Found a Hidden Defect After Buying a BC Home? Claims Against the Seller

Discovering a leak, mould or structural problem after you move in is stressful, and the first question most buyers ask is whether the seller has to pay for it.

The answer turns on a few legal tests. This guide explains caveat emptor, when a seller can be liable, what the property disclosure statement does and does not promise, and the deadline that applies.

The starting point: buyer beware

BC law still begins with caveat emptor, or "let the buyer beware". A buyer is expected to inspect the property and make reasonable inquiries before buying, and generally takes the risk of defects that a reasonable inspection would have revealed. These are called patent defects. In Cardwell v. Perthen, 2007 BCCA 313, the Court of Appeal confirmed that the onus on a buyer to inspect and ask questions is a high one. In Nixon v. MacIver, 2016 BCCA 8, it confirmed that caveat emptor remains a significant rule in BC, subject to limited exceptions.

So the first question about any problem you find after completion is whether it was discoverable. A stain on a ceiling, a soft spot in a floor or a crack visible in the foundation may well be treated as patent, even if you did not notice it. Defects that could not be found on a reasonable inspection are latent defects, and that is where claims against a seller usually start.

When a seller can be responsible

A seller is not a guarantor of the home's condition. A claim generally needs one of the following:

• A dangerous or uninhabitable latent defect the seller knew about. The courts have recognised a duty on a seller to disclose a latent defect they know of that makes the home dangerous or unfit to live in.
• Active concealment. Covering up a known problem, for example painting over water damage or hiding rot behind new panelling, can found a claim even where the defect might otherwise have been discoverable.
• Misrepresentation. A false statement about the property, whether in conversation, in the listing or in a disclosure statement, can support a claim if you relied on it. The remedy depends on whether it was fraudulent (the seller knew it was false or was reckless), negligent or innocent; an honest, innocent misstatement gives far more limited remedies.
• Breach of a contract term. If the contract contains a promise about the property, and that promise was broken, you may have a claim in contract.

What the property disclosure statement does, and does not, promise

Many BC resale contracts attach a property disclosure statement completed by the seller, answering questions about things like leaks, moisture, structural problems and renovations. When it is incorporated into the contract, its answers become representations you can rely on.

But in Nixon v. MacIver, the Court of Appeal held that the answers reflect the seller's current actual knowledge. They are not a warranty that the home is free of the problem. A seller who honestly did not know about a leak is not liable just because the answer turns out to be wrong. A seller who answered "no" to a question about water damage they had repaired, or knew about, is in a different position. The evidence of what the seller knew, and when, usually decides these cases.

The two-year clock

Under section 6 of the Limitation Act, a court proceeding must generally be started within two years after the day the claim is discovered. Section 8 sets the discovery test: the first day you knew, or reasonably ought to have known, that loss had occurred, that it was caused by an act or omission, that the act or omission was the seller's, and that a court proceeding would be an appropriate way to seek a remedy. Section 21 sets an ultimate limit of 15 years after the act or omission, regardless of discovery. Our article on the two-year limitation period in BC explains how these rules work.

The phrase "ought to have known" matters. If you saw signs of a problem and did nothing, the clock may have started earlier than you think.

What to do now

• Record everything. Take dated photos and video of the defect before any repair, and keep a note of when and how you found it.
• Get an independent assessment. A report from a qualified contractor, engineer or remediation company helps show what the defect is, how long it has likely been there and what it will cost to fix.
• Gather the paperwork. Your contract, the disclosure statement, the listing, your inspection report and any emails or messages with the seller or realtors.
• Make urgent repairs carefully. You may need to stop ongoing damage, but keep removed materials or photograph them, and consider giving the seller notice and a chance to inspect first.
• Check other sources of recovery. Your home insurance, a new home warranty if the home is recently built, and in some cases the home inspector may be relevant.
• Get advice on the claim and the forum. The amount in issue affects where a claim is brought. Our guide to the CRT, Small Claims or Supreme Court explains the options.

Damages are often measured by the reasonable cost of repairing the defect, and only for the defects the seller is legally responsible for. If the purchase never completed at all, different remedies apply; see our article on what happens when a BC real estate deal collapses.

Found a problem after buying? Get advice before the two years run

Our litigation lawyers can review your contract, disclosure statement and inspection report, assess whether the seller or others may be responsible, and advise on the evidence you need and where to bring a claim.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.