Kobewka Stark

Who is liable for the defects in your new house?

Imagine you have recently purchased a new home and now you find that the foundation is crumbling and the basement is flooded. Or it is infested with termites and bedbugs. Or, apparently, the seller has hastily painted over a growth of black mold. You are going to have to sink thousands of dollars into the house just to make it livable. You feel cheated and want to know if there is any way to hold the seller legally responsible?

When buying a house, the principle of “caveat emptor” – or “buyer beware” – is supreme. However, this principle is only absolute when we are dealing with patent defects. Patent defects are problems that are ascertainable through a reasonable inspection of the house. If a problem is in plain sight, then the purchaser cannot complain about it after the deal is closed or expect the courts to do anything about it. As long as the seller did not make fraudulent claims, it will be difficult to hold him responsible for defects that are in plain view. So, when it comes to obvious problems, silence is golden as far as the seller is concerned. This is why a professional home inspection is important before completing a purchase.

The situation is somewhat different with latent defects, or those defects which are not easily ascertained through an inspection. In these cases, merely remaining silent is likely not enough for the seller to absolve himself of problems that materialize after the closing date. In fact, when a seller conceals a latent defect or merely remains silent about it, the purchaser may have legal recourse to damages and legal costs.

This longstanding principle of real estate law is supplemented by a clause contained in the standard form purchase agreement that is typically used by Alberta Real Estate Association (AREA) realtors. Clause 6(1)(h) of that form provides that “except as otherwise disclosed, the seller is not aware of any defects that are not visible and that may render the property dangerous or potentially dangerous to occupants or unfit for habitation.”

Some may question the usefulness of this clause given that in real estate transactions, the conditions and warranties of the purchase contract are extinguished by the conveyancing document. This is true. However the standard form purchase agreement also contains clause 6.3 which provides that “the representations and warranties in this contract may be enforced after the completion day.” That is, the conditions in the purchase agreement are contractually preserved and enforceable.

This brings us to the question of what “unfit for habitation” means. The Provincial Court of Alberta has followed the Ontario courts in extending the meaning to include “any loss of use, occupation or enjoyment of any meaningful portion of the premises or residence that results in the loss of the enjoyment of the residence as a whole.”  What this means is that it is not necessary that it be entirely impossible to live in the house. A basement apartment rendered unlivable would likely result in the court deeming the entire house “unfit for habitation.” Being unable to use specific rooms for their intended purposes could also qualify. In any case, before you write off your misfortune as bad luck, get the professional opinion of a lawyer.

Jame Young is an articling student with Kobewka & Associates

Posted in Real Estate

How you can help your child purchase their first home

Many parents want to help their children buy their first home, but are unsure how to proceed. Put yourself in the following situation. Your daughter has finished university and is employed in a full time career. She wants to purchase a home but has no down payment and does not qualify for a mortgage. You have some funds to help her but you do not want to gift this money since you may need it for your retirement. Continue reading

Posted in Real Estate

Purchasing a Property: Real Property Report and Compliance Certificate

Many purchase and sale contracts are signed and delivered to real estate lawyers’ offices only a few weeks, or even days, before the contract closes without sufficient documentation to close the sale. If you do not have a current Real Property Report and a Compliance Certificate, the title transfer will be delayed and money will be held back from the vendor. Continue reading

Posted in Real Estate

What You Need to Know Before Building a House

If you are thinking of building your own home, you should consider hiring your own lawyer to avoid being subject to the builder’s demands. Many people do not realize that builder’s contracts contain clauses that give the builder an unfair advantage over the purchaser. Continue reading

Posted in Real Estate

What You Need to Know Before Buying a Condo

When purchasing a condo many people contact a real estate agent to help them find a condominium and review the documentation. When the offer to purchase is signed it is often conditional on obtaining financing. When financing is approved, the offer to purchase becomes binding. Should you also make the offer subject to the review of your lawyer? If you do, what would a lawyer review? Continue reading

Posted in Real Estate