Problems with Real Estate after Closing


 “I Want To Sue The Bastards!!”

That’s what buyers say when they discover problems after taking over a property because, “the seller knew about the flooding basement/mice in the attic/leaking roof”. When these kinds of questions come our way here at RMLO Law LLP, we turn to our resident litigator. If you have a problem where the only resolution is going to court, expect to pay a retainer and get prompt action.

Most things we buy (even used cars!) come with some form of guarantee or other protection from loss. Unfortunately, used real estate isn’t one of them. Apart from very narrow exceptions, you are truly on your own when it comes to dealing with issues that arise with a property after closing. This post discusses your limited options when trouble arises after you get the keys to your new property.

As part of your diligence, you most likely would have had a property inspection done by a professional inspection company. This may lead you to think that the inspection outfit will be responsible for things they “miss”. This thinking would be wrong.

The contract you sign with the inspection company will clearly define the responsibility of the company and tightly restrict their liability. Chances are pretty good that anything not discussed in their report is excluded from their scope of work and therefore not covered by their guarantee of workmanship.

Well, if the home inspector is not responsible, shouldn’t the seller be?

Not likely. The ancient Roman legal concept of caveat emptor (“buyer beware”) is alive and well in our modern legal system, at least as it applies to buying properties. Another ancient legal principle is that contracts regarding land must be in writing to be enforceable.

Put together, this means that you can’t completely count on any representations—either by the seller or the seller’s agent—regarding anything about the property apart from what is expressly stated in the contract. If you want assurance about something not included in the standard representation and warranty provisions in the printed form contract, you must have seller sign-off, either by way of amendments to the printed form or a separate schedule.

Are there exceptions to this draconian state of affairs? Of course—our legal system is built on exceptions. The best known relates to “latent defects”, which are problems with a property that cannot be detected without “destructive testing”. If the unequivocal evidence shows that the seller concealed a problem, such as by drywalling over major foundation cracks, you may have a claim for the costs of repairing the foundation. BUT, because of the requirement of contractual privity (the principle dictates that an individual cannot sue on a contract to which he or she was not a party), you must be able to prove that it was your seller, and not a previous owner, who committed the dastardly deed.

Another exception to the caveat emptor rule is the existence of a latent danger on the property, whether or not the seller is aware of it. However, most properties in our area aren’t sitting on unexploded artillery shells, so instances of this situation are few and far between. A recent Alberta court decision considered a buried former municipal garbage dump to be a defect rather than a danger.

The lesson here is that you can’t count on anyone else being held responsible for problems with your newly acquired property unless you had the issue specifically covered off in your purchase contract. So the clear focus must be on completing a comprehensive due diligence process before you sign off on condition removal. If you still believe you have grounds for a claim, we would be pleased to review it with you.


Contact Barry McGuire now.
Alberta real estate needs an Alberta real estate lawyer.

“Twisted House” public domain image from Wikipedia.