A recent Alberta court found a structural engineer liable for home buyers’ damages because his home inspection did not meet the standard of care expected of an engineer.
What Happened?
The case involved the purchase of a residential home (the “home”) in the Parkallen neighbourhood in Edmonton, Alberta by a couple (the “buyers”) from another couple (the “sellers”).
The parties executed a standard Residential Real Estate Purchase Contract (the “contract”), which was subject to the condition of an inspection. The sellers hired a structural engineer (the “engineer”) to provide an opinion on the structural integrity of the foundation. The engineer inspected the home on May 15, 2010 and advised that it was structurally sound. He produced a short report to this effect. After further questions by the buyers regarding a horizontal crack, the engineer advised the buyers that it was unnecessary to remove the drywall and reiterated that the foundation was structurally sound. His only recommendation was that the slope of the home around the foundation be regraded in the next few years.
Approximately four months after living in the home, the buyers noted a musty smell in the basement and water stains in the southwest corner of the basement. Through the course of hiring various professionals to help them deal with the issue, they ultimately determined that the horizontal crack extended the length of the west wall and parts of the south and north walls. The buyers replaced the west foundation wall and repaired portions of the north and south walls.
The buyers alleged that the sellers breached the contract warranty provision or, in the alternative, that they were liable in tort for negligent or fraudulent misrepresentation. Their action against the engineer was based on the tort of negligent misrepresentation. The buyers sought damages in relation to the resulting repairs to the home.
Issues
The issues were:
- Was the engineer liable in negligence for the buyers’ damages?
- Were the sellers liable for the buyers’ damages through:
- contractual breach of warranty,
- fraudulent misrepresentation, and / or
- negligent misrepresentation?
Position of the Parties
The buyers argued that there was a breach of warranty contained in a clause of the contract because the concrete spalling was a known latent defect, or in the alternative, that the exclusionary clause, which ordinarily protects against liability for contractual breach, did not apply because the sellers either negligently or fraudulently misrepresented the condition of the home such that the principle of caveat emptor (let the buyer beware) was exempted.
The buyers argued that the engineer negligently misrepresented the state of the home and was liable for professional negligence having failed to meet the expected standard of care of a structural engineer.
The sellers argued that the principle of caveat emptor and the exclusionary clause of the contract applied to bar any remedy for mere misrepresentations. They further argued that the defect was a patent defect as it was discoverable upon reasonable inspection and that the buyers ought to have requested that the drywall be removed by the engineer. Finally, the sellers stated that if the defect was latent, the exclusionary clause applied to bar the claim as there was no fraudulent misrepresentation and that, in any case, it was not pled.
The engineer argued that he met the standard of care of a structural engineer in providing his opinion on the structural integrity of the home, and that in particular, he was not retained to examine water ingress.
Decision
After reviewing the evidence and applicable legal principles, the court found the engineerliable for the ensuing damages as a result of his negligent misrepresentation, stating:
“His inspection was cursory at best and did not meet the standard of care expected of a structural engineer who was retained to specifically examine the horizontal crack in the foundation, provide a technical analysis of the problem, and discuss the risks over the short and medium-term.”
As for the sellers, the court found they were liable to the buyers through the breach of a contractual warranty, because they had failed to disclose a previous home inspection that would have indicated the latent defect and therefore caveat emptor did not apply.
The court accepted the buyers’ damage claim of $113,064 and concluded:
“As between [the engineer] and the sellers there is not equal blameworthiness. The sellers failed to disclose the existence of a report detailing a structural issue with their home by omission. The sellers were not involved with the report’s preparation, and their oversight, while regrettable, is relatively less blameworthy.
Conversely, [the engineer] was hired to investigate a specific structural concern, and he failed to meet the standard of care of a professional engineer. The buyers relied on his expertise to their detriment. His behaviour was more blameworthy than the sellers.’ I attribute 75% of the buyers’ loss to [the engineer], and 25% to the sellers.”
Get Advice
There are significant legal and financial risks in entering into a residential 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 residential 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.