Could GTA flooding be used as home sale escape hatch?
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The recent flooding in the GTA raised important legal questions about homes that were supposed to close at the time.
I was recently asked whether a buyer could refuse to close a deal when they suspected the home had been damaged by flooding before closing. The seller refused to let them in, since the agreement did not provide any more home visits or inspections.
Here are the questions:
1. Does a buyer have an automatic right to inspect a home before they close their purchase to find out if there have been damages since the date they signed the offer? property?
2. Does a buyer have the right to cancel the deal if there has been a flood in the home prior to closing?
The standard Ontario real estate contract says the buyer accepts the condition of the home on the date that they sign the offer, but the seller is responsible for any damage between the date of the offer and final closing. It goes on to say that if substantial damage occurs prior to closing, then the buyer has the right to cancel the contract or take the proceeds of any insurance policy and close the deal.
Many real estate agents will insert an extra clause into the agreement that gives the buyer the right to visit or inspect the property on one or more occasions prior to closing. The purpose could be to do with measurements, bringing in contractors or just to make sure that there has been no damage to the home since the date they signed the offer.
However, what if there is nothing written in your contract permitting you to do a pre-closing inspection? There was a case in 1979 called Harkness vs. Cooney, where a judge ruled that a buyer did have the right to inspect a home before closing. This is even though there was no additional inspection clause in the agreement.
This is not a full right to completely inspect the home, but it is a limited right to make sure that no major damages had occurred. In my opinion, this case could be used to assist a buyer when a seller refuses to permit them into a home to check to see whether there may have been a flood on the property before closing.
Would a flood be sufficient to permit a buyer to cancel the deal completely? This is not a simple answer, and would of course depend on the cause of the flood and the resulting damage. Sewage backup was perhaps one of the leading causes of a lot of the flooding that occurred in the GTA. Experts will tell you that even a few inches of water over the baseboard can result in substantial damage to a home, if the sewage touches the drywall above the baseboard or gets under the floor. The costs to remedy the mould damage alone can be thousands of dollars, not to mention the re-construction costs of the entire basement.
If a seller knows about damage to their home before closing, then the buyers should be informed immediately. Steps should be taken to repair the damages and the buyer should be given the opportunity to inspect the repairs to make sure that they were done properly. Or another solution may be to hold back sufficient money on closing to complete the repairs after closing.
Buyers should always include a clause to give them the right to inspect a home just prior to moving in, to make sure that there has been no damage that occurred since the date you signed your contract.
Mark Weisleder is a Toronto real estate lawyer. Contact him at [email protected]