Buyer’s BEWARE !!!

Buyers must be very careful to check for minor defects in a home by themselves, as they may not be protected if they find out about it later.
One reader complained that after closing, they learned that one of the mirrored closet doors was cracked. When they had first inspected the home, the closet doors were open, such that the cracked one was behind one that was not cracked. The buyer says that they were fooled by the seller.
Another reader complained that they did not want to disturb anything on the kitchen counter when they visited the home, only to find after closing a crack in the countertop under the spot where the coffeemaker was sitting.
This highlights the legal subject of patent or obvious defects. The general principal is that a seller does not have the obligation to disclose defects that are visible to any buyer. However, a seller cannot try to conceal obvious defects either. The following case demonstrates that this is not always easy to figure out:
Randall and Catharine Reiss bought a home from Dr. Emil and Maria Grigore in West Lorne, Ontario in January 2005. The sellers had been in the home 14 years.
The buyers had two opportunities to visit the home before making the offer. The second visit took at least two hours. As Mr. Reiss was an electrician, he did not bother with a home inspection. He had asked the sellers whether they had experienced problems with the air conditioning, furnace or plumbing systems and the answer was no.
He asked whether all the windows opened and the answer was yes. He only tested one of the windows himself. He also checked under many of the rugs in the home.
After closing the buyers discovered numerous problems with the home and sued. Some of the complaints were as follows:
There was soapy water and dishes in the kitchen sink at the time of the visits. After closing the buyers noticed that the entire sink was rusted and had to be replaced.
Some of the window cranks did not work so the windows would not open.
There was a large stain under the bed in the master bedroom, which resulted in the buyer having to replace the entire bedroom broadloom.
There were 50 cracked tiles around the bathtub and on the bathroom floor that were concealed by a combination of a rug on the floor, a vase and a stack of towels.
According to the buyers, even though these were minor defects, they were actively concealed by the sellers.
According to the sellers, they did not say anything untruthful and did not conceal anything. They permitted the buyers as long as they needed to inspect their home before putting in an offer. They did not have a dishwasher so it was not unusual for dishes to be piled up in the sink.
The dog slept under the bed and must have had some accidents that they were not aware of. They tried to remove the stain when they moved out and noticed it for the first time but were not able to get the stain out.
The case was decided on June 30, 2010. Justice Lynne Leitch noted that the sellers were long-standing members of the community, who had family in the area and were not trying to move away and unload a home with problems. She accepted the sellers’ explanations and denied the buyers any damages.
As to the readers who discovered the cracks in the mirrored closet door or under the coffee machine on the kitchen counter, in my opinion they would probably lose their cases as well.
The lesson is that buyers must be very careful to do their own due diligence when visiting a property, before making any offer. This includes testing all windows, looking behind pictures, under rugs and lifting anything off the counters.
Test the appliances, electrical outlets and faucets as well. Being prepared before you make an offer will prevent unwanted surprises after closing.
Mark Weisleder is a Toronto real estate lawyer. Contact him atmark@markweisleder.com

BUYERS OUT $10,000 – Had to share !

Buyers out $10,000 as house deal falls apart

Buyers need to be sure they want to buy a house before they put down a deposit - they might lose it if they change their mind.

Buyers need to be sure they want to buy a house before they put down a deposit – they might lose it if they change their mind.

Keith Beaty/Toronto Star

If a house deal falls apart because the buyer can’t close and the seller then sells the property to someone else for more, who gets the deposit?
Here’s what can happen:
In early September 2003, Shankar Iyer and Bala Ramachandran agreed to pay $289,000 for a new home from Pleasant Developments Inc. They accompanied their offer with a $10,000 deposit and the builder accepted it on September 16. The buyers got cold feet and the next day changed their mind, asking for the return of the deposit.
The builder refused to return it and resold the house for $700 less than the original deal, but kept the deposit. The couple sued in Small Claims Court for the return of the deposit. When it came to the hearing, the question for the court was whether the builder could keep it all. The judge decided the builder could only keep $700 — the amount by which the sale was reduced — and was ordered to give the balance of $9,300 to the buyer.
The builder appealed. Three years later, Judge Brown of the Ontario Superior Court of Justice decided the builder could keep the entire deposit, even though he did not suffer any loss.
He quoted the law on the subject as follows:
“Even in the case where the seller re-sells at a purchase price that is high enough to compensate for any loss from the first sale, the seller may nevertheless retain the deposit.”
What this means is that, where it is the buyer’s fault that a deal does not close, the seller can keep the deposit. There is an exception to this rule if the amount of the deposit is out of all proportion to the losses suffered. In those cases, the loss of the deposit may be considered a penalty and then it will not be paid to the seller and will be returned to the buyer.
The buyers tried to argue that the loss of the $10,000 was out of all proportion to the losses suffered by the seller. The judge noted that the deposit paid was only 3.6 per cent of the purchase price.
In my opinion, the deposit would have to be greater than 10 per cent of the purchase price in order for the buyer to recover it if the seller suffered little or no damages.
Here are the lessons:
1.Understand your rights are before you sign a real estate contract and make a deposit.
2.If you are a buyer, understand that once an agreement is signed and accepted, you cannot simply change your mind, even one day later.
3.If a buyer defaults on their obligations, then not only can the seller sue for any damages, they can in most cases sue for the deposit, even if they have suffered no damages at all.
4.If a matter goes to court, any deposit will remain in the real estate brokerage trust account until the parties sign a mutual release or the matter is decided by a court, which in this case, took more than 2 years.
Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com