Buyer beware! These two simple words carry significant weight in our legal system. They, with other terms like, "As is, Where is" and Caveat Emptor represent the principle that vendors or sellers are not responsible for anything once the good (usually real estate) is transferred to the purchaser or buyer.
While, at times it may seem unfair - how is a purchaser or buyer unfamiliar with the product, or home, able to make a judgement on its condition? - the law likes responsibilities to end. This principal of finality is important for our economy. Otherwise, if vendors were perpetually responsible for a good or property sold, they would have to establish a contingency to deal with possible future claims. How long must vendors remain responsible for a good or home after the sale? How do we determine if the purchasers contributed to an already existing problem?
While I suppose insurance could cover it, you can see how messy this could be. So, to limit ongoing responsibility - imagine buying and selling 4 or 5 homes in your lifetime and remaining responsible for each one - the law developed the principle of Buyer beware. It's arbitrary, but it works.
However, the law is not static. Over the years, the law is modified or changed by judges through their decisions. Caveat Emptor applies when a defect is visible or would be discovered upon a reasonable inspection. The vendor does not have an obligation to disclose defects if they can be found.
But! if a defect cannot be discovered by reasonable inspection and the vendor was aware of the problem, then the vendor remains liable. In Manitoba the vendor would have to disclose this type of defect.
In addition, if the vendor makes a statement like those statements in the property disclosure form, and that statement is false or incomplete, then the vendor may become liable.
In the case Wang v Shao in British Columbia, Ms. Shao made an offer to purchase a luxury home in Vancouver for $5,5 million which Ms. Wang accepted (created a binding contract) During negotiations, Ms. Shao asked the vendor the reason for selling. Ms. Wang advised that they were selling because her daughter was changing schools.
However, Ms. Wang did not disclose that her husband, Raymond Huang, had been murdered in front of the property and that the murder remained unsolved. The purchaser also alleged that Raymond was the leader of the Big Circle Boys, a Chinese gang.
When the purchaser discovered this she wanted to cancel the contract. The vendor claimed that she broke the contract and wanted to keep the deposit and claim damages. As this case occurred in British Columbia with its high priced real estate, litigation was worthwhile. The deposit was $300,000.00 and the vendor claimed another $338,000.00 in damages.
The purchaser, Ms. Shao testified that she feared for her family's safety. In her legal arguments, she claimed that the murder amounted to a defect in the property that was not discoverable. The judge disagreed that the murder amounted to a defect. He concluded the following:
Here, when Ms Shao learned of the death of Raymond Huang in front of the property, her reaction was the product of her particular apprehensions and sensitivities. Neither Ms. Shao's subjective concerns nor the question of whether the death amounted to a defect is amenable to measurement on an objective standard.
However, in the end, the judge did agree that Ms. Wang did not disclose the murder and that by doing so, she misrepresented the truth. As the judge stated:
"An incomplete representation of material facts may amount to an actionable falsehood."
The judge ordered the return of the deposit, some limited damages for her initial legal costs when she cancelled the contract, and costs against the vendor.
This contract was formed on September 3rd, 2009. The decision was released on the 9th of March, 2019, almost 9 years after the action arose, and the trial was held in July and August 2017. I've written before about the costs of litigation. This is a perfect example of how slow courts are to resolve legal problems. The $300,000.00 deposit would have been held back from both parties for the entire time likely without interest. If you sue, be prepared to wait.
This article is presented for informational purposes only. The content does not constitute legal advice or solicitation and does not create a solicitor-client relationship (this means that I am not your lawyer until we both agree that I am). If you are seeking advice on specific matters, please contact Philippe Richer at 204.925.1900. We cannot consider any unsolicited information sent to the author as solicitor-client privileged (this means confidential).
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