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Caveat Emptor Rules Again

We have all heard the phrase “buyer beware” or caveat emptor in latin.

The term refers to a rule of law which provides that a purchaser buys at his or her own risk. In certain cases, the principle has been modified by legislation for the protection of consumers.  However, when it comes to buying a home, a recent court case reaffirms the principle.

In Brown v. Cassidy (2016), a son and his mother purchased a home and later discovered water and mould in the basement. They sued the vendors of the home, claiming damages for the cost of remediating and repairing the basement.

The judge hearing the trial affirmed the principle of “buyer beware,” subject to certain limited exceptions as follows:

  1. where the vendor fraudulently misrepresents or conceals;

  2. where the vendor knows of a latent defect rendering the house unfit for habitation;

  3. where the vendor is reckless as to the truth or falsity of the statements relating to the fitness of the house for habitation; and

  4. where the vendor has breached his or her duty to disclose a latent defect that renders the premises dangerous: McCluskie v. Reynolds,1998 CarswellBC 1543 (B.C. S.C.) at para 53.

In other words, the vendor is not liable for latent defects unless the defects are somehow hidden intentionally or misrepresented to the purchaser. “Latent defects” are those types of defects that would not be readily apparent to a purchaser during an ordinary viewing of a home, whereas “patent defects” are those types of defects that are completely obvious during inspection (and therefore cannot be misrepresented to the same extent).  According to the judge, “A purchaser does not need the vendor to point out a patent defect because it is plain to the senses.”

The onus of proof of course rests with the plaintiff to prove his or her case, including that there was in fact a defect and that the defect was concealed or misrepresented.

In this case, the judge accepted that the vendors were unaware of any water problems and therefore could not have intentionally misrepresented the fitness of the house.

No home inspection was performed by the purchasers.

One important lesson from the case is that it can be important to have representations written into a contract. For instance, the contractual document itself can state what representations are and are not being relied upon in the contract, which can then make the representations actionable in the event of a breach.

Thanks for reading,

Jason

Jason Allan