B2B Series on Real Estate Law for Realtors
Realtors, are you harming your business reputation by not warning clients about the hazards of home inspection deficiencies?
When home buyers ask if they should get a home inspection, be careful how you answer. You could expose yourself or brokerage to legal liabilities. A Seller Property Information Sheet (SPIS) is optional in Ontario and that creates potential problems for everyone.
A home inspection is a necessity for any home buyer, new build or resale. It’s not mandatory, but why let buyers or sellers take the risk?
Commonly found problems in home inspections
Defects home inspections can detect
3 things to inspect on the inside of a house
Defects Sellers and Realtors Must Disclose
Ontario property sellers and realtors have no duty or obligation to disclose visible or patent defects buyers or home inspectors can discover on their own. Minor cracks in a brick facade or noisy water pipes are par for the course. Any competent home inspector will find those flaws.
But if a seller hides defects or tells you they are less serious than they are — and you fail to investigate their claims — the buyer could sue. Not so visible latent defects, like mouldy insulation or a sinking foundation, the owner knew about are grounds for litigation.
Sellers owe buyers a duty not to prevent their discovery. As long as the seller knew about a latent defect, their liability (and potentially yours) extends well beyond the closing date.
Buyer’s Onus for Property Inspections
Since buyers are responsible for writing home inspection conditions into the agreement of purchase and sale, they pay for the cost. Sellers can and do get home inspections, but buyers should not rely on this to waive conditions. Forfeiting an inspection altogether puts the buyer at greater risk. They could name you and your brokerage if they take legal action later.
Insisting on a SPIS or including patent defects in the agreement of purchase and sale is good practice for realtors. It prevents claims you knew about defects, but failed to inform the buyer. When sellers disclose latent defects verbally, it’s your duty to tell buyers’ agents or suffer potential legal consequences.
Getting mutual consent to refund deposits if home inspections reveal defects that can’t be repaired or remedied by reducing the price aids your case. While sellers may be reluctant to accept withdrawn offers without compensation, buyers are less likely to sue when they get a real estate deposit back.
Arranging Inspections for New Build Homes
New build buyers may be tempted to settle for a pre-delivery inspection or walk-through. Discourage this practice when acting for buyers. Most have limited, if any, home construction experience. While their dream home may look perfectly fine, hiring a home inspection professional is money well spent.
Buyers may be surprised to discover what Tarion new home warranties don’t cover:
- elevator-type devices
- heat pumps, furnaces or air conditioners
- improper ventilation
- building shrinkage or settling
- or damages caused by municipal services or utilities.
The cost of professional home inspections is offset when buyers can come to terms with differences between builder negligence and expected wear and tear.
Realtor Recommendations for Home inspectors
Finding a licensed, insured professional is easier now that the Ontario Home Inspection Act, 2017 regulates inspectors. Buyers expect real estate professionals to make qualified referrals. Protect your buyer and self from fraud by referring home buyers to a:
- Registered Home Inspector, Ontario Association of Home Inspectors (OAHI)
- Canadian-Certified Home Inspector, Ontario Association of Certified Home Inspectors (OntarioACHI)
- National Certificate Holder® or Registered Home Inspector (RHI)®, Canadian Association of Home & Property Inspectors (CAPHI)
- or National Home Inspector, National Home Inspector Certification Council (NHICC).
All are required to meet industry standards and their professional associations have complaint and disciplinary procedures.
Your buyer may have family or friends with home building experience. Stay out of the decision if they offer to do a home inspection. If you or a buyer do fall victim to an unlicensed inspector, Axess Law’s licensed real estate lawyers can offer referrals for filing fraudulent misrepresentation lawsuits.
Realtor Amendments After Home Inspection
Home inspection reports often come back with recommendations for minor repairs or future projects like replacing an aging roof. Understanding what deficiencies could be deal breakers can help buyers and sellers form good faith intent to make amends.
- Full or partial price reduction when the roof needs replacing ASAP.
- Removing pervasive black mould, a non-negotiable health hazard.
- Walking away or asking the homeowner to fix it if asbestos, a foreseeable (and frustrating) hazard of purchasing pre-1980s resale homes, is found.
Amended offers should match the cost or effort of remediating problems.
Some deficiencies are regular wear and tear or ongoing maintenance that come with owning any home. Bickering over anything under $5,000 could signal the buyer is not ready for the financial responsibilities of home ownership. It’s at the seller’s discretion if they agree, but not necessarily legal grounds to break a real estate contract and return the deposit.
Refunding Real Estate Deposits in Ontario
Refer to the agreement of purchase and sale if refunding a buyer deposit is in doubt. What buyer and seller mutually agreed to in writing overrides verbal consent. Having both parties sign the release before returning a deposit is helpful in case a dispute goes to court later. Even if both consented at the time, and the contract seems straightforward on that, courts have ruled against buyers when reasons for withdrawing real estate offers are weak.
Accepting Buyer Deposits in Installments
Buyers may offer to make deposits in installments, before and after the home inspection. Your seller is free to consent as long as the agreement of purchase and sale specifies what happens to the pre-inspection deposit if the buyer withdraws. Short of spending time and money getting a court order under Sec. 27(1), Real Estate and Business Brokers Act, 2002, a buyer has little recourse if it wasn’t in the agreement and the seller refuses to budge.
Hiring Real Estate Lawyers Post Home Inspection
Axess Law’s Ontario real estate attorneys advise home buyers with worrisome home inspection reports on their legal options. Referring a buyer or seller with a home inspection dilemma to Axess Law ensures they have professional legal advice before making decisions that could have civil consequences or cause a real estate deal to collapse.
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Book Video Call or In Person Appointments Today
For more advice on realtor’s duty of care, remote video call or in person appointments are available 7 days a week. Use our interactive web form to book online or call our 1-647-479-0118 lawyer line. Toll free calling to 1-877-522-9377. Axess Law has day or evening appointments, with onsite parking and easy transit access. Stop by our conveniently located Greater Toronto Area or Ottawa law offices.
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