Caveat Emptor or “Buyer Beware” does not relieve the seller from colouring the facts

BY JAY BRIJPAUL

The Latin phrase “cavite emptor” is a disclaimer designed to resolve disputes in which the seller has more information than the buyer about the nature of a goods or service. It is important and widely used in resale homes and carries the same meaning as “sold as is”. There are many exceptions to the rule where a seller must disclose hidden defects, such as a buried oil tank for example. There are also many situations where the seller innocently provides the wrong information. The seller could misrepresent the size of the property, which many times, the buyer fails to check before buying.

In the case Issa v Wilson, the Ontario Court of Appeal took a deeper look at the meaning “buyer beware”. In this case, the buyer, Mr. Issa was a twenty-six-year-old, first-time buyer who used the services of Mr. Jarra, a realtor with Keller Williams Realty Centers, to assist in buying a home for his family. Mr. Jarra, found a home where the MLS listing stated that the home size was in the range between 2,000-2,500 square feet. Mr. Jarra was acting for both the seller and buyer in this transaction. Mr. Jarra claimed that the seller told him that the home was 2,100 square feet. Mr. Issa visited the home twice and during one of those visits, the seller mentioned that the home was about 2,000 square feet.

Mr. Issa applied for a mortgage and the lender ordered an appraisal. The report revealed that the actual size of the property to be 1,450 square feet. This is an innocent misrepresentation because the seller mistakenly took the basement square footage into consideration. It is, however, a huge shortfall from 2,000 -2,500 square feet as mentioned in the MLS Listing.

Mr. Issa took the matter to the court against Mr. Jarra, Keller Williams Realty Centers, and the seller. He claimed that the purchase of sale contract was void based on the information provided to him by the parties. He also asked for a refund of his deposit of $50,000.

At the trial, the main focus was whether the disparity between the advertised and actual size of the property gave Mr. Issa the right to annul the transaction or whether his two visits to the home uprooted his assumption that the home would be in the range of 2,000-2,500 square feet. In this case, Justice Ferguson refused to follow case law in which the courts have denied the order to kill the deal based on the size disparity.

Mr. Issa was twenty-six years old and with this being the first home he bought, could not have envisioned the square footage of the home. The defendants’ solicitors provided case law in the courts where the onus was on the purchaser to do his own due diligence prior to entering into a contract to buy the home. Justice Ferguson refused to consider the case law and directed the defendants to refund the deposit of $50,000. With interest.

Mr. Jarra and Keller Williams Realty Centers appealed Justice Ferguson’s judgment on the grounds that the honourable Judge erred. According to the defendants, the buyer inspected the property and bought what he saw.

At the appeal, a group of Justices upheld Justice Ferguson’s decision. They explained that the assumption that the appellants betted on did not apply. The evidence was overwhelming against the seller, Mr. Jarra and Keller Williams Realty Centers. They provided false information that induced Mr. Issa’s decision to purchase the property. The appeal was thrown out.

When selling a home, it is important to review the information provided in the listing. I recall an incident where the lot frontage was three feet less. On closing, the buyer asked for an appropriate discount. To avoid a lawsuit, the seller took a haircut. Over the years, I saw similar problems where the room sizes were wrong and the buyer backed out of the deal because they claimed that their furniture could not fit. There are many other cases where the property tax in the MLS listing was lower than the actual taxes and the buyers did not budget for that and got an equivalent discount for the next five years. Items such as furnaces, hot water tanks and other rental equipment are hot topics in real estate lawsuits. Always provide the tax bill and all utility bills to the realtor.

In the current market, in order for buyers to win the bidding frenzy, they forgo their option for financing and inspection. These buyers often overpay and are looking for an escape strategy. My advice to sellers is to be careful when marketing your home. Do not oversell. Buyers will rely on the information provided. Wrong information can give them an escape strategy.