False Disclosure: No Warranty for Water Damage

 

By Brian Madigan LL.B.

This case of Morrill and Bourgeois came on for trial in Superior Court of Justice at Thunder Bay in 2007.

Matthew Morrill purchased a property in Thunder Bay from Mr. and Mrs. Bourgeois. They acquired the residence in 2004 from Mrs. Bourgeois' grandmother who bought it in 1957.

The residence was relatively small consisting of about 680 to 700 square feet plus the basement.

The case is based on water damage and water leakage in the basement. The action is based on misrepresentations as the condition of the premises at the time of sale. It is alleged that the Seller Property Information Statement contained either fraudulent or negligent representations.

The Bourgeois decided to move to a larger home in September 2005. They listed their home for sale with two agents, being Mr. and Mrs. Ferris. At the time of the listing a Seller Property Information Statement (SPIS) was completed and it disclosed the following under the heading "Improvements and Structural":

· that they had not made any renovations, additions or improvements to the property;

· that they were not aware of any moisture and/or water problems;

· that they were not aware of any damage due to wind, fire, water, insects, termites, rodents, pets or wood rot;

· that they were not aware of any problems with the plumbing system.

Mr. Morrill viewed the property in early October and submitted an Offer on 22 October 2005. Prior to submitting the Offer he saw and reviewed the SPIS document. He again viewed the premises on 2 November 2005 with a home inspector, and closed the deal on 5 December 2005.

As you might imagine shortly after he obtained possession he discovered water problems in the basement. He smelled "mildew" and upon investigation found mould behind the panelling in the basement. He found cracks in the concrete blocks. In fact, some blocks could be removed by hand.

Mr. Morrill obtained estimates for the repair which exceeded $30,000.

Analysis by the Court:

· "Mr. Bourgeois testified that while he and his family resided in the home, he was in the basement daily. He said that he never noticed any mildew, odours or water problems. He stated that he knew a purchaser would read the Seller Property Information Statement before buying the home. He agreed that a portion of the Seller Property Information Statement, which indicated that the vendors had not made any renovations, additions or improvements to the property, was not accurate. He agreed that the master bedroom, and a deck that he had constructed at the rear of the home, were improvements. He explained that he and his wife had not acknowledged these improvements because the wording of the question indicated to him that it was in reference to those improvements for which a building permit had been obtained. He stated that he and Mrs. Bourgeois had not got building permits for the master bedroom or the deck.

· I am satisfied that there are serious water problems with the basement, including leaking, moisture and mildew. It is clear that the south wall has buckled and that a number of the concrete blocks are loose.

· The Seller Property Information Statement is not a warranty. To succeed in his action, Mr. Morrill must therefore prove misrepresentation.

· Weighing the evidence as a whole, with the proof commensurate with the gravity of the allegations, I am not satisfied that Mr. Morrill has proved on the balance of probability that Mr. and Mrs. Bourgeois, or either of them, were guilty of fraudulent misrepresentation concerning the problems with the basement.

· I accept that the basement walls had been a problem long before Mr. Morrill purchased the home.

· There was no evidence of any act of concealment (in fact, the vendors occupied part as the master bedroom and stored both their food and clothing in the basement).

· I do have some concerns about the fact that the Seller Property Information Statement was not accurate with respect to improvements. The explanation given by the Defendants was somewhat unclear. However, Mrs. Bourgeois did testify that the realtor was fully aware that the master bedroom was new to the home. In any event, it is difficult to see any perceived advantage to the Defendants in denying that they had made improvements to the home. I therefore do not place a lot of weight on this inaccuracy.

· The two real estate agents and the home inspector failed to detect the presence of a mildew smell or moisture."

The trial Judge concluded:

"While I have sympathy for Mr. Morrill, who has purchased a home with problems that will be very expensive to remedy, there is not sufficient evidence before me, commensurate with the gravity of the allegations, to conclude on the balance of probabilities that Mr. and Mrs. Bourgeois, or either of them, fraudulently, or negligently, misrepresented the condition of the basement."

COMMENT:

It would certainly seem that in this particular case that the vendors were quite fortunate. They were able to escape liability in part because they must have lived with he mildew smell and the moisture without notice. The fact the two realtors and the home inspector were similarly unaware, allowed the trial Judge to find in favour of the vendors. There was obviously "evidence", just not a sufficient amount of "evidence".

Although, they themselves had undertaken the finishing of the master bedroom in the basement, and their SPIS reference in that regard was inaccurate, it did not really relate to the specific matter in issue.

You will also note that there was no evidence of any egregious act on the part of the vendors like painting, hiding or concealing the problem in any way.

So, on the basis of contract, the SPIS did not amount to a warranty, and on the basis of tort there was no evidence of fraud or negligence.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Royal LePage Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com