The law in British Columbia is that a seller and a listing realtor have a duty to disclose known material latent defects, but not patent defects. A “patent defect” is one which might not be observable on a casual inspection but may nonetheless have been discoverable upon a reasonable inspection by a qualified person. A “latent defect” is one that is not discoverable by a purchaser through reasonable inspection and inquiry.
When purchasing a property in British Columbia, the onus rests upon a buyer to carry out a reasonable inspection of the property and for those defects or conditions discoverable upon a reasonable inspection, the doctrine of caveat emptor* strictly applies (*buyer beware).
However, a seller and their realtor are obligated to represent properties accurately. Sometimes buyers find out after buying a property that they are the victim of property misrepresentation. If a seller misrepresents the condition of a property to a buyer, whether that misrepresentation is negligent or fraudulent, they may be responsible for compensating the buyer. Here is a brief overview of how seller misrepresentation works.
Responsibility of the Seller
Where a seller makes efforts to conceal a patent defect in order to mislead a buyer or lull their suspicions, this action may be considered fraudulent and the buyer may have a legal right to recover against the seller as a result.
Likewise, if a seller was aware of a latent defect and failed to disclose it, this may be construed as a misrepresentation and give a buyer a legal right to recover against the seller.
If the Contract of Purchase and Sale requires a Property Disclosure Statement (PDS), the seller of any piece of property is responsible for accurately representing the condition of the property in question, as best as they can, including providing information on the condition of the building, plumbing/septic systems, age of the building, etc.
This responsibility of the seller doesn’t end with signing the PDS. The PDS requires the seller to inform buyers of any material changes to the property after the completion of the PDS. For instance, if the property experiences a flood after the Contract of Purchase and Sale is signed, but before the closing date, the seller is obligated to report this to the buyer(s). Furthermore, the standard form Contract for Purchase and Sale states that the property in question will be in the same condition on the possession date as it was when viewed.
If a seller misrepresents the condition of the property to a buyer, they can be subject to legal action and may be required to provide financial compensation to the buyer in order to make up for unexpected costs, such as repairs to damaged property.
However, the manner in which a PDS is completed or a misrepresentation is made, doesn’t eliminate the buyers’ obligation to carry out a reasonable inspection of the property, and the lack of an inspection does not make the distinction between patent or latent defects irrelevant.
Types of Seller Misrepresentation
Negligent misrepresentation is when the seller makes a statement that they should reasonably know is false. Any misleading statement that is made based on assumption and without proper grounds to believe that the statement is factual, is considered negligent misrepresentation.
Fraudulent misrepresentation is when a seller intentionally gives you false information about the condition of a property for their own gain. For example, if a seller tells the buyer that a home’s plumbing system is functional and up to code in order to sell the home when the seller knows that the plumbing is actually severely damaged, this would be considered fraudulent misrepresentation.
What Victims of Property Misrepresentation Can Do
Buyers routinely advance claims against sellers based upon misrepresentations and the statements or answers set out in a PDS, not only for negligent and/or fraudulent misrepresentation, but for breach of contract. But remember the governing maxim – “buyer beware”. Before you close a purchase, properly inspect the property and, if necessary, retain professionals to help you. As a purchaser, if you want a promise of fitness for the home you are going to buy, your best course of action is to negotiate express warranties by the seller.
However, if you have already bought a property and there was a misrepresentation made by the seller which has cost you money, you may have grounds for legal action in order to recover your financial loss. Whether the misrepresentation was negligent or fraudulent, the lawyers at Hoogbruin & Company have the experience and knowledge required to ensure that you get the best outcome possible.