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Claims for Latent Defects: Limits to the Pre-Purchase Inspection Obligation and to the Amounts That Can Be Awarded in the Event of Liability

The recent decision in Nguyen c. Succession de Durand, 2022 QCCS 3224 provides a useful illustration of the legal principles which apply in the event of a claim for damages for latent defects. The Superior Court reiterated that a buyer’s obligation to inspect a residence prior to purchase is limited in scope and that the damages which may be claimed with respect to the reduction of the sale price must be reasonable and determined according to the specific circumstances of each case

The Facts

In 1984, defendant Beaumier [the Original Seller] had bought a parcel of land on which he wanted to build a residence. He had a technologist prepare the plans, and hired contractors to build the residence in accordance with the plans. He then lived in the residence until 1990, at which time he sold it to defendant Durand [the Plaintiffs’ Seller] for $180,500.

In 2015, the plaintiffs expressed interest in buying the residence and visited it with a professional. During the site visit the inspector noticed a door that was not closing because of a sagging floor. He recommended that the plaintiffs have the problem examined by a general contractor. The general contractor considered that water damage declared by the Plaintiffs’ Seller had probably caused a joist to buckle. The contractor did not believe that it was necessary to make an opening to verify whether or not that was the case.

Having thus been reassured by the contractor and the Plaintiffs’ Seller, the plaintiffs declared their satisfaction with the inspection and purchased the residence for $455,000.

A few months later, the contractor hired to do the repair work noticed that the joist was not twisted but rather, that there were problems with the structural integrity of the building. The Plaintiffs’ Seller denied any liability, claiming that the irregularities noticed were not structural defects and were in fact visible at the time of the purchase. The plaintiffs then sued their seller, who called in warranty the Original Seller, from whom she had purchased the residence.

The Decision

The court summarized the general principles which apply to claims for latent defects. In short:

4. Under the warranty of quality provided for in the Civil Code of Québec, the seller guarantees the property sold against any latent defect, unless the buyer expressly waives this warranty. A buyer who raises this warranty against his seller has the burden of proving:

4.1 The existence of a defect;

4.2 That it occurred prior to the time of sale;

4.3 That the defect is serious, i.e. that it renders the goods unfit for the purpose for which they were intended or diminishes the use to which the buyer can reasonably be expected to put them;

4.4 That he was not aware of it at the time of the sale;

4.5 That the defect was not apparent, i.e. that it “could not be ascertained by a prudent and diligent buyer without the need for an expert.”

5. The buyer can pursue his or her claim against both the seller and the previous sellers if he or she meets his or her burden of proof against them. By the same token, a seller sued for a latent defect may call in warranty the seller who sold him the property and the previous sellers if he meets the same burden of proof. [Our translation; references omitted]

The court found that the evidence showed that the residence had not been built according to the plans nor according to the applicable rules of art and construction standards. Notably, certain support beams were missing, others were not installed in the proper places, and the floor joists were not the right size.

The court considered that these defects were significant and were jeopardizing the structure of the residence, but found that they were not known to either of the defendants. It determined that those defects were not apparent at the time of the sale, given the contractor’s conclusion that the collapse had been caused by an incorrectly dried joist due to water damage was reasonable under the circumstances, and considering the information provided by the Plaintiffs’ Seller. According to the court, the contractor was not required to make openings during his inspection. The court also concluded that it would have been unfair to impose upon the plaintiffs presumed knowledge of the defects given that the defendants themselves knew nothing about them. Indeed, the court concluded that “a buyer is not under the obligation to verify the plans when purchasing a house” [par 60; our translation]. A claim was also made for a defective French drain and backfill, but the court considered that, although they were latent defects, they were not significant in nature.

The court condemned the Plaintiffs’ Seller to pay to the plaintiffs $110,000, as the reasonable cost of the repairs. However, it considered that the Original Seller could not be held to reimburse that sum to Plaintiffs’ Seller, as it was excessive, representing close to 61% of the 1990 sale price. The court instead condemned him to pay $43,626.85, an amount that it considered to be fairer in corresponding to the cost of the works had they been performed in 1990 if the defects had been known at that time.

Finally, the court dismissed the claim for damages for loss of enjoyment of the property and trouble and inconvenience, considering the Plaintiffs’ Seller’s good faith and the fact that the Original Seller could not be presumed to have knowledge of the defects, even though he qualified as a self-builder.

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