Latent defects: the liability of the sellers and the real estate agent who have made misrepresentations to the buyers of an immovable

Seller's liability, real estate agent's liability, latent defects. In a recentmotion to introduce proceedings requesting compensation following the discovery of latent defects, the Superior Court concluded that it was both the sellers and the real estate who, having misrepresented significant elements concerning the property, were responsible for the damages caused to the buyers, as the proof presented before the Court demonstrated that they would not have purchased the property, had they been aware of the latent defects in question. (D’Amour Uwumuremyi v. St-Onge, 2012 QCCS 4477).

THE FACTS

When the sellers decide to put their property on sale in 2007, they mandate a real estate agent. Although this was followed by the sellers’ acceptance of an offer to buy the property, the finalizing of this sale never takes place. The failure to conclude the sale results from the existence of latent defects discovered during the pre-purchase inspection of the property. Consequently, the property is put back on the market.

During a subsequent visitation of the property by the plaintiffs,the hired real estate agent informs them that certain repairs necessary to remove the mold caused by a ventilation problem should be performed by the sellers prior to the conclusion of the sale. The real estate agent also advises the potential buyers that a previous offer to buy the building had failed due to a negative pre-purchase inspection report, a fact that greatly encourages the plaintiffs to request a copy of the report. This request is denied not only by the real estate agent, who claims that the e-mail containing the report in question had accidently been deleted from his inbox and was therefore, impossible to retrieve, but also by the sellers, who claim that they were also unable to disclose the contents of the reports, as they had experienced a computer crash.

Finally, the real estate agent advises the buyers not to conduct a pre-purchase inspection. He explains that it would constitute an unnecessary expense, seeing as such an inspection had already been completed and work to correct the discovered defects had already been accomplished by the sellers. Reassured by this information, the plaintiffs decide to purchase the property.

Unfortunately, it is only after the sale of the property that the plaintiffs are informed that a tenant of the building in question had previously sent the sellers a notice asking them to rectify serious mold problems that had been gradually developing in her apartment. It is notably this new information that urges the plaintiffs to proceed to an inspection of the property, during which they discover problems that are much more serious that those initially presented to them by the real estate agent.

THE SELLERS’ LIABILITY

Having concluded that the evidence presented clearly demonstrates the existence of defects, the Superior Court recalls the rule stating that all latent defects are assumed to be known by the sellers. The Court also notes that the sellers are responsible not only for the damages experienced by the buyers and caused by the defects, but also for their personal contractual misconduct in not having disclosed all information regarding the latent defects, despite being presumed to have known of their existence. .

THE REAL ESTATE AGENT’S LIABILITY

The Court emphasizes that even though the real estate agent was involved in all stages of the process leading up to the conclusion of the contract of sale, the real estate agent is nevertheless not bound to the plaintiffs by contract and consequently, his liability can only be extracontractual by nature.  

The real estate agent's first fault lies in the preparation of the plaintiffs’ offer to buy, in which he confirms the absence of defects that may substantially affect the value of the property. Knowing that an inspection report had enabled a previous promisor to reconsider and ultimately, to invalidate his promise to purchase the building, the real estate agent had an obligation to disclose this information to the plaintiffs. The real estate agent could not rely, as he did in the present case, on the sellers’ statement that all defects revealed by the inspection report had been corrected, without properly verifying this information.

The second fault of the real estate agent lies in his inability to deliver the inspection report requested by the plaintiffs. The Court considers the real estate’s explanation regarding the regrettable and accidental deletion of the e-mail in question to be implausible, given the importance of the document in question as well as the real estate’s failure to update the software responsible for the document’s loss. In addition, the Court refuses to believe that a computer crash prevented the sellers from supplying the buyers with the report.

The real estate agent’s third fault consisted in his unjustified suggestion that the buyers not proceed with their own pre-purchase inspection. Although he invoked the existence of an earlier report and the fact that all significant repairs had already been completed, he was fully aware that this information did not represent the reality of the situation.

THE CONCLUSION

The Court therefore concludes that the defendants were bound to ensure that the buyers received all information necessary to make an informed decision as to whether or not to purchase the property in question, an obligation that they failed to fulfill in the circumstances. The Superior Court recognizes that all buyers have the right to receive all relevant information concerning the property they wish to purchase and that the sellers and real estate agent must live up to their obligation of providing this information. Otherwise, they can be held civilly or professionally liable. Dubé Légal inc., Montréal latent defects and real estate litigation lawyers.