The British Columbia Court of Appeal recently decided a case in which a home-owner did not disclose to a buyer that the reason she was selling her house was because a family member had been murdered on the property.
The case arose in the context of the sale of a large and expensive residence located in the Shaughnessy area of Vancouver. The home was owned by an elderly woman. In 2007, the home-owner lived in the house with two of her daughters, her son-in-law, and two grandchildren.
In the fall of 2007, her son-in-law was shot to death on the sidewalk outside the front gate to the property. Media reports associated the son-in-law with organized crime and the police regarded the shooting as a targeted one, which has never been solved.
Upon learning of the son-in-law’s violent death, the private school one of the grandchildren was attending insisted that she leave the school, expressing concerns for the safety of students; the grandchild transferred to a different school and the family members moved.
In June 2009, the property was placed on the market. The property was first listed at $7,680,000, but the price was reduced in August to $6,980,000.
The home-owner’s daughter had told the real estate agent that her husband had been killed on the street in front of the property. She asked whether it was necessary to disclose that fact to prospective purchasers. The home-owner told the real estate agent she wanted to sell because her granddaughter was attending a different school but did not mention the murder as part of the reason for the move.
Two months after the house was put on the market, a buyer visited the property several times. When the buyer asked why the seller wanted to sell the property the real estate agent responded that “the reason for selling was that the daughter had moved to a school in West Vancouver where she would have a better chance to practice her English.” There was no discussion of any other reason for the sale and the buyer did not ask any further questions. A contract of sale and purchase was agreed upon in September 2009, with a closing date of November 17, 2009. The disclosure statement provided stated that the property did not have any known material latent defects. The buyer paid $300,000 in deposits for the sale.
However, on September 30, 2009, the buyer learned through a friend that a death had occurred at the front entrance of the property. She then learned through a Google search that an alleged gangster had been shot fatally near the front entrance of the property.
The buyer immediately contacted the real estate agent who confirmed that the information was true. The buyer then informed them that she would not complete the purchase. On November 2, 2009, the buyer’s solicitor confirmed in a letter that she would not be completing the transaction “due to your client’s breach of its representation in the Contract of Purchase and Sale… which our client relied upon.”
Issues and Parties’ Positions
In February 2010, the home-owner initiated a civil claim against the buyer for breach of contract. She claimed damages and a declaration that she was entitled to retain the $300,000 deposit.
The buyer counterclaimed against the home-owner and real estate agents, claiming that the property had been occupied by a “high level organized crime figure”, in addition to the unsolved murder, which had made the property dangerous or potentially dangerous and constituted a “defect” that the home-owner had failed to disclose. Alternatively, the buyer alleged that the home-owner had fraudulently misrepresented, negligently or otherwise, the state of the property and the prior incidents on the property. In her counterclaim, the buyer sought an order for rescission and the return of the deposit, and damages for breach of contract and for fraudulent material and/or negligent misrepresentation as against the home-owner and her agents jointly and severally.
Lower Court Decision
The trial judge found the home-owner liable for fraudulent misrepresentation and made an order for rescission and the return of the buyer’s deposit.
Court of Appeal Decision
On appeal, the court found that the trial judge erred in law in ruling that the answer to the buyer’s question constituted a misrepresentation by omission. Additionally, it found that the trial judge erred in fact in finding that the answer “concealed” a fact that was important to the buyer.
The court found that the answer given to the buyer was an honest one, stating:
“[The home-owner] was not required to supplement [the answer] with a description of the entire chain of events that led to the enrolment of the granddaughter at the new private school — unless the buyer asked specifically why the girl had been at a public school or whether any violent deaths had occurred during [the home-owner]’s tenure of the property.”
The court further stated that:
“The doctrine of caveat emptor is not intended to permit sellers to deceive buyers. It is a principle that recognizes that if buyers were required to disclose every possible feature relating not only to the physical and extrinsic qualities of their properties but also to all possible sensitivities and superstitions buyers might have, there would be no end to the resulting litigation. The doctrine places on the buyer the onus of asking specific questions designed to unearth the facts relating to the buyer’s particular subjective likes and dislikes.”
As a result, the court allowed the appeal and dismissed the counterclaim.
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.