Fischer v. Volpe, 2016 ONSC 6326
Overview
In Fischer v. Volpe, 2016 ONSC 6326, the Ontario Superior Court of Justice considered an important real estate disclosure dispute involving a former marijuana grow operation, the duties of real estate agents, latent defects, negligent misrepresentation, and the obligations of a buyer’s agent when information about a property is provided through a listing agent.
The case arose after a purchaser discovered, almost nine years after closing, that the home he purchased had previously been used as a marijuana grow operation.
The purchaser alleged that the vendor, listing agent, buyer’s agent, and brokerage had fraudulently concealed the property’s history and misrepresented its condition.
The Court did not decide liability. Instead, it dismissed the purchaser’s motion for summary judgment, finding that several factual issues required a trial.
However, the decision provides valuable guidance regarding real estate disclosure obligations and the standard of care expected of REALTORS® in Ontario.
Facts
The plaintiff, Frederick Fischer, purchased a rural property in Caledon, Ontario, from Gasparino Volpe in 2004 for $330,000.
Before the sale, Mr. Volpe had operated a marijuana grow operation inside the home. Police discovered approximately 130 marijuana plants, and Mr. Volpe was charged.
After being released on bail with conditions preventing him from occupying the property, Mr. Volpe listed the home for sale through listing agent David Scanlan.
The MLS listing did not disclose that the property had been used as a grow operation.
Mr. Fischer retained Ron Hartwick as his buyer’s agent. Mr. Hartwick provided Mr. Fischer with the MLS listing and prepared the Agreement of Purchase and Sale. Neither document disclosed the prior grow operation.
The transaction closed on April 30, 2004.
Discovery of the Grow Operation
Approximately nine years later, in 2013, Mr. Fischer attempted to sell the property.
At that time, he learned from neighbours and police records that the property had previously been used as a marijuana grow operation.
He also discovered black mold in portions of the home.
Mr. Fischer alleged that:
- he would not have purchased the property had he known of the grow operation;
- the property was more difficult to sell;
- lenders would not finance a former grow operation property;
- he would have to replace the home at an estimated cost of approximately $370,000.
He sued:
- the vendor;
- the listing agent;
- the listing brokerage;
- his buyer’s agent; and
- the buyer’s brokerage.
Issues Before the Court
The Court identified two major issues:
1. Who was responsible for failing to disclose the grow operation?
The central question was whether:
- Mr. Volpe told the listing agent about the grow operation;
- the listing agent informed the buyer’s agent;
- the buyer’s agent knew, or ought to have discovered, the information; and
- the buyer’s agent had a duty to independently investigate.
2. What damages did Mr. Fischer suffer?
The Court noted that while a former grow operation may affect marketability, questions remained:
- Was the property actually unmarketable?
- Could the damage be repaired?
- What was the cost of remediation?
- Did the purchaser suffer a compensable loss?
Latent Defects and Disclosure Obligations
The Court confirmed the established principle that a vendor must disclose known latent defects that make a property:
- dangerous; or
- unfit for habitation.
Justice Price relied on the Ontario Court of Appeal decision in Barbieri v. Mastronardi, 2014 ONCA 416, which involved a similar grow operation disclosure issue.
The Court stated:
- “In Ontario, a vendor may be liable to the purchaser of a property which is not new if he knows of a latent defect which renders the premises unfit for habitation or dangerous in itself and does not disclose it to the purchaser.”
The Court accepted that the prior grow operation was a latent defect, because it was not visible to a purchaser.
Duty of a Buyer’s Agent
One of the most important aspects of the decision concerns the obligations of a Buyer’s agent.
The Court confirmed that a Buyer’s agent owes duties to the purchaser, including obligations arising from professional standards.
However, the Court emphasized that liability depends on the circumstances.
A Buyer’s agent may generally rely on information provided by the Listing agent or vendor unless there are warning signs or circumstances requiring further investigation.
Justice Price stated:
- “The Code of Ethics … reaffirmed that an agent acting for either the purchaser or vendor may rely on the representations of a vendor unless there are suspicious or other circumstances that suggest the representations should not be relied upon.”
The duty is fact-dependent.
Importance of Expert Evidence
The purchaser argued that the Buyer’s agent breached the standard of care by failing to discover the grow operation.
However, the Court held that expert evidence was required.
In professional negligence claims, the plaintiff must establish:
- the applicable standard of care; and
- how the professional failed to meet that standard.
The Court stated:
- “In a professional negligence claim, the burden is on the plaintiff to prove that the defendant’s conduct fell below the standard of care. Evidence must be led to establish the appropriate standard of care in the circumstances.”
Because Mr. Fischer had not provided expert evidence regarding the obligations of a Buyer’s agent, the Court found that the issue required a trial.
RECO Code of Ethics and Standard of Care
Mr. Fischer relied on the real estate Code of Ethics under REBBA 2002, arguing that REALTORS® have obligations to:
- disclose material facts;
- avoid misrepresentation; and
- verify relevant information.
The Court held that although the Code was not legally determinative, it was an important indicator of professional expectations.
Justice Price relied on the Ontario Court of Appeal decision in Krawchuk v. Scherbak, 2011 ONCA 352, stating:
- “The due diligence requirements of a real estate agent mandated by the Code, while not dispositive, are of considerable importance in informing what is expected of real estate agents in terms of verifying information about a property listed for sale.”
However, the Court emphasized that professional rules do not automatically establish legal liability.
Summary Judgment Dismissed
The Court refused to grant summary judgment because genuine issues remained, including:
1. Whether the Buyer’s agent knew about the grow operation
Mr. Hartwick denied knowing about it.
The Court found this credibility issue required a trial.
2. Whether the Buyer’s agent relied reasonably on information from the Listing agent
The Buyer’s agent stated that any information about the seller’s reason for selling came from the listing agent.
The Court held that this required cross-examination and further evidence.
3. Whether damages were proven
The Court found conflicting evidence regarding marketability.
The purchaser claimed banks would not finance former grow operations.
The defendants provided evidence that former grow operations could be sold after remediation and certification.
The Court concluded that damages required further evidence.
Final Decision
The Court ordered:
- Mr. Fischer’s motion for summary judgment was dismissed.
- Mr. Fischer was permitted to amend his claim to specifically plead negligent misrepresentation.
- The matter was required to proceed toward trial.
Considerations for Ontario Real Estate Professionals
1. Grow operations are material facts
A prior marijuana grow operation may constitute a latent defect requiring disclosure where it creates risks such as:
- mould;
- electrical problems;
- contamination;
- reduced marketability.
2. REALTORS® cannot knowingly conceal material facts
A Listing agent who knows a property was used as a grow operation has a duty to disclose that information.
3. Buyer’s agents have professional obligations
A Buyer’s agent is not merely a messenger. The agent must exercise reasonable care and skill.
However, whether additional investigation is required depends on the circumstances.
4. Expert evidence is often required in negligence claims
A purchaser alleging REALTOR® negligence must establish:
- what a reasonable REALTOR® would have done; and
- how the agent fell below that standard.
5. Disclosure disputes often turn on credibility
Where agents, vendors, and purchasers give conflicting accounts of conversations, courts will often require a trial rather than determine liability summarily.
Conclusion
Fischer v. Volpe reinforces the importance of disclosure, due diligence, and professional competence in Ontario real estate transactions.
The case confirms that a hidden history such as a marijuana grow operation can create significant legal consequences for vendors and real estate professionals. However, liability depends on proving knowledge, breach of duty, causation, and damages.
For REALTORS®, the practical lesson is clear: when information about a property raises concerns, careful investigation and proper disclosure remain essential components of professional practice.
Comment
Very easily a remediated grow-op can be a defect and not simply a stigma.
Expert witness testimony is required to establish professional liability.
Brian Madigan LL.B., Broker