Seller’s Liability for Providing Faulty Inspection Report

5 Risks In Using Past or Prior Home Inspection Reports - Buyers Ask

I have a question for you more seasoned agents.

My buyer purchased a home which already had an inspection done by a previous deal that did not go through. We chose not to do another one as the prior one was within 60 days and the house was vacant.

My buyer moves in. Hardly lives there and 30 days after the purchase, the drop cables go out, half of the home had electricity. Shortly after that, hears water running from inside the walls in the bathroom when they take a shower only to find out the pipes inside the walls are leaking when you turn on the shower.

Insurance company comes and tears out the wall and it has prior water damage. Seller never disclosed it. Nothing on the inspection report. What is my buyer’s recourse at this point? Thank you.

Answer:

This is an interesting case. I assume that you acquired the Inspection Report from the Seller rather than from Buyer #1.

Any liability upon the Seller will be based upon: 1) the failure to disclose a latent defect which they knew about, or 2) providing false representations concerning the condition of the house (Inspection report). The first claim is in contract, the second claim is in tort.

Did the Seller know about these two problems? Obviously, they are not particularly visible. I gather that the electrical system worked for 30 days. The water behind the walls would not likely have been evident to the inspector. However, apparently there was prior damage. Did you ask about any prior damage? Was there any repair or renovation work undertaken? Were building permits obtained? Have they now been closed? Was a claim made to an insurance company? Your client’s insurance broker can check on this. Depending upon the circumstances, if your client obtained Title Insurance and there were open permits, but the status wasn’t checked by the lawyer, then there may be a title insurance claim here. They will fix the problem. The homeowner’s insurer will repair the damage.

The next issue would be a possible claim in tort as against the Seller and possibly the Home Inspector. I do appreciate that there is no privity of contract, but this is not a contract claim. It is one based in negligence. It may very well be that the Seller deceptively provided a poorly completed inspection report knowing that it was inaccurate and used it to falsely describe the property. It is not necessary to prove nefarious conduct, pure carelessness will be sufficient.

There are about 50 questions that need to be asked and answered before this could be figured out. But, all in all, I think you might get to first base here.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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