A recent Ontario court ruling arising from a major structural defect in a cottage country home shows why a homeowner should get the vendor to complete a seller property information sheet (SPIS) before agreeing to a purchase.
“The law can provide remedies for the misrepresentation of home defects even many years after the fact,” Toronto litigation lawyer Peter Spiro wrote Aug. 23 in a blog post on CanLII Connects. Spiro was commenting on Wesley v. Geneau, released earlier this year by the Ontario Superior Court of Justice.
Noel and Margaret Geneau were successfully sued for $100,000 by Robert and Sheila Wesley, who bought their home in 2006 from the Geneaus.
The Wesleys filed their lawsuit in 2015. In February of that year, Robert Wesley discovered the north foundation wall had collapsed and the south foundation wall showed signs of bowing. Shortly afterward, he discovered visible drywall cracking in the living room.
The Wesleys sued the Geneaus mainly to recover $97,000 in repair costs. Total damages were $104,301.71 but only $100,000 could actually be awarded under Ontario’s “simplified rules” for civil trials.
The Wesleys alleged the Geneaus negligently misrepresented the state of the property when it was sold in 2006 to the Wesleys. Justice Guy Di Tomaso of the Ontario Superior Court of Justice agreed.
“Intent to mislead is not a requirement for a misrepresentation to be negligent; where a representation does not amount to full, frank, and accurate disclosure, negligent misrepresentation is made out,” Di Tomaso wrote in Wesley v. Geneau, released March 9, 2020.
The Geneaus argue that the Wesleys should have done a more diligent investigation at the home at the time of the purchase. Had they done a more detailed inspection, they could have discovered deficiencies with respect to construction. The defendants also argued the buyers contributed to the problem by failing to recognize signs of water infiltration or not investigating the source of the ongoing water infiltration when they owned the home.
The Geneaus also argued the lawsuit was time-barred because the Wesleys should have known they had a case before 2013. Normally Ontario lawsuits are subject to a two-year statute of limitations. Essentially, Justice Di Tomaso found that the Wesleys did not discover their cause of action until early 2015.
Key to the case was a seller property information sheet that the Geneaus signed in 2006 when they sold their home, in a sparsely populated area near the Magnetawan River about 100 kilometres southwest of North Bay. Noel Geneau built the home in 1989. At the time, a municipal building permit was not required at the property’s location, but the building was still required to comply with the 1986 Ontario Building Code.
There were three questions on the seller property information sheet to which the sellers answered no. The answers should have been “yes,” Justice s Di Tomaso found. Those questions were:
Are you aware of any structural problems?
Have you made any renovations, additions or improvements to the property?
Are you aware of any moisture and/or water problems?
Justice di Tomaso ruled that there was incorrect information on the SPIS and so the Wesleys purchased a property that was in a far worse physical condition than they believed it to be.
“If the seller fills out the SPIS inaccurately, failing to disclose a latent defect of which he was aware, then it is a negligent or fraudulent misrepresentation for which he becomes liable to damages,” Spiro wrote Aug. 23 on CanLII connects.
Before the Geneaus sold their home to the Wesleys, a stud wall was built in the basement next to the north foundation wall.
Experts for the plaintiffs said the stud wall was built several inches in from the foundation wall — instead of immediately next to it — because the foundation wall had already begun to heave.
The seller testified he built the wall because he observed frost coming through the foundation wall. So he built the stud wall in an effort to prevent heat loss.
An engineer retained by the plaintiffs’ insurer said freeze/thaw activity in the soil along the north side of the house caused frost to build up and ratcheted the foundation wall inward. As the wall moved inward, more water flowed into the space, with more freeze/thawing cycles displacing the foundation wall further inward.
The Wesleys hired a professional to inspect the home in 2006 before they bought it. There was nothing in that report to cause the Wesleys to walk away from the transaction.
The Wesleys’s inspector advised them to add soil along the exterior north wall and slope the soil away from the house to deal with proper water drainage.
Had the Geneaus not constructed the stud wall — or if they had told the Wesleys about the bowing wall and the frost or efflorescence that was visible behind it — the Wesleys would have been able to take these defects into consideration when deciding whether or not to offer to buy the property, Justice Di Tomaso found.
“At the very least, knowing about these defects would have given them the opportunity to hire a professional to conduct a deeper investigation into the significance of those red flags.”
The defendants argued the plaintiffs contributed to the loss in several ways — for example in not addressing the grading properly or on an ongoing basis. The defendants also alleged that grading remained a problem along the north wall after the plaintiffs bought it.
But the court accepted evidence, from a plaintiffs’ expert, who said the poor grading visible along the north wall was due to backfill dropping to fill in the void caused by the wall collapse. There is no evidence that the grading along the north wall “remained a problem” prior to the collapse.
The defendants also alleged the plaintiffs were responsible for building a deck that was anchored to the north exterior wall and not supported properly. But Justice Di Tomaso found there is no evidence that this contributed to the loss.