Robert Smith (not his real name) acted for the Buyers.
A summary of the facts:
(note: some omissions)
5. On 11 December 2021, the Property for sale on the local multiple listing service for $729,000.
6. The Listing stated that a buyer would be able to obtain rental income from a finished basement (“Basement”) that had a separate entrance and included a kitchen with appliances.
7. However, the Basement had not been approved by the municipality, was not legal and could not be legally rented.
8. On 20 December 2021, the Buyers and Sellers entered into an agreement of purchase and sale (“APS”) for the Property for $880,000. The APS included no conditions regarding home inspection or financing.
9. The transaction successfully closed on 17 March 2022.
10. On April 25, 2022, the City issued a compliance order against the Buyers requiring them to remove the basement kitchen.
11. Robert Smith acknowledged that he never informed the Buyers in writing that the Basement was not legal.
12. On June 22, 2022, without any admission of responsibility and prior to a complaint being filed with RECO, Robert Smith paid the Buyers $15,000 to assist them in making the Basement legal.
13. The payment of $15,000 to the Buyers was considered as a mitigating factor, and had it not been made, RECO would have sought a more significant penalty in this matter.
The result was a $500.00 fine and a requirement to attend two RECO Courses.
Comment
Even if the Listing does not indicate that the premises were “legally approved” by the City, make sure that your clients are aware of this fact “in writing”.
Brian Madigan LL.B., Broker
Comments 2
I often see realtors use terms like in-law potential on country properties on well and septic systems.
The septics are rarely designed for two kitchens and occupancies. A compliant septic costs 30 to 50 k. So be careful what you promise or imply
Author
Good points