Aug 23, 2020

Home Purchaser Successfully Sues Nine Years Later for a Concealed Latent Defect

Wesley v. Geneau, 2020 ONSC 868 (CanLII)

The unusual facts of this case illustrate that the law can provide remedies for the misrepresentation of home defects even many years after the fact. It also shows the importance of always obtaining a Seller Property Information Sheet (SPIS), a voluntary disclosure by the vendor, that can be used as a record of the representations that were made.

The Wesleys bought a house from the Geneaus in 2006. In 2015, one of the foundation walls collapsed, requiring expensive repairs. After a six-day trial involving a considerable amount of expert testimony and detailed sifting of engineering evidence, Justice DiTomaso awarded the plaintiffs $100,000 (the maximum available under the simplified procedure).

The latent defect was only discoverable long after the purchase

There is a two-year limitation period for bringing claims, but that is from the date that the cause of action was discoverable. The defendants argued that if the plaintiffs had carried out a thorough home inspection at the time of purchase, they would have discovered the problem immediately. They therefore argued that the claim was statute-barred.

In this case, the judge found as a fact that even a careful home inspection could not have discovered the problem. He also found evidence that the previous owner knew about the problem and acted to conceal it by building an interior wall to conceal cracks in the foundation.

Vendor’s negligent misrepresentation for hiding the latent defect

A vendor does not ordinarily provide a guarantee on a used house, and he is not responsible for any defects of which he was unaware. Even if he was aware of a latent defect (one that could not ordinarily be discovered by an inspection), he is not obligated to disclose it unless it makes the home uninhabitable or dangerous: McGrath v. MacLean (1979), 1979 CanLII 1691 (ON CA).

It is only the willful concealment of known defects that may constitute negligent misrepresentation, or even fraud. That is where the SPIS provides a substantial safeguard for the purchaser. It includes a detailed list of questions about potential defects. If the seller fills out the SPIS inaccurately, failing to disclose a latent defect of which he was aware, then it is a negligent or fraudulent misrepresentation for which he becomes liable to damages.

It was because a SPIS had been filled out that the defendants owed a duty of care to the plaintiffs in this case:

[117] In Krawchuk [v. Scherbak,, 2011 ONCA 352], Madame Justice Epstein found that a special relationship giving rise to a duty of care existed between the seller and purchaser of a home. She based this conclusion on the fact that the representations in question were made in a Seller Property Information Sheet and because that Seller Property Information Sheet was attached as a schedule to the corresponding Agreement of Purchase and Sale.

[120] The SPIS contains a list of statements followed by several boxes that can be checked off. On page two of the SPIS, under “Improvements and Structural” Question 1 states “Are you aware of any structural problems?” and the corresponding “No” box is checked.

The evidence that the vendor knew about the defect

The onus is on the purchaser to prove that the vendor knew about the defect, and this is often hard to prove. In the present case, the plaintiffs were at an advantage, as the defendant had been in charge of construction of the house. Moreover, there was a type of “smoking gun” evidence, in that an interior wall had been built with a large gap from the foundation to accommodate the foundation wall that was already bowed in.

[123] I agree with the Wesleys’ submissions that each of these representations are untrue, inaccurate or misleading, all of which are related to construction of the stud wall next to the failed north wall.

[124] Mr. Koerth and Mr. Flynn testified that the stud wall was built several inches away from the north foundation wall because the foundation wall had already begun to heave. Otherwise, the stud wall would have been constructed flush against the north foundation wall. As the foundation wall is crucial to the structural integrity of the property, I find the heaving would represent a structural problem. As such, the answer to Question 1 should have been “Yes”.

[150] However, no such disclosure of the bowing or the efflorescence was provided. They were concealed by the stud wall which, pursuant to Kelly, amounts to a misrepresentation for which the Geneaus are liable.

This type of evidence would potentially exist whenever the previous owner was deeply involved in the construction or renovation of the house. That would tend to create a presumption that he was aware of the defects. In other situations, the previous owner might be blissfully ignorant of the defect, in which case no liability would arise.

The value of the Seller Property Information Sheet

The vendor is not liable for a defect, per se, but for making a misrepresentation about it if he is asked. That is why the SPIS is important protection for the buyer, and why vendors sometimes do not like to provide them. However, an honest vendor who has nothing to hide should not be inclined to refuse. A vendor who has lived in a house for many years is the one who knows the most about its defects, including some that cannot be detected with even a careful inspection that does not tear open walls. Buyers in a hot market should avoid the temptation of giving up this protection, as it can lead to very costly problems.

This article is for general information purposes and you should seek specific advice for your particular case.