Real Estate

Undisclosed damage after closing

  • Last Updated:
  • Sep 5th, 2020 11:25 pm
Deal Addict
Jan 19, 2008
1682 posts
1578 upvotes
Etobicoke
Toronto Star:
What sellers must disclose about a home: Ask Joe:
Sat., Jan. 7, 2017


As an example of a latent defect, consider a home that has a history of flooding, structural or fire damage where the impact is not visible without an invasive inspection. In this case, the seller is only obligated to disclose the problem if they know about it — and if the defect could be deemed a serious risk to health and safety of those who live in the home.

Joseph Richer is registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real-estate professionals in Ontario. Email questions to askjoe@reco.on.ca .
Deal Expert
Aug 2, 2001
18944 posts
10527 upvotes
superscoots wrote: do you own a car? would you be 100% okay with paying full price for a vehicle and then finding out later the front end was torn off, repaired under insurance, and sold to you?

also for OP: SUE THEIR ASSES OFF
A house has to be brought up to the latest code which may include, depending on age, a significant improvement.

What do you really think goes wrong when it's properly repaired?
Deal Guru
Dec 20, 2018
10120 posts
10230 upvotes
xxxray wrote: Toronto Star:
What sellers must disclose about a home: Ask Joe:
Sat., Jan. 7, 2017


As an example of a latent defect, consider a home that has a history of flooding, structural or fire damage where the impact is not visible without an invasive inspection. In this case, the seller is only obligated to disclose the problem if they know about it — and if the defect could be deemed a serious risk to health and safety of those who live in the home.

Joseph Richer is registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real-estate professionals in Ontario. Email questions to askjoe@reco.on.ca .
Yup, it was fixed .no need to disclose it as I thought.

Op has no legal basis to get anything as seller wasn't required to disclose
Jr. Member
User avatar
Sep 5, 2018
199 posts
349 upvotes
I actually just went through a somewhat similar ordeal on a 30 day closing. We asked the seller about renovations and flooding — they said reno’s done years ago and no issues. We had the home inspected day 3 (no major issues found), and a week later, during my own google search of the property, found that the house had open permits by the city to repair a leaky foundation along with mold on the foundation wall. We went back for a visit to the house the very next day and lo and behold, when we removed the green styrofoam and red tape that made it seem the situation had been rectified, we found water leakage and mold on the wall. Then our lawyer said they were requested to do underpinning, which we do not believe they did — and if they did, we didn’t trust their work.

Our lawyer found precedence to show that open permits on a house are a root of title defect, meaning that is serious enough to back out of a deal and potentially sue thereafter, especially if the seller knows about such things (mold, fire, leaks/floods must be disclosed by the sellers or they can absolutely face lawsuits). The problem is that if you find out this sort of information while you’re in the process of closing, it’s possible that your own title insurance / the bank won’t want to insure the house / loan you money because they know right away there are already issues. The only way to rectify is if the seller purchases or is able to have their title insurance cover the costs of the work, or if you arrange a hold back prior to closing.

The worst part of all this is another giant loophole by the city: the city was willing to close the permit on this property, even without seeing the property in person, because we were buying it as a single use property (with the intention to rent the basement as it is fully renovated and ready to be rented from day 1). The only reason the permit was opened is because a tenant complained. How can the city order you to underpin, fix leaks / mould, and then turn around when you’re selling the house and say "not a problem anymore"? Ridiculous.

We agreed to a mutual release, but had to pay our legal fees / other costs associated, so we’re still talking 4k gone for nothing. Had we closed on the home and then discovered this stuff, absolutely we’d be able to file a lawsuit - they did not disclose a latent defect and obviously knew about it as the city had ordered them to fix it. You have to understand though that unless the cost is significant (100k+) there almost is no point in legal action unless you know you’ve done your due diligence and have a rock solid case. The legal fees aren’t worth it in most cases.

Always ask the sellers these questions and get answers in writing:

1) Are there any open permits on your home?
2) Have you completed any renovations and did you obtain permits? Proof of permits?
3) Has the basement or any other part of the house ever leaked?
4) Has the basement ever flooded?
5) Is there mould anywhere in the house?

Have your lawyer run a permit search on any property you’ve closed on prior to your home inspection. Costs $200 from the city. Don’t waive your right to a home inspection either.
People will misrepresent their house in order to pass the buck onto the next buyer. Don’t let that be you.
Late Cycle Investing
Deal Addict
Jul 3, 2007
4153 posts
4626 upvotes
Toronto
StatsGuy wrote: Yup, it was fixed .no need to disclose it as I thought.

Op has no legal basis to get anything as seller wasn't required to disclose
like I thought too and all the wanna be lawyers on here telling him to sue....lol

only one whos gonna win is the lawyers bank account....
Deal Addict
Mar 2, 2017
3835 posts
7789 upvotes
Toronto/Markham
TrevorK wrote: A house has to be brought up to the latest code which may include, depending on age, a significant improvement.

What do you really think goes wrong when it's properly repaired?
This is a matter of stigma associated with a house that was on fire, more than anything else.

Quantifying and proving the downside cost of that stigma is different issue.
RE Broker
Sr. Member
Oct 30, 2017
820 posts
608 upvotes
Toronto
pistilogo wrote: I actually just went through a somewhat similar ordeal on a 30 day closing. We asked the seller about renovations and flooding — they said reno’s done years ago and no issues. We had the home inspected day 3 (no major issues found), and a week later, during my own google search of the property, found that the house had open permits by the city to repair a leaky foundation along with mold on the foundation wall. We went back for a visit to the house the very next day and lo and behold, when we removed the green styrofoam and red tape that made it seem the situation had been rectified, we found water leakage and mold on the wall. Then our lawyer said they were requested to do underpinning, which we do not believe they did — and if they did, we didn’t trust their work.

Our lawyer found precedence to show that open permits on a house are a root of title defect, meaning that is serious enough to back out of a deal and potentially sue thereafter, especially if the seller knows about such things (mold, fire, leaks/floods must be disclosed by the sellers or they can absolutely face lawsuits). The problem is that if you find out this sort of information while you’re in the process of closing, it’s possible that your own title insurance / the bank won’t want to insure the house / loan you money because they know right away there are already issues. The only way to rectify is if the seller purchases or is able to have their title insurance cover the costs of the work, or if you arrange a hold back prior to closing.

The worst part of all this is another giant loophole by the city: the city was willing to close the permit on this property, even without seeing the property in person, because we were buying it as a single use property (with the intention to rent the basement as it is fully renovated and ready to be rented from day 1). The only reason the permit was opened is because a tenant complained. How can the city order you to underpin, fix leaks / mould, and then turn around when you’re selling the house and say "not a problem anymore"? Ridiculous.

We agreed to a mutual release, but had to pay our legal fees / other costs associated, so we’re still talking 4k gone for nothing. Had we closed on the home and then discovered this stuff, absolutely we’d be able to file a lawsuit - they did not disclose a latent defect and obviously knew about it as the city had ordered them to fix it. You have to understand though that unless the cost is significant (100k+) there almost is no point in legal action unless you know you’ve done your due diligence and have a rock solid case. The legal fees aren’t worth it in most cases.

Always ask the sellers these questions and get answers in writing:

1) Are there any open permits on your home?
2) Have you completed any renovations and did you obtain permits? Proof of permits?
3) Has the basement or any other part of the house ever leaked?
4) Has the basement ever flooded?
5) Is there mould anywhere in the house?

Have your lawyer run a permit search on any property you’ve closed on prior to your home inspection. Costs $200 from the city. Don’t waive your right to a home inspection either.
People will misrepresent their house in order to pass the buck onto the next buyer. Don’t let that be you.
That's a bummer. Once I was close to buying a house and a home inspection revealed that the asbestos in the attic wasn't removed 100% properly. In retrospect I should've just bought the place since this was in the fall of 2015 just before the prices skyrocketed by 20% in 2016 - the 20k or whatever the cost of removing any traces of asbestos with certificate would have been peanuts in comparison.
Deal Addict
Sep 2, 2009
2978 posts
3020 upvotes
Ottawa
In short, if the damage was fixed, it did not need to be disclosed.

In Ontario, you don't have to disclose much. However, if you do disclose anything, you can't lie. In this case, you don't needed to disclose there was a fire because it was fixed (or assumed to be). However, if they had been asked: had there ever been a fire? They would have had to say 'yes' or refuse to answer (refusing to answer would be a red flag but not lying).
Deal Fanatic
Jul 3, 2011
6517 posts
3798 upvotes
Thornhill
And why did you choose to not highlight the underlined? Do you understand what the conjunction 'AND" don't you? It means the two sentences must be used as one.

I'm waiting for someone to tell me what the defect or serious nature is that the remediated property will cause.
xxxray wrote: Toronto Star:
What sellers must disclose about a home: Ask Joe:
Sat., Jan. 7, 2017


As an example of a latent defect, consider a home that has a history of flooding, structural or fire damage where the impact is not visible without an invasive inspection. In this case, the seller is only obligated to disclose the problem if they know about it — and if the defect could be deemed a serious risk to health and safety of those who live in the home.

Joseph Richer is registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real-estate professionals in Ontario. Email questions to askjoe@reco.on.ca .
Newbie
Aug 9, 2020
11 posts
Definitely an interesting discussion.

I am going to see if I can pursue any reports from the City of Toronto.

Given permits would have had to be obtained to repair the damage and inspections done, I’ll try to see if there is documentation on this.

Thanks for the replies all
Deal Fanatic
Jul 3, 2011
6517 posts
3798 upvotes
Thornhill
You can verify via Toronto's online permit portal.

The property once burned down or severely damaged cannot be rebuilt without permits.
Scothoward wrote: Definitely an interesting discussion.

I am going to see if I can pursue any reports from the City of Toronto.

Given permits would have had to be obtained to repair the damage and inspections done, I’ll try to see if there is documentation on this.

Thanks for the replies all
Jr. Member
Mar 21, 2006
175 posts
17 upvotes
licenced wrote: You can verify via Toronto's online permit portal.

The property once burned down or severely damaged cannot be rebuilt without permits.
+1 for this! Was just about to post the same thing. This is one thing I like to do as an agent an follow up with the city if there are any issues.

Have a peek when you have a chance and you’ll be surprised how many homes around the city have open permits and are habitable even without occupancy being passed Astonished Face

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