Decision reaffirms buyer beware rule

A recent Superior Court decision dismissing a claim brought by a homebuyer against the previous owners over mould found in the property’s basement reaffirms the doctrine of caveat emptor, lawyers say.

Justice Russell Raikes threw out the claim of Eric and Louise Brown, a son and mother, who found water and mould in the basement of their home in Forest, Ont., shortly after purchasing it from Gary and Wanda Cassidy in 2011.

The Browns sought more than $80,000 in damages, but Raikes found they had not used the contractual protections needed to shift the risk of any deficiencies in the property to the seller.

“I find that the Cassidy’s were ignorant of the water drainage/leakage and mold contamination issues anywhere in or around the house,” Raikes wrote in the decision.

“They saw nothing that led them to understand the problem was recurring, nor was there anything that should have led them to that conclusion,” he added.

Lawyers say the decision reaffirms the doctrine of caveat emptor, which  is  the “buyer beware” rule. Raikes notes that under the doctrine, the risk of any deficiencies in the property purchased rest with the purchaser, unless they have contractual protections or if the circumstances fall within four specific exceptions.

The four exceptions concern when a seller fraudulently misrepresents or conceals, knows of a latent defect rendering the house unfit for habitation, is reckless as to the truth or falsity of statements relating to the fitness of the house or has breached his or her duty to disclose defects that render the property dangerous.

“I think buyers are in a risky situation practically speaking because this is the law,” says Kate Grossi, a real estate lawyer with Korman & Company Barristers & Solicitors, who was not involved in the case.

“Inform yourself, protect yourself in the agreement.”

Ronald Bildfell, a Sarnia, Ont. lawyer who represented the Browns on the claim, says such cases can be difficult to prove as the onus is on the plaintiff to prove the seller was aware of the defect at the time of the sale.

“It’s always incumbent on the plaintiff to prove that there was either actual fraud or sort of turning a blind eye to an existing problem. So it’s difficult to get around that factual problem,” he says.

Bildfell adds that the decision “reaffirms that it’s incumbent on the purchaser alleging that there has been a failure to disclose a problem to prove it.”

The Browns first looked at buying the house in September 2011.

The Cassidys, who owned the house since 1983, had some issues with water and mould in the basement in the 1990s. They brought in a contractor in 2002 to fix the problem.

When Eric Brown first visited the home to enquire about buying it in 2011, he claimed he asked Cassidy if they had had water problems to which he replied no.

Cassidy testified that they had a discussion about past water problems and what they had done to fix the problem.

 “My client appeared to be satisfied with the resolution of the past water problem, but I think he didn’t apply his mind to . . .  [whether] the past water problem [was] totally corrected,” says Bildfell.

In the agreement of purchase, there was no mention of water problems.

“Although Mr. Brown testified that it was important to him that the property had not had any water problems, the agreement is entirely silent on that score,” Raikes said in the decision.

After they bought the house, the Browns hired a contractor to do some work on the house and discovered water and black mould in the basement. They subsequently restored the basement.

Brown sought damages of $85,100.17, which the Browns said was what they paid for the repair and remediation work on the house after they bought it.

Brown also claimed the Cassidys were responsible for a deck at the back of the house that was repaired in 2013, two years after the Browns bought the house.

Brown said he discovered the deck was not securely connected to the original posts when he stumbled on it that year.

Brown did not have an inspection done on the house before the purchase, which was done in a private transaction, the decision said.

Toronto lawyer Jordan Donich says if the Browns had retained a lawyer before they purchased the home, they would have been advised to get an inspection and to protect themselves in the purchase agreement.

“Hire a lawyer before you need him, and you won’t need him at all,” says Donich, who is not involved in the case.

Raikes found that the Cassidys were ignorant of any water and mould problems that had arisen after they thought they had fixed the problem and, therefore, could not have misrepresented the condition of the house. He dismissed the claim.

Grossi says the pace of the housing market at the moment can serve as a deterrent for buyers to conduct an inspection or inject clauses into the purchasers agreement that protect them against possible defects in the house.

“Unfortunately, I think that in the current market, there is a lot of pressure because of the time constraints and how quickly something sells,” she says.

“People feel they don’t have the opportunity to do their due diligence and be informed. If you can’t do that, you want to do the alternative, which is protect yourself in the agreement.”

Grossi says residential real estate lawsuits do not often make it to trial and are usually settled out of court or in Small Claims Court.

“We don’t see a lot of residential real estate matters. A lot of the real estate decisions are commercial,” she says.

Donald Elliott, the lawyer representing the defendant, was contacted and was not available for an interview.

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