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Disclosure and As Is Clauses - what are the rules

 

It seems that every week I am asked for advice as to what a seller or real estate agent needs to disclose to a buyer, how to protect a buyer from sellers who do not disclose and to assist in preparing an as is clause for sellers who do not know anything about a property they are selling.

Here are 5 lessons to remember:

 
1. Patent or visible defects do not need to be disclosed

If you can see a defect during a typical home inspection, it does not need to be disclosed by a

 
seller. This can include a crack in a window, mirror or kitchen counter, a stain under the bed
 
or damage to a wall behind a picture. It can even include KITEC plumbing, which is
 
typically visible. The lesson is to be more diligent when inspecting a property before signing
 
any agreement in the first place and make sure to have the home inspected by a
 
professional.Latent or hidden defects need to be

2. Material latent defects must be disclosed by the seller

 
Latent defects are defects that a home inspector could not see during a typical home
 
inspection. If a seller knows about a material latent defect and does not disclose it, a buyer
 
can sue the seller even after closing. Examples include water damages that have not been
 
properly repaired, whether from the roof or basement, smoke damages from a fire, mold
 
behind the walls, underground fuel tanks or foundation problems. In all cases, the defect
 
must make the home uninhabitable or dangerous. If a buyer can demonstrate after closing
 
that the seller must have known about the issue, they can be successful in taking legal action
 
after closing. Buyers should be advised to conduct an insurance search against any property
 
to see if a prior insurance claim was made by a previous owner.

3. Psychological stigmas do not have to be disclosed

 
Sellers do not have to disclose whether there has been a murder or suicide on the property or
 
adjoining property or whether a pedophile lives on the same street. As this will likely matter
 
to most buyers, google the property address to see if anything comes up, speak to the
 
neighbours and consider putting a clause right in the offer whereby the seller represents and
 
warrants that there has been no murder, suicide, illegal grow operation natural death or
 
shooting on the property during their ownership. Sellers must respond truthfully to this
 
statement.

 
4. What are a real estate agent’s duties about disclosure?

As a real estate agent, you are not obligated to disclose psychological issues, however, you

 
are obligated to tell the truth. You must therefore ask your seller how you are to respond if
 
you are asked the question by a buyer or buyer agent. If the seller tells you to lie, then you
 
should strongly consider terminating the listing.

 
5. Will an “as is” clause protect my seller?

 
“As is” clauses are generally a warning to buyers that they must have a home inspection done
 
since the seller is giving no warranty about anything in the property. Often you see this when
 
a property is being sold by a lender under a power of sale in their mortgage or by an estate,
 
when the trustees have no actual knowledge about the property. However, this will still not
 
protect a seller if they actually know about material hidden defects that make the home
 
uninhabitable or dangerous.

 

By Mark Weisleder, a Partner, author and speaker at the law firm Real Estate Lawyers.ca LLP.

 
Contact him at mark@realestatelawyers.ca or toll free at 1-888-876-5529

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