Legal Brief for July, 2012

What Can I Do If I've Bought A Lemon?

The wording of the standard form purchase contract currently in use by the Edmonton Real Estate Board for sale of previously owned homes uses the caveat emptor approach.  The seller of the property does have a legal requirement to disclose if there are any "defects that are not visible and that may render the Property dangerous".  However, there is no obligation on the seller to disclose any defects of a lesser nature, and in any event some sellers may conveniently forget to disclose those that might be in the potentially dangerous category.  There is in other words no warranty in the purchase contract that what you are buying is free of defects or meets a certain standard of construction.

In last month's Brief we looked at the importance of having professional home inspections done on previously owned residences.  The nature of the caveat emptor principle makes it especially important to have such an inspection done when buying a home.  Unfortunately however, it can still happen that despite having an inspection done, you may find after having moved in that there are any number of things wrong with your house, and you start to feel like Tom Hanks and Shelley Long in The Money Pit.  If you discover that your dream home is in fact a lemon, what are your rights?

The first impulse many people will have is to call their lawyer and ask: "Can I sue?"  Whether you have a case will depend largely on whether the problem you are facing falls into the category of a patent defect or a latent defect.

Patent defects are problems which are readily visible to the eye and which a purchaser is capable of finding out about if they conduct an inspection of the property, either personally by themselves or by a home inspector.  An example of a patent defect would be if there was a crack in the ceiling in the living room.  The seller has made no attempt to hide it, and has not warranted that there are no cracks.  It was something that as purchaser you would have been able to see during your inspection, and you would have had the opportunity to follow up on and have the seller fix prior to closing, or simply not go ahead with an offer.  A seller will not be held liable for patent defects.

Latent defects are problems which are known to the seller but which are not readily visible to the eye.  An example would be if there was a hole in the basement wall structure that was behind a wall that the seller had built in the course of developing the basement, and which allowed water to seep into the basement during heavy rains.  A purchaser is not going to be able to rip out walls during an inspection to see what is behind them, so the seller does have a legal duty to disclose that problem to a purchaser (as long as the seller is aware of it).  In such a case, the purchaser would potentially have a claim against the seller if the basement flooded during the next heavy rain storm and it was proven that the cause of the flooding was the inflow of water through that particular hole in the wall.

You are entitled as a purchaser to try to protect yourself by having specific statements added to the purchase contract by the seller.  A common example is having a statement to the effect that "there has never been any flooding in the basement".  Statements such as those go at least some way to giving a purchaser the possibility of establishing a case against a seller if a flooding problem develops in the first year or so after completion of the purchase.