Back in November, I posted about Seller Property Information Statements ("SPIS") and a case in which a vendor was found to have misrepresented the answer to a question on the SPIS and was held to be liable.
In a recent decision, the Court of Appeal partially upheld a trial judge's decision awarding over $70,000 in damages to the purchasers of a home as a result of fraudulent misrepresentations made by the vendors prior to the deal going through.
The defendants (vendors) had constructed the house themselves. Prior to entering an agreement of purchase and sale the purchasers noticed some patching in the basement and asked if there had ever been water damage. The defendants' response, "absolutely not". The defendants also stated that the house had been built to a very high standard and at one point provided the purchasers with the engineering drawings for the home. Based on all of this, the plaintiffs decided to purchase the house.
Within weeks of closing a large rain storm resulted in water seeping into the basement.
The defendants admitted at trial that there had been some water issues during the construction and once after construction and prior to the sale. It was also revealed that the defendants did not build the house exactly in accordance with the engineered drawings.
As a result, the trial judge held that the defendants' had made fraudulent misrepresentations to the purchasers prior to the contract being signed. The representations about there never being any water problems and the house being built to a high standard were explicit representations. The fact that the defendants provided the drawings without saying that they did not follow them 100% was held to be an implicit representation that they had in fact followed the drawings (however, the Court of Appeal disagreed on this point and held that only the explicit misrepresentations triggered liability in this case).
The explicit misrepresentations meant that the entire agreement clause in the contract (which usually states that there are no representations or warranties made except those specifically set out in the written contract) was of no force or effect. The trial judge awarded the plaintiffs' damages in excess of $70,000, which was nearly the amount spent by the plaintiffs to remedy the problem. This amount was reduced on appeal to $48,000 as the Court of Appeal held that some of the work performed had nothing to do with correcting the basement problem.
This case is another good example that the more questions potential purchasers ask, the more protection they will receive down the road.