In certain markets it is often tempting to write an offer with few subjects to gain appeal especially in a multiple offer situation. As a buyer it is your responsibility to discover facts. One way you do this is to ask for information by making the offer subject to receiving that information and being satisfied with it.
True, it is a seller’s responsibility to disclose certain facts to you, they are called latent defects >>> A latent defect is something that cannot be discerned through a “reasonable” inspection of the property including; a defect that renders the property dangerous, potentially dangerous to occupants, or unfit for habitation. This also includes lack of building permits.
A seller does not have to disclose a patent defect! While some defects could be latent, the courts can rule YOU the buyer, had reasonable opportunity to discover the defect. Example is in a recent article written by Jennifer A Clee for BCREA.
I have included the article below for further reading, but the bottom line is: Make inquiries or take the risk.
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February 2012, Article from BCREA:
There have been a number of recent articles on a seller’s obligation to make full and complete disclosure of all issues respecting property offered for sale. What about a buyer’s obligation when purchasing property?
Most licensees are familiar with the doctrine of caveat emptor or ‘buyer beware.’ That maxim holds that a seller has no obligation to disclose patent defects: those discoverable upon a reasonable inspection. However, a seller does have an obligation to disclose latent defects – those not discoverable upon a reasonable inspection – which make the premises dangerous or unfit for habitation. Courts have balanced a seller’s duty to disclose certain facts and to avoid misrepresentation with the buyer’s duty to protect their own interests.
Characterizing a defect as patent or latent is a question of fact requiring consideration of the defect’s nature, its importance to the buyer, and the extent of the inspection and inquiry that would be reasonable in the circumstances to reveal the defect. In determining the applicable standard of care, the court will consider the investigative actions that a reasonably prudent buyer would take in the circumstances. The buyer’s level of sophistication is relevant in determining the standard. Our courts consider that buyers have the primary responsibility for investigating a property they propose to purchase, and
a duty to carefully review all information provided to them regarding the property.
Consider the facts in Creswell Investments Inc. v. Pavone1: a sophisticated commercial buyer purchased a commercial strata unit that had a removable mezzanine installed without the necessary building permit. The buyer’s offer was non-subject and specified that the mezzanine was included. While the seller had completed a Property Disclosure Statement (PDS), which indicated the seller was aware of alterations or additions done without a required permit and referred to the mezzanine, the buyer did not ask for the PDS and thus it was not provided.
Prior to completion, and at his request, the buyer received authorization from the seller to review the property’s city file and received the contact information for the mezzanine manufacturer. The buyer did not follow up in reviewing the file or contacting the manufacturer.
After the sale completed, the buyer discovered the mezzanine did not comply with the building code. The buyer sued the seller for failing to disclose the mezzanine’s status. After dismissing the claims for misrepresentation against the seller, the ultimate issue for the court was whether the mezzanine’s status constituted a latent defect, which the seller was obliged to disclose, or a patent defect.
The court found that the mezzanine did not comply with the fire safety provisions of the building code and this was a latent defect as the premises were potentially dangerous. However, the court concluded that, as the mezzanine’s status could have been discovered by a reasonable investigation by the buyer, the defect was patent.
The court held that a reasonably prudent buyer in the buyer’s position would have made enquiries about the property at the time of his offer and made the agreement subject to being satisfied with the results of those enquiries. The court held that at the very least, the buyer should have requested a copy of the PDS. Had those steps been taken, the buyer would have discovered the mezzanine’s status.
The decision serves as a reminder that while sellers are obliged to make full and complete disclosure of defects not readily discoverable, making the property dangerous or unfit for habitation, buyers are equally obliged to exercise due diligence in investigating properties they propose to purchase. The standard of inquiry will be that of a reasonably prudent buyer in the circumstances.
Jennifer A. Clee
B.A., LL.B.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
Link to more information about: Property Disclosure Statements (PDS)
