Hiding a geotechnical report from homebuyers got a B.C. couple their day in court for fraudulent misrepresentation.
Don’t let it happen to you or your clients.
Get that SPIS (seller property information sheet) filled in and verify with sellers that they are telling nothing but the truth, the whole truth.
What is fraudulent misrepresent in legal terms?
What is the Fraudulent Misrepresentation Act in Canada?
What is fraudulent misrepresentation in law of contract?
What are the elements of fraudulent misrepresentation in Ontario?
What is an example of a fraudulent misrepresentation?
To Commit Fraudulent Misrepresentation or Not
Leaving the SPIS out seems innocent enough. After all, it’s not mandatory and experienced homebuyers hire a professional home inspector. If they don’t, you’re likely to suggest it.
That may be true, but to deliberately fraudulently misrepresent a product or service is both a Canada Criminal Code offence and cause for a civil action. Your client could sue the seller and, worse yet, sue you. Did we mention the seller could go to prison, for somewhere up to 14 years?
Section 380 (1) of the Criminal Code says it best —
Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service, (a) is guilty of an indictable offence….
It could even land you in civil court under the federal Competition Act, which prohibits false or misleading representations and deceptive marketing practices. The words you speak or put in writing, or even the impression you convey, could make a bad impression on a court. See how the Canada Competition Act may apply to you.
Law of Contract and Fraudulent Misrepresentation
Falsely or recklessly misrepresenting a fact in a contract will run you and your client afoul of Canadian contract law if you:
- Make an untrue statement of fact or law.
- Know it is false or are reckless in making it.
- The buyer relies on the statement (the inducement) to sign a contract.
- They suffer a loss.
In fact, unless you update your information if circumstances change, or state you aren’t responsible for inaccuracies, you can still be guilty of misrepresentation. It gives new meaning to “err on the side of caution” — and check with a real estate lawyer first.
Now what do you do? Go back through your records. Hopefully, you took notes because fraudulent misrepresentation allegations rely on proving those four elements. Fiduciary duty in real estate.
How a Fraudulent Misrepresentation Turned Out in Court
When a B.C. couple’s deck was damaged by rock fall, they mentioned it on their disclosure statement. Unfortunately, they neglected to include a geotechnical report stating overhanging rock above their deck was unstable or a cost estimate to repair it. That left the buyers, who paid $660,000 for the property, with an $170,000 bill for remedial work.
They sued and won for the alleged tort of deceit and breach of contract (Kuhnke vs Karner 2022 BCCA 399). The court heard the couple withheld the geotechnical report and cost estimate from their realtor out of fear their home would be devalued, knowingly misrepresenting their property’s condition and associated risks. Read the court’s decision.
And that cost the couple $184,000 in compensatory and punitive damages.
Why You Need a Real Estate Lawyer
Before you make an offer to purchase legally binding, have an Axess Law real estate lawyer review your agreement of purchase and sale. We add clauses that protect your right to a home inspection or final walk-through before you take possession. Best ways to word the home inspection clause (Ontario).
Buying or selling, our real estate lawyers can search property titles to register your new home with a local land titles office. We liaise with your realtor and mortgage lender to receive documents necessary to finalize real estate transactions by closing deadlines. Your deposit is held in trust until all your legal documents are in order. Real estate closing process Ontario.
Axess Law negotiates with the seller’s or buyer’s real estate agent to amend the agreement of purchase and sale to allow more time to get mortgage financing. Once you do, we discharge your existing mortgage and arrange new mortgage documents to be witnessed, signed, and conveyed to your lender. Protect interest-only mortgages during rate hikes.
Legal claim in your way? Axess Law negotiates with the seller’s or buyer’s lawyer to resolve title disputes. We add title insurance to protect you from mortgage fraud or errors in land registry records. Your real estate lawyer can even hand you the keys to your new home. See 25 questions you ask our real estate lawyers.
Complain here if you have a gripe about your financial rights as a creditor.
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Axess Law makes it easy to meet with an experienced real estate lawyer, any day of the week. Call us toll free at 1-877-402-4207 or in Toronto, dial our 647-479-0118 lawyer line to make day or evening appointments. Our easy online booking form lets you arrange appointments at your convenience. Our professional legal team can meet with you at any of our conveniently located Greater Toronto Area or Ottawa law offices or by video conference call anywhere you are.
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