Buying a home in Peel or Halton Region is a significant financial decision, and disputes can arise when serious problems are discovered after closing. A buyer may later uncover a foundation issue, water intrusion, roof damage, structural problem, unauthorized renovation, or another defect that was not apparent during the viewing.
The legal question is often more complicated than simply asking, “Who should pay for the repairs?”
Ontario generally follows the principle of buyer beware, meaning buyers are expected to conduct reasonable due diligence before purchasing a property. However, this principle does not give sellers permission to actively conceal defects or make inaccurate or misleading representations about a property.
Depending on the circumstances, a buyer may have potential legal remedies involving negligent misrepresentation, fraudulent misrepresentation, breach of contract, negligence, or other causes of action.
The timing of the claim is also important. Under Ontario’s Limitations Act, 2002, the basic limitation period for a claim is generally two years from the date the claim was discovered, subject to the Act’s specific rules and exceptions.
Real Estate Litigation Risk After Discovering Home Defects
A home inspection can identify many problems before a purchase is completed, but an inspection is not guaranteed to uncover every defect.
Some problems are obvious or reasonably discoverable during a buyer’s inspection. Others may be hidden behind walls, flooring, insulation, landscaping, or other structures and may only become apparent months or years after closing.
Examples of potentially significant property defects include:
- Foundation movement or structural damage
- Water penetration or recurring flooding
- Roof defects
- Electrical or plumbing problems
- Mould or moisture issues
- Unsafe renovations
- Defective additions
- Drainage problems
- Defects caused by previous construction or renovations
- Problems that were concealed before the sale
- Significant work completed without required permits
A buyer who discovers a serious problem should avoid assuming that they automatically have a claim against the seller. The legal outcome depends on the nature of the defect, what the seller knew, what was disclosed, what a reasonable buyer could have discovered, and the circumstances surrounding the transaction.
Does Buyer Beware Protect a Seller from All Claims?
No.
The principle of buyer beware does not mean that sellers can conceal material defects or knowingly provide false or misleading information.
A distinction is generally made between patent defects and latent defects.
A patent defect is a problem that is visible or reasonably discoverable through an appropriate inspection. A latent defect is a hidden problem that may not reasonably be discoverable by a buyer exercising appropriate diligence.
The distinction can become important when determining whether a seller had a duty to disclose a particular problem and whether the buyer reasonably could have discovered it before completing the purchase.
A buyer who waived a home inspection or failed to investigate obvious warning signs may face additional challenges. However, the absence of an inspection does not necessarily eliminate every possible claim.
The specific facts matter.
Wesley v. Geneau: A Significant Ontario Property Defect Case
The Ontario decision in Wesley v. Geneau provides an important example of how serious property defects can lead to litigation involving both negligent construction and negligent misrepresentation.
The case involved the sale of a rural property north of Parry Sound.
The sellers had owned the property for many years. One of the sellers had constructed the home himself in the late 1980s without obtaining the required permits and had made various changes to the property over time.
The property was sold in 2006 for approximately $183,500.
The buyers initially used the property as a cottage before eventually occupying it as their year-round home.
Several years after purchasing the property, the buyers discovered significant foundation problems.
In the winter of 2015, they discovered that the north foundation wall had collapsed and that the south foundation wall was showing signs of bowing. They also discovered cracks in the drywall.
The repair costs were approximately $100,000.
The buyers commenced legal proceedings against the sellers.
When Can a Buyer Sue for a Hidden Property Defect?
One of the important issues in Wesley v. Geneau was when the buyers discovered, or ought reasonably to have discovered, their claim.
The property had been purchased in 2006, but the significant foundation problems were not discovered until 2015.
The sellers argued that the buyers should have discovered the problems earlier and that the claim was therefore statute-barred.
The buyers maintained that they had exercised reasonable diligence when purchasing the property and that the serious foundation defects could not reasonably have been discovered until the problems became apparent in 2015.
The timing of discovery was therefore critical.
Under section 4 of Ontario’s Limitations Act, 2002, the basic limitation period is generally two years from the date a claim is discovered. Section 5 provides detailed rules for determining when a claim is considered discovered, including when the claimant knew or ought reasonably to have known about the injury, its cause, the person responsible, and that a proceeding would be an appropriate means of seeking a remedy.
The Act also contains an ultimate limitation period that generally prevents a proceeding from being commenced more than 15 years after the act or omission on which the claim is based, subject to the statutory exceptions.
This means a homeowner should obtain legal advice promptly after discovering a potentially significant defect. Waiting can create serious limitation issues.
Negligent Construction Claims in Real Estate Litigation
A property defect may result from negligent construction rather than simply a seller’s failure to disclose a problem.
In Wesley v. Geneau, one of the sellers had personally constructed the home. The buyers alleged that the construction had been performed negligently and that this negligence contributed to the foundation problems.
The court considered whether the construction complied with the applicable requirements and whether the failure to properly construct the foundation caused the resulting damage.
This type of claim can be particularly relevant when a seller is also the person who originally constructed or substantially renovated the property.
Construction-related claims can also involve other parties depending on the circumstances, including:
- Builders
- General contractors
- Subcontractors
- Engineers
- Architects
- Other professionals involved in the design or construction
The legal duties and available claims will depend on the specific facts, the parties involved, the nature of the work, and the applicable legislation.
New Homes and Tarion Warranty Protection
Buyers of newly constructed homes may have protections that differ from those available to purchasers of older resale properties.
Ontario’s New Home Warranties Plan Act establishes statutory warranties for new homes. Among other protections, the legislation provides warranties relating to workmanship, materials, fitness for habitation, compliance with the Ontario Building Code, and major structural defects, subject to the applicable statutory requirements and exclusions.
Tarion administers Ontario’s new-home warranty program, and the applicable claim periods and procedures depend on the type of defect and the date of possession.
The warranty framework has also been updated in recent years. Ontario’s current regulations contain different claim periods and procedures depending on when possession occurred and the type of claim.
A purchaser of a new home should therefore determine whether a problem falls within the applicable Tarion warranty framework before assuming that a conventional lawsuit against the seller or builder is the only available option.
Negligent Misrepresentation in Real Estate Transactions
Negligent misrepresentation can also become an issue when a seller provides inaccurate or misleading information about a property.
A representation does not necessarily have to be a formal statement in the agreement of purchase and sale. Depending on the circumstances, information provided in a property disclosure document, during negotiations, or through other communications may become relevant to a later dispute.
A potential negligent misrepresentation claim generally requires careful analysis of the specific representations made, whether they were inaccurate, whether it was reasonable for the buyer to rely on them, and whether the buyer suffered damages as a result.
Misrepresentations in Seller Property Information Statements
A Seller Property Information Statement, or SPIS, can become an important piece of evidence in a property dispute.
In Wesley v. Geneau, the sellers had completed a property information statement indicating, among other things, that there were no structural problems and no moisture or water problems.
The buyers later discovered significant foundation issues.
The court considered the information provided by the sellers as part of the negligent misrepresentation analysis.
This demonstrates why sellers should take care when completing any property disclosure document.
A seller should not guess when answering questions about a property’s history. If a seller is unsure about a particular issue, obtaining legal advice before making a representation may help reduce the risk of an inaccurate disclosure.
Can a Seller’s Actions Amount to Misrepresentation?
Potentially, yes.
Misrepresentation is not necessarily limited to an explicit statement.
A seller’s conduct may become relevant when it creates a misleading impression about a material condition of the property.
In Wesley v. Geneau, the court considered evidence that one of the sellers had constructed a stud wall in front of the north foundation wall. The evidence indicated that there were signs of frost and heaving around the foundation when the wall was constructed.
The placement of the wall was relevant because it concealed the condition of the foundation from the buyers and their inspector.
This is an important distinction.
A seller is generally entitled to make ordinary improvements to a property. However, taking steps specifically to conceal a serious defect can create significant legal risk.
What Should Buyers Do After Discovering a Major Defect?
If you discover a potentially serious defect after purchasing a property, taking prompt steps can help preserve evidence and protect your legal position.
Consider the following:
Document the Problem
Take photographs and videos of the defect and keep records showing when it was discovered.
Preserve Relevant Documents
Keep your agreement of purchase and sale, inspection report, seller disclosures, emails, text messages, photographs, invoices, renovation records, and other documents relating to the property.
Obtain a Professional Assessment
Depending on the issue, you may need an assessment from a qualified engineer, contractor, building professional, or other specialist.
Avoid Destroying Evidence
Where possible, document the original condition before major repairs or demolition are undertaken.
Notify the Appropriate Parties
Depending on the circumstances, it may be appropriate to notify the seller, builder, insurer, warranty provider, or another responsible party.
Obtain Legal Advice Promptly
Do not wait until a limitation period is close to expiring before speaking with a lawyer.
Ontario’s basic limitation period is generally two years from discovery, but determining when a claim was legally discovered can be complicated.
What Should Sellers Do When Selling a Property?
Sellers can also take practical steps to reduce the risk of future disputes.
Before listing a property, sellers should consider:
- Reviewing known defects and previous repairs
- Gathering permits and renovation records
- Being accurate when completing disclosure documents
- Avoiding statements that cannot be supported
- Disclosing known material issues where legally required
- Keeping records of significant repairs and renovations
- Obtaining legal advice when uncertain about disclosure obligations
A seller should not assume that a defect is irrelevant simply because it is not immediately visible.
What If the Buyer Waived the Home Inspection?
Waiving a home inspection does not automatically determine the outcome of a future lawsuit.
However, it can become an important fact in assessing what the buyer knew or reasonably should have known before completing the transaction.
For example, if a visible defect could have been identified through a reasonable inspection, a buyer may face difficulty arguing that the defect was completely hidden.
The situation can be different when a defect was concealed or could not reasonably have been discovered during a normal inspection.
This is why the specific circumstances surrounding the purchase matter.
A buyer who waived an inspection should therefore not assume that they have no legal options after discovering a serious defect. Conversely, a buyer should not assume that every hidden problem creates a claim against the seller.
Real Estate Litigation in Peel and Halton Region
Real estate disputes can arise in communities throughout Peel and Halton, including Mississauga, Brampton, Caledon, Oakville, Burlington, Milton, and Halton Hills.
Common disputes can involve:
- Undisclosed property defects
- Water damage and flooding
- Foundation problems
- Structural defects
- Construction deficiencies
- Renovation disputes
- Misrepresentation by a seller
- Breach of an agreement of purchase and sale
- Title and ownership disputes
- Boundary disputes
- Real estate contract disputes
- Disputes involving builders and contractors
- Claims relating to property damage
- Disputes involving commercial properties
The appropriate legal strategy depends on the nature of the dispute and the evidence available.
Frequently Asked Questions About Real Estate Defects and Litigation
Can I sue a seller for a hidden defect in Ontario?
Potentially. A buyer’s rights depend on the nature of the defect, what the seller knew or represented, whether the defect was reasonably discoverable before closing, the terms of the agreement, and the applicable cause of action.
Does buyer beware mean a seller can hide defects?
No. The buyer-beware principle does not give a seller permission to actively conceal defects or make fraudulent or negligent misrepresentations. The circumstances of the transaction must be carefully examined.
How long do I have to sue for a property defect in Ontario?
The basic limitation period under Ontario’s Limitations Act, 2002 is generally two years from the date the claim was discovered. The Act contains detailed discovery rules and an ultimate limitation period, so the applicable deadline should be assessed based on the specific facts.
What if I discovered the defect years after buying the property?
A claim may still be possible in some circumstances, particularly where the defect was latent and could not reasonably have been discovered earlier. However, limitation periods can be complicated, and legal advice should be obtained as soon as the defect is discovered.
Can I sue if I waived my home inspection?
Waiving an inspection does not automatically prevent a claim. However, it may affect the analysis of what the buyer knew or ought reasonably to have discovered. The circumstances surrounding the defect and the seller’s conduct will be important.
Can I make a claim against a builder for construction defects?
Potentially. Depending on the circumstances, a buyer may have rights under Ontario’s new-home warranty legislation or may have other potential legal claims. New-home buyers should also consider the applicable Tarion warranty and claim procedures.
What should I do if I find a major foundation or water problem after closing?
Document the condition, preserve relevant records, obtain an appropriate professional assessment, and seek legal advice promptly. Avoid unnecessary delay because limitation periods may apply.
Protect Your Rights in a Peel or Halton Real Estate Dispute
Discovering a serious property defect after closing can be stressful, particularly when the required repairs are expensive.
However, the fact that a problem was discovered after a purchase does not automatically determine who is legally responsible. The circumstances surrounding the defect, the buyer’s due diligence, the seller’s knowledge and representations, the purchase agreement, available evidence, and applicable limitation periods all need to be considered.
The real estate litigation lawyers at Prudent Law assist clients with a wide range of real estate disputes, including property defect claims, negligent misrepresentation, construction disputes, contract disputes, and other real estate litigation matters.
Our team provides practical advice and representation with the goal of helping clients understand their legal options and protect their interests.
If you have discovered a serious defect after purchasing a property, are facing a dispute with a buyer or seller, or have questions about a potential real estate claim, contact Prudent Law at 905-361-9789 or contact our legal team online.
