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Court decision emphasizes it’s the house buyer, not the seller, who is most at risk.
A small claims court decision released last year underscores the importance of careful wording of seller promises in agreements of purchase and sale.
Back in March, 2014, Mrs. Smith bought a house in Milton, Ont., from Mrs. Brown. In the purchase agreement, the seller promised that the fixtures and movable items (chattels) being purchased would be in good working order on completion.
In a second warranty in the agreement, the seller also promised that the swimming pool and equipment would be in good working order on completion of the deal.
Robinson hired a home inspector to examine the house before the purchase agreement became binding.
The closing took place on May 30, 2014; Smith took possession on June 6 and two days later a Union Gas representative showed up to inspect the furnace — required as a condition of turning on gas service to the home. He “red-tagged” the furnace, and issued an order requiring replacement of the rusted and corroded venting liner and sleeve. A heating contractor later advised the new owner that the heat exchanger in the furnace was defective and had to be replaced.
Photographs taken the following month when a new furnace was installed showed rot and rust inside the old one.
Ten days after closing, a pool contractor came to the house and advised that the pool pump and solar auto controller were not working and required replacement at a cost of $1,778.
Smith sued Brown in small claims court for a total of $6,016 for the cost of a new furnace and pool repairs.
The trial was held before deputy judge Kenneth Kelertas last year. In finding against the buyer, the deputy judge ruled that the warranty expired on the closing date of May 30, 2014, and that it was up to the buyer to determine whether or not the pool equipment and furnace were working before closing — not after.
In my view, the court’s decision is wrong. It was obvious from a post-closing examination of the pool equipment and furnace that they had been inoperable for some time before the closing.
But, in the court’s opinion, the only issue was whether the items were working on closing.
“When representations and warranties of this sort are given,” the judge wrote in his decision, “purchasers should inspect the property just before closing to ensure that the vendor’s warranties are true.
“Otherwise, if the purchaser discovers a problem with respect to a warranted fixture, chattel, or the state of the property after closing and they do not have proof . . . that the problem existed at the time of closing, they will not succeed in a claim for breach of warranty . . . ”
Lessons from the case:
Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at firstname.lastname@example.org, or his website www.aaron.ca.
Note: Names have been changed. Robert