At some point, a client may contact you after purchasing a property to inform you that he or she has discovered a problem with the building that he did not know about previously. The sale of a property normally includes a warranty as to the quality of the building, unless specifically indicated otherwise, such as a sale without legal warranty at the buyer's risk and peril. However, a sale without legal warranty at the buyer's risk and peril contains specific rules that will certainly be covered in a future Legal Bulletin.
What problems are covered by the warranty of quality?
The warranty of quality covers hidden defects, meaning defects that were unknown to the buyer and that were not detected during an ordinary inspection. In addition, the defect must meet the following conditions:
It must be a true defect, not a problem resulting from normal wear and tear to the property, its deterioration or a change in standards;
It must be sufficiently serious, meaning it renders the building unfit for its intended use or it diminishes its usefulness to the extent that the buyer would not have bought it or would not have paid so high a price;
It must be unknown to the BUYER following a reasonable inspection by a diligent and prudent person, without necessarily resorting to an expert, unless ordered to do so;
It must have existed before the building was sold.
Here are some situations in which the courts determined that a hidden defect was present:
A French drain was not installed according to generally accepted practices and its use was therefore affected. After purchasing the property, the buyers noticed water infiltration in the basement, which they could not have noticed previously. This constitutes a hidden defect.
A home was purchased in 1999. Many years later, there were signs indicating the presence of pyrite. After obtaining an expert opinion from a specialized company, it was determined that cracks on the floors and walls were the result of backfill swelling. Because there were insufficient signs for the defect to be detected at the time of sale, and because knowledge in this area was more limited at that time, it was determined that the problem did qualify as a hidden defect.
However, in a different situation, a house built in the 1970s had a petrographic expansion potential index (PEPI) of 14, which means a low swelling potential. During an examination of the building in November 2000, there was no sign of swelling, with the exception of a few minor cracks that could have resulted from other causes. The simple presence of pyrite does not constitute a hidden defect in the absence of significant structural damage or probability of significant structural damage.
The presence of iron ochre led to a deficiency in the drainage tile: it became clogged with iron mud. In the presence of iron ochre, a rigid drain with oversized perforations must be installed and it must be surrounded by crushed rock that is three times thicker than a standard installation. In the absence of this particular installation, there cannot be adequate drainage and this results in water infiltration. The property is therefore affected by a hidden defect that could not have been detected when the home was purchased.
If you want to properly protect your buyer or seller, conduct a very thorough visit of the property, do not hesitate to ask questions about the condition of the building, and demand the Seller's Declaration form.
More on HIDDEN DEFECTS on my next blog.