August 23, 2011
Leong & Roozendaal (Re/Max Camosun)
MULLIN DEMEO ELECTRONIC LEGAL UPDATE - August 22, 2011
Most real estate purchases are made conditional on the buyer approving the results of a building inspection. Because most buyers are unable to determine whether a house is well built and structurally sound on their own, they rely on advice provided by qualified, licensed inspectors. However, what if the information and advice provided by the inspector turns out to be incorrect? A recent decision of the B.C. Supreme Court examined this exact scenario.
In 2006 a prospective purchaser (hereafter the “Purchaser”) made a conditional offer to purchase a Victoria property. The offer was accepted by the sellers. One condition of the offer was that it was subject to the Purchaser’s approval of the results of an inspection; the Purchaser hired a local building inspector to inspect the property and, upon completing of his inspection, the inspector advised the Purchaser that there was a solid, complete foundation and only minor drainage problems with the house. In addition, when the sellers filled out the Property Disclosure Statement (the “PDS”) they indicated that they were not aware of any structural problems or moisture related problems with the house. Relying on that advice, and on the PDS, the Purchaser removed this condition in addition to all of the others and completed her purchase.
After completion, the Purchaser discovered water damage in the house caused by significant cracking in parts of the foundation, and further discovered that the house was not in fact supported by a complete foundation. The costs of completing the necessary repair work were estimated at more than $30,000, so the Purchaser sued the building inspector alleging negligence as well as the sellers for misrepresentation.
At the outset of the trial the Supreme Court judge quickly dismissed the case against the sellers. The judge reaffirmed that the PDS is not a warranty from the sellers to the buyers, and that in most instances the seller’s only obligation is to not mislead or lie on the PDS. The judge held that the sellers honestly did not know of the problems with the foundations, and therefore did not misrepresent anything on the PDS. Addressing the inspector’s liability, the judge noted that the “…purpose of securing a residential home inspection is to provide to a lay purchaser expert advice about substantial deficiencies in the property...” This expert advice helps the buyer determine whether or not to proceed with the purchase. In addition, the court noted that “…persons who hold themselves out as professional know they invite reliance, and create a risk of harm if….their advice is wrong”.
The court emphasized that the inspector not only missed the fact that there were significant problems with the foundation, but he in fact positively asserted that the foundation was fine. This turned out to be incorrect. The Purchaser reasonably relied on the inspector’s expert advice, and suffered as a result of it. The Supreme Court ruled against the inspector and awarded damages emphasizing that real estate purchasers act reasonably when they rely on the advice of professionals, and those professionals are expected to provide advice that is reasonable in the circumstances.
This discussion of building inspectors’ liability is intended only as a brief introduction to the subject. Should you have any questions or concerns with respect to this or any other aspect of real estate law, please contact Brendan Piovesan, Mullin DeMeo, at firstname.lastname@example.org, or (250) 477-3327.