Comfortably settled in their new home, the Richardsons finally heave a sigh of relief. The buying-selling-moving marathon is finally behind them! But just as they’re beginning to enjoy their residential honeymoon, the phone rings. On the other end of the line is the new owner of their former house, who has just discovered a serious problem for which he is holding them liable.
Linda and Ralph are shaken. When the sale went through, nothing seemed wrong. They had stated everything they knew about the house. And the buyer had had the house inspected. The initial shock is followed by anxiety. What should they do?
When receiving the legal notice
You cannot just ignore the buyer by telling yourself his claims are unfounded. If you are contacted for an alleged hidden defect …
- 1. By telephone (conversation or voicemail message) or by e-mail:
- You do not have to take an official position or feel guilty of anything, says notary Yvon Boily.*
- Take note of the buyer’s allegations and ask him to present the facts in a letter, as required by law (Civil Code of Quebec, Section 1739).
- 2. By letter:
- Use the same channel as the buyer and send him a reply by registered mail.
- Take a firm position and ask that the nature and source of the problem be explained to you clearly, if this has not already been done (for example, through a detailed expert’s report or explicit photos). This amounts to asking the buyer to provide his evidence.
You have everything to gain by creating a suitable climate for gaining an understanding of the problem, for negotiation purposes and, if necessary, for seeking a solution. “Going to court can cost much more, and this is something to think about.” Mr. Boily notes. “In addition, going before the courts is a process that can take many months, whereas the problem may be settled quickly and effectively between the parties involved.”
Room for negotiation
If you consider this useful, ask to have access to the premises in the company of your own expert to size up the problem with your own eyes. This will give you a second opinion and a second estimate that will enable you, depending on circumstances, to establish a basis for negotiation when it comes to discussions with the buyer.
What can the buyer demand? Most often, he will claim a lump sum covering the cost of the repairs that have to be done. For a major defect, he may seek a reduction in the selling price. Take note that only a very major problem can justify cancelling the sale of a house.
Depending on the case, you have four grounds for defence in showing that the matter does not involve a hidden defect:
- The defect was apparent at the time of sale or was known to the buyer;
- The defect is due to normal wear and tear;
- The defect results from misuse by the buyer;
- The contract stipulates that the property was sold “at buyer’s risk” with no legal warranty.
In the Civil Code of Quebec, Section 1726 explains the warranty of quality by the seller: “The seller is bound to warrant the buyer that the property and its accessories are, at the time of the sale, free of latent defects which render it unfit for the use for which it was intended or which so diminish its usefulness that the buyer would not have bought it or paid so high a price if he had been aware of them. The seller is not bound, however, to warrant against any latent defect known to the buyer or any apparent defect; an apparent defect is a defect that can be perceived by a prudent and diligent buyer without any need of expert assistance.”
The notion of hidden defect is often misinterpreted. The buyer, like the seller, may have an interest in consulting an expert in real estate law, including a notary, before going to the barricades. In this regard, the notary was handled the real estate transaction involved in the dispute is in an especially good position. “A notary must deal impartially with all the parties involved in a real estate transaction,” Mr. Boily added. “The notary’s role is to make things clear and not to pull the covers to one side.”
If, following consultation, discussion and reflection, you reject the buyer’s allegations, you would do better to inform him of this by registered letter. The seller will then have the burden of launching legal action if he remains convinced of your liability.
* We thank Yvon Boily, Notary, Montreal.
Also read our article intended for buyers, titled Hidden defects: s buyer’s approach