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Court holds buyer to contract after property found to be former grow-op.
The standard clause “to the best of the seller’s knowledge and belief,” contained in an Agreement of Purchase and Sale, has had its meaning settled by the Ontario Court of Appeal.
As I recently wrote, the initial court case arose after a couple sold their home.
A home seller’s knowledge of a grow-op in the residence was the subject of a recent Court of Appeal decision.
In the APS, the sellers made a representation and warranty that the house had not been used as a marijuana grow-op during their ownership — and “to the best of the sellers’ knowledge and belief,” it had never been used as a grow-op.
The wording of the warranty made it enforceable both before and after closing.
The sellers had no idea, however, that the house had indeed been used as a grow-op by a prior owner in 2004. But, before closing, the most recent buyer’s lawyer discovered proof of the grow-op. Believing the house to be stigmatized, the buyers refused to close and sued for the return of their deposit. The sellers countersued for breach of contract and damages because they had to sell the house for $86,100 less than the first buyer agreed to pay.
In a decision which sent shock waves through the real estate industry, the initial judge ruled that the buyer was entitled to terminate the transaction because the representation was not true upon the closing date.
Written by Toronto real estate lawyer Bob Aaron, a frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at firstname.lastname@example.org, phone 416-364-9366 or fax 416-364-3818.
June 9, 2018