Home Inspection Reveals Issues? Be Sure to Disclose This to Potential Purchasers…

Home Inspection Reveals Issues?
Be Sure to Disclose This to Potential Purchasers…

As a real estate agent it is advisable that you inform potential purchasers if a previous home inspection had been conducted on the property which revealed defects. Also be sure to disclose ALL defects which were identified, and if any work had been completed to attempt to repair the issues.

In the case Gundersen v. Savoy an offer was made on the Savoy’s property conditional upon a home inspection. The home inspection revealed some defects which allowed the potential buyer to terminate the deal. The results of that inspection was not disclosed to the next potential buyer (the plaintiffs) and the real estate agent (Mr. Lightburn) discouraged this buyer from conducting their own home inspection. The property was purchased and it was discovered that the structure was infested with mould and mildew.

The Savoy’s had listed their property in 2003 and over a period of three years they did not have much action on their home until an offer was submitted in 2005, conditional upon a home inspection. The home inspection revealed the presence of mildew and as a result the offer was terminated. Some work was undertaken to attempt to remediate the issue and the real estate agent was aware of this fact.

In 2006, the plaintiffs viewed the property and had discussions with the real estate agent indicating that if an offer was made they felt it should be conditional upon a satisfactory home inspection. The agent advised that this was not necessary and pointed out the fact that an inspection had already been completed, however, he left out the very important detail that mildew/mould had been identified. The purchasers took the agents advice (he was also a family friend) and an offer was submitted without the home inspection condition. It was accepted the next day by the vendors.

Several months after taking possession, the purchasers discovered a significant amount of mould infestation. Furthermore, their daughter began to experience some minor health issues. As a result, they vacated the property and started a lawsuit against both the vendors and the real estate agent/brokerage. During this time, Ms. Gundersen also developed depression as a result of the whole situation. The detrimental health effects on both the daughter and Ms. Gundersen was included in the lawsuit to seek aggravated damages which “are awarded to compensate for intangible emotional injury.”

At trial it was found that the vendors were not liable as they had not attempted to conceal anything. They undertook to complete the work that they believed was required to fix the issue when it was first identified in the home inspection. After the work was completed, they were under the impression that they had solved the problem.

The listing agent and the brokerage were found to be liable for both general and aggravated damages. The listing agent had been attempting to sell the property for about three years and was clearly in a position “where his desire to sell a property that had been on the market a long time and his duty to the vendors to do his best […] conflicted with his duty to the plaintiffs as purchasers.” As a result, what he decided to say and not say to the purchasers was considered to be deceitful. There was clearly a conflict of interest and the way that he chose to approach and resolve the situation was detrimental to the plaintiffs.

Justice Melnick stated that “by only giving part of the findings of the report […] Mr. Lightburn was probably more effective in dissuading the plaintiffs from having an inspection done than if he had said nothing at all about the prior inspection.” This led to the conclusion that he was liable to the plaintiffs in deceit. Also, his brokerage was found liable due to the fact that listing agent’s knowledge is ascribed to it as his employer. The general damages amounted to $37,000. The plaintiffs were also awarded aggravated damages in the amount of $10,000 due to the ill health effects and inconvenience that was caused to their lives.

This case points to the fact that real estate agents have a duty to act fairly, honestly and with integrity in their real estate dealings. Even when agents have a listing of a property which could be considered a ‘problem property’, they have a duty to advise potential purchasers of any issues which they are aware of. If a home inspection has been completed which has resulted in a revoked offer, be sure to inform potential purchasers of this fact and do not intentionally leave anything out.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

Shari D. Elliott
Elliott & Elliott
135 Bayfield Street, Suite 101A
Barrie, Ontario, L4M 3B3
Tel.: 705-797-2672
Fax: 705-797-8445
Prepared with the assistance of Hayley Valleau Email: shari@elliottlawyers.com