TRESA stipulates we are now under the obligation to disclose material latent defects if they are known to us.
1. Are we now under the obligation to ask our seller clients before we list their homes if they are aware of any material latent defects? The law is silent on that point. I’d say best practice is to ask even if there’s no legal obligation.
2. From a liability standpoint, does this make it more or less beneficial to advise seller clients to do a pre-listing home inspection?
This is the relevant section:
“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.”
RECO has published a Bulletin 7.4, entitled “Facts a seller has a legal obligation to disclose”.
“A seller must disclose latent defects.” This does not appear to be supported by the case law. The only obligation is “known, material, latent defects”.
“Even if a seller does not have direct knowledge of a latent defect, they may still be liable if they were willfully blind about the existence of the defect.” This again is not supported by the case law. They either knew or they didn’t know. To establish liability, the Buyer has to prove to the satisfaction of the Trial Judge that the Seller had “knowledge”. No knowledge, no liability!
So, before we get to disclosure, we have two tests:
- Knowledge on the part of the Seller, and
- Knowledge on the part of the Agent.
Going forward, why would any Listing agent wish to cross that barrier? In response to your two questions:
- Don’t ask,
- Don’t get a pre-listing inspection.
At the outset in terms of discussion, the Seller should be advised in advance of this new obligation, cautioned that “anything they say, can be used against them” and if appropriate recommended to seek legal counsel.
Once the Seller elects to disclose, this factual disclosure should be clearly authorized.
If the Seller refuses to disclose, and the agent knows, then, the agent can decide not to proceed with the Listing.
Otherwise, the Seller might later in a lawsuit seek damages for the deficiency in price based upon a breach of the agent’s fiduciary obligations.
Brian Madigan LL.B., Broker