Bob Aaron: Court Will Decide About ‘Latent Defect’

Bob Aaron in Legal

Does a seller have an obligation to disclose to a purchaser with young children the fact that a person convicted of child pornography lives across the street? That was the issue in a court case which came before Justice Alexandra Hoy in March of this year.

The plaintiffs were Jason Dennis and Rebecca Bound, a husband and wife who are the parents of two young children. After they purchased a house in Bracebridge from William and Helen Gray, they discovered that a person convicted under the child pornography provisions of the Criminal Code lived across the street and that this was common knowledge in the neighbourhood.

The Grays were aware of this, knew the buyers had young children, and did not disclose it to them. The buyers have not lived in the property and do not intend to.

Last year, Dennis and Bound sued the Grays and the real estate agents involved in the transaction. They based their claim on the failure to disclose what in law is known as a hidden or latent defect in the home, namely the fact that a neighbour with a particular criminal record lived on the street, and represented a potential danger to the children of the purchasers.

In March of this year, before the case was scheduled for trial, the Grays asked a judge to strike out the claim against them because it disclosed no reasonable cause of action. Their position was that even if the facts were proved, there was no legal basis for a court to award damages to the plaintiffs.

The test on the motion to dismiss this case before trial was whether it is “plain and obvious” that the seller of a house does not have to disclose to a purchaser with young children the fact that a person convicted of child pornography lives across the street — a situation which was common knowledge in the neighbourhood.

In other words, Hoy succinctly stated the issue by asking whether it is “plain and obvious” that such a fact does not in law amount to the kind of latent defect which must be disclosed to a purchaser.

If it was “plain and obvious” to the court that the plaintiff’s action was doomed, the judge would have to dismiss the case.

In general, the doctrine of caveat emptor, or buyer beware, applies to the sale of land. The Supreme Court of Canada has ruled that a buyer who does not protect himself by contract or by inspection will, in the absence of fraud, have no case against the sellers.

The only exception to this rule is that a seller may be liable to the purchasers of a resale home if he knows of a hidden defect which renders the property dangerous or unfit for habitation and fails to disclose it. This exception was the basis of the plaintiffs’ case.

In her decision on the Grays’ motion to dismiss the case, Hoy reviewed a number of Canadian court cases decided between 1979 and 2006 to determine how the courts have treated hidden defects. These cases deal with defects such as landslides, radioactive soil, landfills on or near the property, leaky basements and hidden structural, electric and plumbing defects.

Hoy noted that the buyers’ claim was novel and raised policy issues, including the protection of children and whether, if successful, the case would have the effect of making the reintegration into society of persons convicted of certain crimes more difficult.

Hoy concluded that it was not “plain and obvious” that the plaintiffs’ action would fail. She dismissed the sellers’ application to strike out the buyers’ claim, effectively ruling that the case should go to trial and that there was a chance that the buyers could succeed — even though it might be a challenge for the court to stretch the definition of latent defect to include the ex-convict across the road.

The real estate community will be watching the outcome of this case with considerable interest.

Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto and a board member of the Tarion Warranty Corp.  Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly.  E-mail

Subscribe to the Move Smartly blog by email

Legal     |    

Toronto’s most authoritative real estate insights, delivered right to your inbox.