Deceitful Disclosures

Imagine making an offer on a home then asking your real estate professional if you need a home inspection. Imagine being told “no” because one was done two years prior and the only issue was a too-small furnace, proceeding with the purchase and then discovering your house is filled with mildew and mould. Now, imagine how you’d feel if you found out that prior home inspection indicated a mildew problem. That is essentially what happened in a recent court case in B.C.

Case Particulars:

• In June 2004, sellers listed their property and in a Property Disclosure Statement (PDS) they stated they were not aware of any moisture problems.
• In February 2005, the sellers accepted an offer subject to a home inspection. The home inspection pointed out a minor mildew problem and indicated the furnace was too small for the home. The deal collapsed as a result of the home inspection.
• The inspector gave the sellers advice on a quick way to remedy the mildew issue. This was not a professional mould remediation, but a DIY fix with vapour barrier and a mildew-killing solution; advice the sellers acted upon.
• In January 2006, new buyers submitted an offer on the property. The new buyers knew the listing professional who represented the seller and chose to use him as their representative as well.
• The buyers indicated they wanted to make their offer subject to a home inspection, but their representative told them an inspection had been done recently and that it only turned up a too-small furnace. By that point, the sellers had updated their PDS to say they were not aware of any moisture or water problems in the walls, basement or crawl space – they did so because of the DIY remedy.
• Upon moving in, the buyers became aware of widespread mould and mildew problems. After six months they moved out of the home because of health concerns.
• The buyers sued the sellers, the industry professional and the brokerage for $47,000 in damages. The Court threw out the claim against the seller, but found the industry professional and the brokerage liable for deceit.

The Court’s Findings

The Court found the sellers’ industry professional was deceitful to the buyers in what he said and didn’t say about the original home inspection. His argument was that the sellers had fixed the problem, but the Court found that if he truly believed the seller had remediated the property, he should have told the buyers about the original home inspection report.

What Did He Do Wrong?

Where the industry professional erred was in misrepresenting the contents of a previously completed home inspection. The court found this was deceitful, especially since the previous report DID identify a material defect. In a sense, the industry professional did not answer the buyer’s inquiry about the need for a home inspection honestly.

Beyond the Court’s findings, this particular industry professional was in a Limited Dual Agency situation with the buyers and sellers, which is similar to transaction brokerage in Alberta. In a transaction brokerage situation, the industry professional must treat both parties in an even handed, objective and impartial manner and may not advocate for the interests of either party nor assist any party in gaining an advantage over the other party. The industry professional should not have given any advice to the buyers. In this case, by advising against a home inspection condition, the industry professional acted to the benefit of the sellers and detrimentally to the interests of the buyers, this is especially true since he knew there had been a problem with moisture on the property.

Do you agree with the Court’s findings?

Should the sellers have also been liable?