Building Permit Liability Update

September 14, 2022

By Brian Babcock

In September 2021 we posted an article entitled “Building Permit Liability” which focused on hidden liability risks lurking in old building permit files. It was based upon the trial decision in Breen v. The Corporation of the Township of Lake of Bays.

That decision toddled off to the Ontario Court of Appeal which provided a decision more quickly than usual.

To refresh your memories, this case involved a Township sued by owners of a custom-built cottage built in 1988, purchased in 1999, and building code violations were not discovered until the owners went to renovate in 2012. The case became a bit of a battle of experts who took the same facts and reached very different conclusions on some points, although the townships expert agreed with the homeowners expert on some points.

The role of the experts was one of the issues on appeal. The Township’s position was that the forensic engineer testifying on behalf of the homeowners did not have sufficient experience with building permits to give an opinion on the standard of care of a municipal building official. The Court of Appeal quickly disposed of this issue, accepting the qualifications of that expert who had 30 years of experience as a civil and forensic engineer and had appeared 17 times in matters related to construction inspections before the Superior Court of Justice. The Court of Appeal confirmed that was sufficient expertise. What this issue illustrates is the importance of having properly qualified experts, the best proof of which is prior successful testimony.

Another issue on the appeal was whether the Township had a duty to inspect the construction in the absence of a request from the original owner or contractor. It used to be quite common that municipalities took the position that they would only inspect upon notification of the completion of a step in the construction, and a request for inspection. That made it easy for municipalities, who did not have to keep track of the progress of building permits. It was not until 2012 that municipalities were required specifically to inspect.

In Breen, the trial judge had determined that once a building permit was granted, a duty to inspect arose. The Township felt that finding differed from two Supreme Court of Canada cases, which justified an appeal.

The Court of Appeal once again agreed with the trial judge by distinguishing the facts in Breen from the earlier cases. In Breen, the inspectors had inspected the cottage while it was under construction on 3 separate occasions. Having decided to inspect, the Township owed a duty of care to subsequent owners that might be injured by negligent exercise of construction powers, even a failure to inspect. The Court of Appeal points out with underlining emphasis in a quote from the trial judge that: “I am of the view that once a building permit is granted, the municipality has an obligation to inspect the building to comply with the Act and the requisite Building CodeAnything less would make the whole building permit and inspection process meaningless” .

Simply closing the building permit without a final inspection does not meet the standard of care.

Because the purpose of the Building Code is to protect the health and safety of the public, a municipality cannot avoid its “clear responsibilities” in this area by making a policy decision not to inspect.

Although most municipalities are automatically doing inspections at some stage under the updated legislation, there may be thousands of older buildings where there  are lurking problems just waiting for lawsuits.

Another issue in Breen was the short turnaround on the building permit, and the absence or apparent absence of plans to support the building permit. The Township on appeal argued that a fire had destroyed most of the Township’s records but that the onus should be on the homeowners to prove that there were no plans to support the building permit.

The Court of Appeal agreed with the trial judge that it was difficult to believe that a proper plan review could be done in a single day, even if plans existed. In the Breen case, the evidence was that the application for the permit was one day before the permit was issued. The Court of Appeal says that such a time frame would not have permitted the Township to conduct a reasonable review of the proposed cottage which included complex features such as gables, dormers and engineered beams.

Although this very fact specific finding may not apply in every building permit liability situation, it does reflect the very strong consumer protection attitude that we expect from the Court of Appeal.

In keeping with that, the Township argued that the trial judge imposed too strict a standard of care by effectively making the Township an “insurer against any construction defects”. There were five major defects in the construction as found by the homeowners’ expert.

The Court of Appeal agreed with the trial judge that there were sufficient facts to support the expert’s opinion on three of those defects. The Court of Appeal did agree with the Township that the clearance on the stairway and the insulation in the cathedral ceiling were not proven to be defects that should have been disclosed by a proper inspection. A municipality is not required to discover every latent or hidden defect in each project; rather, it must show reasonable care in the exercise of its powers of inspection.

The Township also argued that the homeowners had not proved that the breaches of the duty of care had caused the losses suffered by the homeowners because the homeowners, at the time they purchased, had not had a final inspection of the home which might have noted some of these defects.

The Court of Appeal agreed that a typical final inspection on closing would not have disclosed most of the defects because these inspections are typically not invasive and would not have disclosed hidden defects. This is again an issue upon which the results may vary depending upon the facts of the specific case.

As a result the damages were reduced by about $46,000, which is a slightly more than 10% of the total damages awarded.

TAKEAWAYS

We suggested 7 takeaways for municipalities as a result of the trial decision:

  • First and foremost, make sure that your municipal liability insurance covers historical building inspection errors discovered currently.
  • Second, make sure records are maintained, not just for current or recent projects, but historically.
  • Third, though it is hard to do much about historical claims, review policies and procedures to avoid or limit current or future claims.
  • Fourth, for smaller municipalities in particular, consider the qualifications of the staff involved in the building permit and inspection process. Consider whether some functions might be better done by contracting out, or by sharing services of better trained staff between several municipalities. “Dog catcher in the morning, building inspector in the afternoon” is seldom a great idea.
  • Fifth, train plans examiners to take time in reviewing applications.
  • Sixth, require adequate plans and specifications.
  • Seventh, do not allow construction to proceed without compliance with plans and specifications.

Nothing in the appeal makes us reconsider these suggestions.

The Court of Appeal decision also confirms our view that homeowners who find that they have bought a defective home may take comfort, but that each case will turn very much on its own facts and the available expert evidence. Choosing a good expert is crucial.

We made two further points in the earlier article that the Court of Appeal confirms:

  • Courts will typically be sympathetic with losses suffered by homeowners due to defects; and
  • Municipalities are attractive “deep pockets” which will be frequently sued by homeowners seeking a remedy from somebody who can afford to pay.

HOW WEILERS LAW CAN HELP YOU

The Municipal Law Group at Weilers Law is available to provide preventive advice to municipalities large and small with respect to whether their policies and procedures comply with various standards of care. A small investment in this sort of review is a lot cheaper than defending a lawsuit. Even if you are insured for the lawsuit, there are significant costs in the defence.

Where there is not a conflict of interest, our litigation team is also available to represent homeowners who may have claims against municipalities.

On any issue of municipal law, Weilers Law maybe the right lawyers before you.