May 14, 2024
The “death of caveat emptor” has been much heralded but is an exaggeration.
THE ISSUE
When does a seller of real estate have to disclose defects in the property?
THE CASE
CanDeal Group Inc. v. Capservco Limited , an Ontario superior Court decision, reviews the boundaries of doctrine of caveat emptor (which is Latin for “let the buyer beware”).
The judge describes the rule as a “complex legal concept”. The goal of this article is not to provide a full enough explanation to fully protect yourself, bur is merely to provide reassurance that in some circumstances, the seller can win the fight. Fights are best avoided, and as with any complex legal concept, knowing you need legal help is a good start.
Though recent caselaw has done much to water down the reach of the principle, increasing the obligations of sellers to disclose “latent defects” which a potential buyer might not notice on a careful inspection of the property, the rule still exists.
A buyer of land must still fend for themselves to a large extent, including seeking any information or warranties needed, in addition to a careful examination of the property.
Absent fraud, breach of contract or misrepresentation, the seller is not at fault for failing to disclose latent defects unless they render the property uninhabitable or unsafe.
Caveat emptor applies to “patent defects” which should be noticed by a buyer on a reasonable inspection of the property. So, in this case, noise from trains idling at Union Station in downtown Toronto which was noticeable in a nearby office building ought to have been apparent to the buyer and was not the fault of the seller.
In another case, which went to the Court of Appeal, a buyer could not recover damages from the seller for contamination of industrial lands by pollutants. The seller had done nothing to hide the contamination, had simply remained silent. The Court of Appeal ruled that the buyer got what they bargained for and ought not be shocked that industrial lands might turn out to be contaminated. The contamination was held to be a patent defect. By not protecting themselves through representations or warranties in the contract, the buyer assumed the risk.
TAKEAWAYS
- “Let the buyer beware” is still a rule of law.
- Its application is complex and sophisticated.
- Buyers are well advised to seek specific representations or contractual warranties as protection.
- Sellers must be cautious not to mislead the buyer- in those situations, the seller may be at fault.
- If in doubt, consult a lawyer BEFORE you sign or accept an offer.
WHAT WEILERS LLP CAN DO FOR YOU
Our real estate team is experienced in both residential and commercial transactions. We are familiar with the risks you may face. If you choose us to draft or review your agreements, we will take the time to identify the risks, and do our best to protect you from them. If you want this valuable protection, give us a call and see if we are the right lawyers for you.