In a recent decision, the court allowed a claim for damages for a latent defect nine years after the home was sold.
Buyers Discover Defect with Property
A husband and wife owned and subsequently sold a residential property in Ontario. The property was situated in an unorganized township with no municipal office, no building inspector and no one to issue building permits.
The husband had built a home on the property in and around 1989. With the exception of the construction of the foundation concrete block walls, he built the home himself without a building permit. The construction of the home evolved over time. By 1997, a sunroom and garage had been added to the main structure.
On June 30, 2006 the husband and wife sold the property to a couple for $183,500.
The couple used the property for recreational purposes as their cottage. They eventually moved to the property occupying it on a full time basis as their permanent home.
On February 25, 2015, the couple discovered that the north foundation wall had collapsed and similarly, the south foundation wall showed signs of bowing. The following weekend, the couple went to the property to find visible drywall cracking in the living room.
Following this discovery, the couple commenced an action against the husband and wife claiming damages for negligent construction and for negligent misrepresentation.
In response, the husband and wife denied the couple’s claims, disputed damages and contended that, in any event, all claims and the action were statute-barred.
Sellers Argue That Claim Was Statute-Barred
The husband and wife pled that the couple knew, or ought to have known by reasonable inspection, at the time of purchase particulars of the manner and quality of the construction of the residence including any deviation from the standards of the Ontario Building Code and any potential risks associated therefrom. The husband and wife further pled that the couple’s claim was therefore statute-barred pursuant to the provisions of the Limitations Act, 2002.
The husband and wife argued that the couple should have conducted a more diligent investigation at the home at the time of the purchase, and had they done so, the deficiencies with respect to construction and the failing north foundation wall could have been discovered or at least prior to 2013; the statement of claim was issued in 2015.
The husband and wife further submitted that there was clear evidence of the structural defects that would have led a reasonable homebuyer to make further investigations prior to 2013.
Finally, the husband and wife asserted that the couple had not established the level of due diligence required of a purchaser when purchasing a home.
Court Finds Claim is Not Statute-Barred
After reviewing the relevant legislation, which states that there is a two-year limitation period for bringing a claim, the court explained that a limitation period commences when the plaintiff discovers the underlying material facts or, alternatively, when the plaintiff ought to have discovered those facts by the exercise of reasonable diligence.
After reviewing the evidence, the court found that even if the couple had conducted a careful home inspection, they would not have discovered the problem. Additionally, the court found that the husband knew about the problem and had acted to conceal it by building an interior wall to conceal cracks in the foundation. The court stated:
“At the time of purchase, up to August 31, 2013 and up until February 25, 2015 I find the [couple] acted with due diligence and that there was nothing to put them on notice of serious structural defects – in particular, a collapsed north foundation wall.
I find there is no clear evidence as asserted by the [husband and wife] of structural defects that would have led a reasonable home buyer to make further investigations prior to August 31, 2013. Neither can the [husband and wife] suggest that the [couple] did not rely on the [husband and wife’s] misrepresentation, opting instead to obtain a home inspection.”
As a result, the couple’s claim was not statute-barred because the couple had properly brought their claim within two years of discovering the defect.
Additionally, the court found that the husband and wife were liable for the negligent construction at the property and for misrepresentation and concealment of the defects.
As a result, the court ordered the husband and wife to pay damages to the couple in the amount of $100,000 for negligent construction, negligent misrepresentation and general damages.
There are significant legal and financial risks in entering into a real estate transaction. Such large purchases should not be made without proper guidance from an experienced lawyer. Without sound legal advice, you could end up paying more than you should for your home, or accept an offer that is too low, or worse yet, end up with a transaction that falls through due to missed paperwork, or details and technicalities that go unnoticed.
At DBH Law in Calgary, our real estate lawyers have more than 25 years of combined experience acting for purchasers, lenders, and developers through all stages of real estate transactions.
We help our clients avoid huge areas of risk, including poorly drafted or incomplete agreements of purchase and sale, hidden fees, encroachment or easement issues, complex concerns like properties held in trust, and similar pitfalls. We also look for contract language which may impose unfavourable duties or obligations. To learn more about how we can help, contact us online or by phone at 403.252.9937.