For hundreds of years, “caveat emptor” or “let the buyer beware” was the prevailing law when it came to real estate transactions.
Sellers could expect that Buyers would do “their own homework”.
There was one exception and that was the obligation placed upon the Seller to disclose certain latent defects. These were ones that:
- Were known to the Seller, and
- Rendered the premises unsafe or uninhabitable.
Absent that situation, any investigation would be up to the Buyer and the Buyer’s agent.
However, that was “then” and this is “now”.
TRESA comes into play effective 1 December 2023. Have a look at s. 22.2 (1) under TRESA (Regulation 567/05):
22.2 (1) If a seller has a legal obligation to disclose a fact to the buyer and the fact is known to the broker or salesperson who represents the seller, the broker or salesperson shall disclose the fact to every buyer who expresses an interest in the real estate.
So, what happened?
The Listing agent thought that it would be good to do a pre-listing inspection. The inspector came across a latent defect. Now, the Seller knows about it and so does the Listing agent.
The disclosure requirement is placed upon the Seller and as soon as TRESA (Phase 2) comes into force, the Listing agent will have to disclose that information too!
Both the Buyer who has expressed interest in the property and the Buyer’s agent are entitled to that information.
The obligations upon the Listing agent would be:
- Caution about the pre-listing inspection,
- Pre-listing inspections should be less common going forward,
- Warn the Seller about the potential loss of “caveat emptor”,
- Disclose the information as required under TRESA,
- Advise the Seller that the disclosure has been made,
- Arrange to document the “disclosure” for the file.
From the Seller’s perspective, this information from the pre-listing inspection could have remained “unknown” had there been no inspection at all, or had the inspection report been sent directly to their own lawyer, then the lawyer could have made appropriate decisions including “not to release it” to the Seller. The lawyer has a fiduciary duty to the Seller and the obligation to act in the Seller’s best interests. That might mean keeping “caveat emptor” intact for the sale, in the same way it has been for hundreds of years.
Brian Madigan LL.B., Broker