Water Penetration in the Basement: Available Remedies
The Buyers purchased a property less than two years ago. Following the closing they noticed that the property was experiencing water coming in through the basement walls.
Foundation Contractors were consulted to estimate the cost of repairs. In providing their quotations they remarked that the problem had been ongoing and was never properly repaired by the previous owners.
This information was not disclosed in any of the material related to the sale of the property.
What recourse would the new homeowners have as against the previous owners?
Time to Sue
The Buyers may have a case, but they will have to sue within two years; that’s not since the closing date but rather from the first point in time that they could have become aware of it. So, that may go as far back as the time when they saw it for the first time. The matter is quite urgent now.
It is possible that the two year period could start as late as the closing date, but better safe than sorry. Institute legal proceedings at once rather than be faced with the Limitations Act defence.
Defect: Latent or Patent
The first issue is to determine whether the defect was patent or latent. Was it out in the open for all to see? Was there evidence of water penetration? Could anyone see it just by looking at it? Was there any attempt to conceal or obscure any evidence? Did the Buyers have a home inspection? Did the Buyers receive a report to the effect that they should investigate further? Did they undertake such further investigation?
The second issue is one of importance. Is this water leakage/penetration significant enough? Is it important? Usually, it would be. It needs to be “material”, that’s as outlined in the cases dealing with the common law, not the Code definition of “material”.
Is the defect sufficiently important that it would be a relevant consideration at the time of purchase? This is a question of fact in each and every case.
The third issue is whether the Seller knew about it. This is a “fact”. It must be proven. It’s not guesswork! Subsequent contractors may say that… ‘they must have known about it, how could they not…”. That’s just speculation. It’s “hearsay”. It’s not proof.
Did they make an actual insurance claim? Did they contact a few foundation contractors and obtain quotes? Did they tell a neighbour? If so, that’s proof.
You will appreciate that there can be many instances when a homeowner just never investigates or pursues inquiry. They just don’t go down into an unfinished basement very often, and when they do, it’s dry.
The fourth issue is the “disclosure test”. Would this water penetration be important enough to render the premises:
1) structurally unsound or
2) unfit for human habitation?
You just need one or the other, not both.
The fifth issue is the application of the Negligence Act. Was the Buyer compliant in some way? Did the Buyer have their wits about them upon observation and inspection (spending most of your time texting on your phone would not be good)? Did the Buyer’s own actions or inactions contribute to their own loss?
This is the primary issue of “contributory negligence” on the part of the Buyer.
In this regard a Trial Judge would have the opportunity under the Act to apportion liability as between the parties. If the Buyer were assessed with 40% of the blame, then, the Buyer would recover only 60% of their loss.
The sixth issue is the contractual agreement itself. Were there any conditions, warranties, representations or clauses which dealt with this matter either specifically or generally? They would also be applied.
Choice of Remedy
There are two causes of action in this type of a situation:
In many cases, a plaintiff will prefer to sue under the law of torts, but, if the facts are insufficient, there may be good grounds simply in contract.
Court Level in Ontario
What Court should they be in? Small Claims goes up to $25,000.00. That makes the most sense for cases which go as high as $30,000.00 (abandon $5,000.00 and stick to Small Claims). After that, Superior Court is the route.
The Buyer will require a Paralegal to assist with this, perhaps up to $15,000.00 and over that should have a lawyer. In addition, it probably makes sense to have a Real Estate Expert Witness Report as well which would help to narrow the issues at trial.
Brian Madigan LL.B., Broker