Property Condition Disclosure

You may have heard the Latin term “caveat emptor” in relation to buying property. It means “buyer beware.” In legal terms, this means buyers have a responsibility to inspect the property and the condition it is in. A seller does not need to point out defects that the buyer could see for themselves. Things like stains on carpets, dents in walls and missing shingles typically fall into this category. The exception to this is where the seller has taken steps to conceal the otherwise obvious defects.

On the other hand, sellers must inform buyers about any defects known to the seller that would not be discovered by a reasonable inspection. This could include things like past problems with water in the basement, windows that leak when it rains or faulty plumbing. This only applies, however, if the seller knows about the problem. Sellers and their real estate agents are required to answer honestly when asked about the condition of the property.

This concept exists so that buyers are given the same amount of knowledge as the seller. This allows the buyer to make an informed choice as to whether to buy the property. The buyer cannot complain to the seller after the purchase about defects that the seller honestly told them about.

The buyer usually asks the seller to complete a document called a property condition disclosure statement. This document has questions asking whether there are issues with things like flooding, the foundation, or the plumbing or electrical systems. A property condition disclosure statement is not required for a sale. However, even if one is not used, sellers must still tell buyers about defects that cannot be seen by a normal inspection. The advantage in completing one is that it creates a written record of what was disclosed.

It is important for sellers to understand that buyers can hold them to their answers. Sellers will want to carefully answer the questions to the best of their ability. They should add as much information as needed even if there is not enough room on the document. Sellers must answer the questions truthfully. The buyer could use any false or misleading statements against the seller.

If a dispute arises over the condition of the property, the matter may end up in court. The court will try to determine whether the seller answered the questions truthfully and honestly. If the seller did not, the court can order them to pay damages to the buyer. This could include damages for the cost of repairs or the reduction in value of the property.

However, courts have found that a seller giving answers on a disclosure statement is not the same as giving a warranty about the condition of the house. A warranty is a promise that the property is or will be in a certain condition. The courts have also said that by completing a disclosure statement, the seller is not guaranteeing that there are no problems other than those asked about.

It is important to remember that a seller only has to disclose defects that they know about. For this reason, it is a good idea for the buyer to get the property inspected by a trained professional. This can reveal defects that no one knows about. Some of the things to check are:

• the foundation and building structure
• the water and sewer systems
• the furnace and water heater
• the insulation

Buyers often make an offer on a house conditional on obtaining a favourable building inspection. If a buyer then becomes aware of a problem or potential problem, they can choose to walk away from the deal before it becomes final. The buyer could also ask for more information, make a lower offer on the property because of the problem or just make the purchase as planned.