Disclosed Kitec Plumbing is not a Reason to Permit Buyer to Walk

The Divisional Court of Ontario just considered a Kitec Plumbing issue in a condominium. In fact, it was disclosed. It was also identified in the contract and subsequently it was subject to a credit in the Agreement of Purchase and Sale. So, when the Buyer decided to walk away from the deal and blamed it on the “kitec plumbing”, the Trial Judge simply didn’t buy it.

I might mention that the Buyer was unable to sell her own property. That might have been the “real reason”. Nevertheless, the Buyer stated that her refusal to close the transaction was based upon:

1. concealment by the Sellers of Kitec plumbing and
2. stained carpeting in the unit.

And, “yes” this is the notorious “carpet stain” case of Ashrafi v. Carraro on 31 October 2019.

This time, we’ll just deal with the Kitec plumbing issue.

The Buyer argues that the Trial Judge erred:

1.  in failing to find that the Kitec plumbing was a latent defect hidden by the Sellers from her;
2. erred in failing to find that its presence constituted a breach of a condition of the agreement of the purchase and sale (“APS”); and
3. erred in failing to find that the Sellers committed either fraudulent or negligent misrepresentation by concealing the Kitec plumbing from her.

The parties entered into an agreement of purchase and sale dated March 31, 2017 for a condominium unit at 3939 Duke of York Boulevard in Mississauga. The purchase price to be paid by the Buyer was:

• $610,000.00
• $15,000.00  as a deposit, which was paid.

The closing date was to be June 14, 2017.

Schedule A to the APS provided in capital letters,

“THE BUYER UNDERSTANDS AND ACCEPTS THAT THERE IS KITEC PLUMBING IN THE BUILDING & IN THE SUBJECT PROPERTY.” 

The Buyer initialled this term. That seems like disclosure to me!

On November 2, 2016 the issue of Kitec piping in the condominium units had been discussed at the annual general meeting of the condominium. The condominium corporation asked the unit holders after that meeting to hire a licensed plumber to replace all Kitec plumbing in the units at their own expense before March 31, 2017.

On April 4, 2017 the Buyer waived the term that provided that the APS was “conditional upon the Buyer and the Buyer’s lawyer reviewing the Status Certificate…and finding the Status Certificate… satisfactory….” .

The purchase price was also revised to $607,000.00. So, that looks to me like a $3,000.00 credit for the Kitec plumbing issue.

Apparently, the lawyer for the Buyer  by letter dated April 5, 2017 confirmed to his client that he and she had spoken by telephone on April 4, 2017; that he had reviewed the status certificate relating to the condominium purchase; that, in his view,

• the only item of concern was the potential cost of replacing Kitec piping in the unit she was purchasing; and 
• that she had negotiated a $3,000.00 purchase price reduction to cover such cost.  

It’s strange that this letter got before the Courts because it’s otherwise subject to solicitor-client privilege. Obviously, that was waived. Introducing this extra piece of evidence was just one more nail in the coffin. This was particularly foolhardy!

The Trial Judge concluded that there was no failure to disclose, and no fraudulent or negligent representation which gave rise to any rights in favour of the Buyer to rescind the transaction:

The clues were:

1. it was in the Agreement,
2. it was in the Status Certificate,
3. The Buyer’s lawyer reviewed the Status Certificate,
4. The Buyer waived the Status Certificate review condition, and
5. The Buyer received a credit in the amount of $3,000.00 for the Kitec.

Strange case, but as I mentioned previously, this case on appeal was really about crediting the deposit to the Buyer on the damage award. That was a “mistake” by the Trial Judge.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com