The doctrine of caveat emptor (“let the buyer beware”) applies to residential real estate transactions in Ontario. The underlying rationale for the doctrine rests on a policy decision as to which party should bear the risk of any deficiencies in property purchased. In general, that risk is to be borne by the purchaser unless the circumstances fall within recognized exceptions. The buyer may otherwise protect him or herself by contractual terms.
The courts have recognized four exceptions to the rule of caveat emptor:
1. where the vendor fraudulently misrepresents or conceals;
2. where the vendor knows of a latent defect rendering the house unfit for habitation;
3. where the vendor is reckless as to the truth or falsity of the statements relating to the fitness of the house
for habitation; and
4. where the vendor has breached his or her duty to disclose a latent defect that renders the premises
The plaintiff must prove the following to establish a fraudulent misrepresentation was made by the vendor:
(a) the vendor made a representation of fact;
(b) the representation was false;
(c) the vendor knew the representation was false or made it recklessly; and
(d) the representation did, in fact, induce the plaintiff to enter into the agreement to his or her
The law distinguishes between latent and patent defects. A patent defect is one that would be apparent to a purchaser without further inquiry or inspection. A purchaser does not need the vendor to point out a patent defect because it is plain to the senses. A purchaser is expected to protect himself or herself from patent defects by ordinary inspection or inquiry. A purchaser can also protect him or herself by including contractual warranties that survive closing.
A latent defect is a defect not readily apparent to an ordinary purchaser during a routine inspection of the property. A vendor can be liable to a purchaser if he or she knows of a latent defect that renders the premises unfit for habitation. The onus rests on the purchaser to show that the vendor knew of the latent defect, concealed the latent defect or made representations with reckless disregard for the truth.
“Concealment” in the context of a latent defect connotes an act done with an intention to hide from view some defect of which the vendor is aware or wilfully blind. Silence about a known major latent defect is the equivalent of an intention to deceive. *
William Poulos, Barrister
* This blog is not a substitute for legal advice. Should you require legal advice, a lawyer should be consulted to advise on the specific circumstances of your matter.