SPIS ~ Cartwright and Fournier

Update the Document

This is another in the series of Property Disclosure Statements giving rise to litigation after closing. The parties entered into an agreement in November 2003 to close 14 April 2004.

The matter came on for trial in the Provincial Court in Calgary, Alberta.

The purchaser claims damages for alleged misleading and fraudulent statements regarding basement water leakage.

As part of the agreement, the following provision was included:

Vendor to supply Property Disclosure Statement satisfactory to Buyer’s approval.”

A Property Disclosure Statement was in fact executed by the vendors and the information contained in the Property Disclosure Statement formed representations but not warranties.

The vendors answered “no” to the following questions which are relevant to the issues in this matter:

“19. Where you aware of any roof leakage or unrepaired damage?

(age of roofing 3 years)
Indicate type of roofing: Asphalt.

23. Are there any hidden defects under the floor coverings or in the walls?”

27. Are you aware of any moisture and/or water problems in the house or any other part of the Property?

28. Are you aware of any past or present flooding or drainage problems on the Property?

29. Are you aware of any excessive setting, slippage sliding or soil problem?

31. Are you aware of any damage due to weather, fire, water, insects or rodents?”

The Property Disclosure Statement in part states as follows:

” Acknowledgement and Limitation of Statement

The Seller states that the above information is true based on the Seller’s current actual knowledge as of the above date. Any important changes to this information made known to the Seller will be disclosed by the Seller to the Buyer prior to Completion Day.”

There was significant water damage in the basement at the Completion Day. The purchaser discovered water damage in the basement within a few days of taking possession after she had initiated steps to commence renovations in the basement.

Court Analysis

The Court reviewed the issues as follows:

· The key question to be decided by this Court is whether the water damage was within the Defendant’s current actual knowledge at the time of completion of the sale.

· The Purchaser emphasized there was a misrepresentation in the Property Disclosure Statement with regard to any past roof leakage problems.

· Based on paragraph 19 of the Property Disclosure Statement I am of the view that there is not a misrepresentation with regard to the roof since paragraph 19 deals with a 3 year old asphalt roof which in fact did not have any leakage or unrepaired damage to it.

· Even if there was a misrepresentation made with regard to past roof leakage it was not fraudulent and not related to the damages claimed.


Accordingly, the purchaser’s case was dismissed.

COMMENT:

There are several matters to note. There was an obligation on the part of the vendor to update the Property Disclosure Statement right up to the closing date. In this case, actual knowledge was in issue. The Court did not look to the issue of whether the vendor reasonably ought to have known.

There was simply insufficient evidence to prove actual knowledge. This is quite unlike septic systems where there is clear evidence that a vendor sought to repair or replace a damaged system, but simply concluded that the property should be placed on the market instead.

Brian Madigan LL.B., Broker

wwwOntarioRealEstateSource.com

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