By Donald H. Lapowich

In a recent case, the plaintiff purchased a home from the defendants, who had signed a Seller Property Information Statement, disclosing that the northwest corner of the house had settled with no further problems for 17 years.  The defendants also stated to the plaintiff that there were no plumbing problems.

The salesperson acted for both the plaintiff and defendant. The salesperson advised that multiple offers were expected. The plaintiff made an offer that had no conditions on financing or a home inspection and for more than the listing price.

After closing, the plaintiff discovered major structural and plumbing defects, since the home was built on unsuitable soil. The plumbing system was defective.

A number of principles emerged from this lawsuit against the defendant and the real estate salesperson. The court found:

a) The salesperson explained dual agency and advised the purchaser to offer the most she was prepared to pay because of the “hot” market (multiple offers).  The plaintiff understood that conditions, including a home inspection, would not make her offer the most attractive and she did not include those conditions.

b) The defendant vendors made negligent misrepresentations and did not disclose ongoing sewer backups to the salesperson, who would have insisted that information was added to the Seller Property Information Statement.

c) The salesperson noticed the sloping floors. The defendant vendors indicated the northwest corner of house had settled with no further problems for the last 17 years.  The salesperson relied on the vendors’ representations and relayed them to the purchasers. The problem foundation and plumbing were latent defects for which the salesperson was not liable and had no duty to inquire further if a structural defect existed.

d) The purchaser did not properly mitigate when she unreasonably spent more than the purchase price to put the house into a condition she believed it to be when she purchased it.

e) Through the Seller Property Information Statement, the vendors made representations about the property that were meant to be disclosed to purchasers, and it was reasonable for purchasers to reply upon the statement representation.  The purchaser reviewed the statement prior to making the offer and the purchaser would not have made the offer had she known of sewer backups or structural problems.

(So much for the usual disclaimer put in a seller’s statement, which certainly was not held applicable to relieve the vendors of responsibility.  In this case, my neighbour and colleague Bob Aaron would certainly be vindicated in his opposition to the use of such statements.)

f) It appears the real estate salesperson was very fortunate, in the writer’s opinion.  When you consider sloping floors, alleged settling of the house and advice to make the offer as positive as possible, would not these signs point to advice to have a home inspection or even an engineer look at the structure? Is it enough to simply take the word of the vendors and pass the misinformation on to your other client, the purchaser?  Did the dual role of the agent unconscionably lead to haste to conclude a transaction without reasonable inquiries to check out what appears to be some fault demonstrated by the sloping floors?

The answer usually lies with the judge, who has the opportunity to see and evaluate the personalities and their testimony in open court.                                                

Donald Lapowich, Q.C. is a partner at the law firm of Koskie, Minsky in Toronto, where he practices civil litigation, with a particular emphasis on real estate litigation and mediation, acting for builders, real estate agents and lawyers.