Every month we will share answers to common questions we get from both buyers and sellers .
This months question “ What does it mean to sell without legal warranty ? “
Courtesy of:
Me Elaine Rosenberg
Rosenberg Attorney Inc.
514-604-8891
elaine@rosenberg-law.ca
Under the law, the seller is bound by legal warranty to the buyer. This warranty includes two elements:
Warranty of right of ownership
The seller must guarantee the buyer a valid title of ownership. In other words, the seller guarantees the right of ownership of the property. More specifically, this means that the seller must guarantee that the property:
Has no title defects and that it is free of all charges (mortgage, servitude, etc.) except those declared at the time of sale
Does not encroach on the neighbouring property and vice versa
Does not contravene public law restrictions, such as a zoning or urban planning by-law violation, except for those registered with the land registry office or those that have been declared
The notary will analyze the seller’s declarations and make various verifications, including the location certificate and title of ownership. The notary can also, upon request, verify the property’s compliance with municipal by-laws.
Warranty of quality
The seller is also bound by the warranty of quality, i.e. the warranty against latent (hidden) defects. This covers only major defects that existed at the time of the sale that were unknown to the buyer and that even a prudent and careful buyer could not have discovered.
A defect is a flaw significant enough to render the property unusable for the purpose for which it was purchased. The defect so diminishes the value of the property that, if the buyer had been aware of it, they would not have purchased the property or would have negotiated a lower price. Currently, due to the tight supply of residential units for sale, many Buyers accept to purchase without legal warranty of quality to render their bids more attractive. Conversely, Vendors feel emboldened offering to sell only without legal warranty of quality. In practical terms, what does this mean for each side of the equation?
As stated above, a Vendor is obliged to declare all known defects in the “Seller’s Declaration”. Selling without legal warranty will not absolve a Vendor who fails to completely declare all known defects to the Buyer prior to the sale. The failure to disclose can vitiate or cancel the waiver of a sale made without legal warranty.
Every aspect of this claim for compensation based on latent defects relies on the evidence adduced and the success of the case relies entirely on a question of proof. Ultimately a judge will have to decide whether one is in the presence of a latent defect that meets the criteria necessary to invoke a Vendor’s liability.
Vendor’s failure to disclose completely can trigger the warranty of quality notwithstanding an explicit exclusion in the offering documents. A Buyer will be able to hold the Vendor responsible for the costs of remediation, direct and indirect damages. They may even ask to cancel the sale. The claim for compensation for latent defects however must be proven on a balance of probabilities.
First of all, it is not enough to simply allege that there was a latent defect in your unit. As a matter of fact, you must prove that:
The defect actually exists: your allegation must be well supported by proof which usually requires an expertise prepared by a .
The latent defect already existed at the time of the purchase.
The latent defect rendered the unit unfit for the use for which it was intended or diminished its usefulness so much that the buyer would never have paid such a price
It was unknown to the buyer at the time of the purchase that such a defect existed
In addition, an apparent defect, such as visible cracks in the foundation, may be rendered “hidden” or “latent” if the Vendor declares that repairs were made, and no further problems were discovered since. Courts have ruled, on several occasions, that the seller's fraudulent behaviour, through misleading gestures or declarations that falsely reassure the buyer, have the effect of rendering an otherwise apparent defect legally concealed or hidden.
Therefore, a sale without legal warranty of quality is not a “bullet-proof” strategy to avoid future litigation as certain structural problems only make themselves known over time. Should the Buyer be able to prove that the cause of the damage was foreseeable or known and not disclosed prior to the sale, the guarantee may be successfully invoked notwithstanding the waiver or exclusion of the guarantee of quality.
This is not legal advice and is intended as a general overview of a very complex area of real estate law. Should the reader have a particular issue to discuss, it would be prudent and advisable to meet with your legal advisor for a more personalized assessment.
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