system makes for sale that stinks

This lawsuit hinged on the state of the septic system at a rural property and claims about plumbing expertise made by the registrant.

Legal Beat

This lawsuit hinged on the state of the septic system at a rural property and claims about plumbing expertise made by the registrant.

Legal Beat

by Merv Burgard, Q.C

This case in the Nova Scotia Small Claims Court hinged on the state of a septic system and claims made by the registrant about his plumbing expertise.

During the rural real estate transaction, the owner completed a Seller Property Information Statement (SPIS). In that document, she inserted a handwritten response to a question plumbing on the property. In response to the question: “Are you aware of any problems with the plumbing system?" the seller’s handwritten response stated: "smaller than normal septic pump more frequently." [sic]

A property inspection was conducted and no septic system problems were reported, although frozen ground may have masked some issues with the older, below-ground tank. The buyer’s representative testified that she had asked the listing representative about the septic system. According to her, the listing rep, who was also the son of the owner, stated that he was a former plumber and he assured her there were no problems with the septic system. She saw no “red flags” about the septic system at that time, she testified, and therefore did not advise her buyers to pursue further testing. She stated that it is common in her profession “to rely on the word of other agents.”

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After closing, the buyers discovered problems with the septic system. A new septic system cost $13,690 to install. They sued the seller. In the ensuing lawsuit, the judge ruled that the seller was a credible witness who “did not intentionally misrepresent anything” and that she was an “honest and reliable person.” The judge noted that the seller wrote in the SPIS “information which was in fact to the best of her knowledge”. The judge did not rule on whether the defect was patent or latent, or whether the seller ought to have known there was a problem.

However, the judge went on to say, “What is problematic for the defendant [seller] in this case are the representations that were made by [her REALTOR®]. I hold that he is the agent of the seller, and the seller is bound by, and must accept the consequences of, the representations made by him.”

The judge continued, “I find that [the registrant] did represent that he had the knowledge to make an informed and intelligent assessment of the septic system, by stating that he was a former plumber. I find that [the registrant] did say that the septic system was functional and working properly. I find that he did state that the septic system was only pumped about three times during the ownership of the defendant.”

The claims of plumbing expertise and of the soundness of the septic system made by the REALTOR® were problematic and led the buyers to believe that no further examination of the septic system was needed, the judge ruled.

“I am satisfied that any reasonable buyer would take from his representations that further consideration of the fitness of the septic system was not necessary, and that was the reason that no further examinations [of the property or its plumbing systems] were made by the buyers.”

If the registrant had not made the assurances he had, the buyer’s representative would likely have “encouraged further investigations” of the septic system, the judge ruled. The seller was found liable to pay the buyers $6,945, half of the costs of the repairs to the system. 

Owen v. Boudreau 2015 NSSM 45 (CanLII)

MERV’S COMMENTS

Mervin Burgard Q.C.

The seller was required to pay compensatory damages to the buyers. I expect that the Realtor paid the seller something for her losses -- especially since he is her son! As the judge noted, the buyers’ representative “specifically questioned [the listing rep] about the septic tank and the oil tank. The buyer rep says that [the registrant] told her that the seller had owned the property since 2009, the septic tank had only been pumped three times in the last six years, (as a precaution), that he was a former plumber and he assured her there were no problems with the septic system.”

Had the seller’s agent not claimed plumbing expertise, the buyers and their Realtor might have done more testing on the septic system, the judge ruled. The defendant’s agent made statements that were “at the very least, misleading, inaccurate on a balance of probabilities, and probably untrue. … He either knew or ought to have known that his statements were likely to induce a buyer to waive the requirement of the [septic] test.”

No problem??! Registrants must be cautious about the representations they make. An old wartime expression comes to mind: “Loose lips sink ships”.

Mervin Burgard, Q.C.

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