Homebuyers Successful in Negligent Construction and Misrepresentation Action

Peel and Halton Real Estate Litigation

Peel Region and Halton Region continue to experience a hot real estate market as homebuyers search for more space, affordability, and the perfect home office. The Greater Toronto real estate market continues to experience affordability pressures, and the increased ability to work from home corresponding with the need for more space has been felt in both the Peel and Halton real estate markets.

In fact, first-time homebuyers in Peel and Halton are often desperate to get into the market due to bidding wars and escalating prices. Many homebuyers have taken to writing letters, waiving financing conditions and not obtaining a home inspection on the property prior to purchase.

Real Estate Litigation Risk Around Home Defects

Not obtaining a home inspection has some obvious risks, but many buyers are doing this to ensure they can get into the real estate market. This blog post looks at what recourse home buyers have if the property later runs into major issues. Who is responsible for the costs associated with repairing a flooded basement, damaged roof or foundation?

Generally speaking, the courts recognize a buyer beware principle that limits the recourse buyers have if there are defects in the home that the buyer knew about or ought to have known about at the time of purchase. A home inspection, tour of the home and asking questions of the seller is part of homebuyers engaging in the proper diligence prior to purchase.

In certain circumstances, the seller can be held responsible for defects in the property. In Wesley v. Geneau, the sellers were held responsible for negligent construction and negligent misrepresentation. Further details are discussed below.

Home Defects that Expose Sellers to Real Estate Litigation Risk

Wesley v. Geneau was a dispute between the buyers and sellers of a property over significant defects to the property. The sellers were a married couple, Mr. and Mrs. G, who owned and then sold a property in a rural area north of Parry Sound. Mr. G built the home on the property in the late 1980s without permits and made several changes to the property over the years. Mr. and Mrs. G sold the property in 2006 for $183,500.00. The buyers of the property were also a married couple, Mr. and Mrs. W, originally used the property as a cottage and then later moved there year-round. While Mr. and Mrs. W bought the property in 2006, they did not have any issues until 2015.

In the winter of 2015, Mr. W discovered the north foundation wall had collapsed and the south foundation wall showed signs of bowing. The following weekend, they discovered visible cracks in the drywall. In total, it cost Mr. and Mrs. W approximately $100,000 to repair the damage.

Timing for Bringing a Real Estate Lawsuit

One of the challenges discussed in this case was the timing. The purchase of the property was completed in 2006, but the litigation did not commence until 2015. Under the Limitations Act, real estate litigation claims must be brought within two years of the day the claim was discovered or ought to have been discovered.

The sellers claimed that the buyers ought to have discovered the foundation issues at the time of sale in 2006 or sometime shortly thereafter. Whereas the buyers indicated they exercised reasonable due diligence at the time of the purchase and the foundational issues could only have been discovered when they found out about the issues in 2015.

In this case, the courts accepted the evidence of the buyers and found that they discovered the claim in 2015, so their lawsuit was not out of time. All buyers and sellers should obtain timely legal advice if they have any major concerns about property defects to ensure their rights are protected.

Negligent Construction Claims

Mr. and Mrs. W claimed the property was negligently constructed. Since one of the sellers, Mr. G, had also constructed the property, Mr. and Mrs. W pursued this claim against the seller. However, in other circumstances, a negligent construction claim may be considered against a construction company or architectural firm that is a separate entity from the sellers.

In fact, contractors, sub-contractors, engineers and architects owe a duty of care not just to the first occupant of the home, but also to subsequent purchasers of a property. This is a duty to ensure that they construct a home in such a way that it does not pose a danger to future occupants.

Here, the court found that Mr. G failed to comply with the Ontario Building Code standards in place at the time. This failure to comply is what caused the foundation issues, which meant Mr. G negligently constructed the home.

Negligent Misrepresentation Claims

In Peel and Halton, there are sometimes claims by real estate buyers against sellers for negligent misrepresentation.

Negligent misrepresentations occur in real estate from time to time. Sellers owe a duty of care to buyers and cannot make representations to buyers that are untrue, inaccurate or misleading. Representations in these situations can be a positive action or an omission and it can be something spoken, written or some kind of action that communicates misleading, untrue or inaccurate information.

In Wesley v. Geneau, negligent misrepresentation formed part of the claim. There were misrepresentations made both in writing and by the seller’s actions.

Negligent Misrepresentation in Writing

During a real estate transaction, it is important to obtain sound legal advice as any information the seller provides to the buyer can form part of a negligent misrepresentation claim if it is inaccurate, untrue or misleading. In this case, Mr. and Mrs. G had completed a Seller Property Information Statement and indicated on that form that there were:

  • No structural problems;
  • No renovations, additions or improvements to the property; and
  • No moisture and/or water problems.

All of which were determined to be inaccurate.

Negligent Misrepresentation in Actions

Often we think of negligent misrepresentations as being something a person says or writes. However, actions can form part of a negligent misrepresentation claim.

In addition to the written misrepresentations, the court found that Mr. G had engaged in negligent misrepresentation by an action. Mr. G had constructed a stud wall in front of the north foundation wall. There was evidence that at the time the stud wall was built, there were signs of frost and heaving on the north foundation wall. The stud wall essentially concealed the foundational problems from the buyers and their home inspector.

While a seller may want to show their property in a way that makes it attractive, they put themselves at risk if they take steps that actively conceal defects in the property.

Contact Prudent Law in Mississauga and Milton for Adept Advocacy in Real Estate Litigation Matters

Litigation and real estate litigation in particular can be complicated. The real estate litigation lawyers at Prudent Law in Mississauga and Milton are a trusted resource for representation on a variety of real estate litigation issues. We provide practical advice and passionate representation in both litigation and alternative dispute resolution options. If you are facing a real estate dispute and you’d like to discuss it with one of our experienced lawyers, please call us at 905-361-9789 or contact us online.


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