WOW Did the SELLER ever get the best deal...

The lack of homes for sale continues into the 2012 spring real estate market in Toronto. Older homes do present a challenge when you want the property but may be forced by competition to waive your Home Inspection Condition.

My personal advice is to endure a few sales and bidding cycles; have a home inspector standing by who can assist in a walk through. With any older home they can only report on what can be seen. They are not permitted to open any walls or drill any holes. That is why thermal imaging is so vital.

A simple 20-item home inspection checklist for buyers. The home inspection system is far from perfect, but it is the best way to safeguard your interest.

Related: 20 things to look for in a home inspection

Inspections are imperfect because in most cases the inspector is not permitted to look behind walls or under floors which means many potential problems are hidden. But Andrew Radomski of Pillar to Post, a professional home inspection company, tells me that inspection firms can identify plenty of potential trouble spots. These include:

• Obsolete knob and tube wiring. This is found in homes built prior to the 1950s in most of the original City of Toronto. It is hard to get insurance if your home has knob and tube wiring.

• A 60-amp electrical service when the norm today is either 100 or 200. Again this will lead to higher insurance premiums.

• Old galvanized plumbing. It rusts, can leak and plug up, slowing water flow. Old lead pipes are a health risk. • Any roof over 20 years old should probably be partially or completely replaced.

• Old foundations will gradually deteriorate, causing leaks, and are expensive to repair.

• Windows can be expensive to replace, if in poor condition.

Some firms use thermal imaging technology and, for an additional fee, can identify problems with the structure, moisture leakage or air leakage in a home. They can also better identify when there is insufficient insulation, plumbing leaks or poor construction, which can lead to problems down the road.

http://www.moneyville.ca/article/1132345--never-buy-a-house-without-a-home-inspection

Mark Weisleder is a real estate lawyer. mark@markweisleder.com.

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OOPS But we had a Home Inspector

Court ruling rattles home inspectors

The home inspection industry in Canada may never be the same again following the decision of the British Columbia Supreme Court last week in the case of Salgado v. Toth*.

Back in September 2006, Manuel Salgado and Nora Calcaneo signed an agreement to buy a house in North Vancouver for $1,095,000. The contract was conditional on financing and a home inspection.

At the recommendation of their real estate agent, the buyers hired Imre Toth and his company HomePro Inspections to prepare a home inspection report for the property. Toth inspected the interior of the house, then spent another 30 minutes examining the roof and the rest of the exterior.

The contract Toth signed with the buyers stated that the inspection and report could not be used as a warranty of the condition of the house, and in the event the inspector was found liable for negligence or breach of contract, his liability would be limited to the $450 cost of the report.

After the inspection, Toth provided both a written and verbal report to Salgado and Calcaneo. He noted a number of structural deficiencies and told his clients that repair costs would be in the neighbourhood of $15,000 to $20,000. On that assurance, the buyers closed the deal.

After closing, the new owners discovered serious problems with the wooden structural beams of the house due to rot and moisture. As well, it turned out that the south part of the house was sitting on fill that had not been properly compacted and the structure itself was settling and unstable.

The buyers sued Toth, the sellers and the real estate agents. The case against the former owners was settled before trial and the claim against the agents was discontinued. The only defendants remaining at trial were Toth and his company.

After a five-day trial, Justice Grant Burnyeat awarded the buyers $192,920, representing the restoration costs of $212,920, minus Toth's original $20,000 estimate.

The judge ruled that Toth was negligent in not inspecting all of the structural beams and in failing to draw to the buyers' attention that the rot was much more widespread than he indicated to them.

The judge found that Salgado and Calcaneo would not have bought the house and would not have suffered damages had they known the full extent of the rot on the east and west side beams of the house. The judge also ruled that Toth was negligent in failing to advise the buyers to retain a geotechnical engineer before waiving the inspection condition in the offer. They relied on Toth's advice regarding the stability of the house and suffered damages as a result of that reliance.

Toth's repair estimate, said the judge, was "woefully inadequate." The judge decided that the repair estimate Toth provided led the buyers to believe that the structural expenditures would not be excessive and that the problems were not significant.

He awarded them the actual cost of the necessary structural changes, including engineering costs. With respect to the exclusion of liability in Toth's inspection contract, the evidence showed that the buyers never read the contract before signing it. The court decided that it was incumbent on Toth to draw to Salgado's attention the exclusion and waiver clauses in the contract and ensure that he understood them.

Since that didn't happen, the judge ruled the exclusion of liability paragraph didn't apply.

An award approaching $200,000 in a home inspection case is virtually unheard of in Canada. My guess is that the case will result in an end to "quickie" home inspections.

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Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818. Visit the column archives at http://aaron.ca/columns/toronto-star-index.htm for articles on this and other topics.

Property Information Statements SPIS

Disclosure document is an invitation to litigation

The vast majority of residential real estate transactions close as scheduled, without problems or disputes. The chances of any given real estate deal resulting in litigation involving the buyers, sellers and real estate agents increase dramatically when the agents insist that the sellers complete a disclosure document called the Sellers Property Information Statement (SPIS).

The form is published by the Ontario Real Estate Association (OREA).

An increasing tide of court cases from across the country is evidence that the forms provide an endless source of income for litigation lawyers, and a bottomless pit of grief and expense to the parties involved in the transaction.

An Ontario Superior Court decision released earlier this year is yet another example of how dangerous these forms are and why OREA and some of its member boards should bear the blame for promoting them.

Back in 2002, Maria Lunney purchased a 90-year old Ottawa duplex for $180,000 from Jana Kuntova. The listing agent was Masoud Badre, an employee of Re/Max Metro City. The house was described in the sale listing as having a "stone, stucco" exterior with a "stone" foundation.

This type of foundation, with parging on the interior sides, was in common use until about 70 years ago, and is also known as a rubble foundation.

At the time of the listing, Kuntova – with the assistance of her agent, Badre – completed a Sellers Property Information Statement on the OREA form.

In it she stated that she was not aware of any structural problems in the basement.

Prior to the sale to Lunney, however, Kuntova had accepted an offer to purchase the property from Marque Laflamme. That purchaser had obtained a home inspection report, which indicated advanced crumbling of the rubble foundation under the rear extension of the house. Laflamme backed out of the transaction, although the seller was not told the reason for the cancellation.

At the time of her purchase in 2002, Lunney also commissioned a home inspection, but it did not reveal any defects in the foundation as the interior basement walls had been covered with drywall since the previous inspection.

A subsequent inspection undertaken for Lunney in 2005 revealed that there were serious foundation deficiencies behind the drywall, and that the property would either have to be demolished or raised to permit the construction of a new foundation under it.

The following year, Lunney sued Kuntova, Badre and Re/Max Metro-City for $300,000 in damages for misrepresentation. The co-defendants also sued each other.

The trial took place late last year over the course of five days. As a general guideline, the three lawyers involved probably spent at least another five days each in pre-trial discoveries and in preparation for trial. That comes to a total of a minimum of 30 lawyer-days, and points to a combined legal bill for everyone of something north of $100,000.

In the end, the judge found no evidence that the defendants were aware that the foundation was useless. The judge dismissed the case. Following the trial, Lunney paid court costs to the defendants, but the amounts have not been made public. As well, the losing plaintiff was responsible for her own legal bills and the foundation is still at the end of its useful life.

But for the existence of the SPIS this case may never have gone to court. The form is an invitation to litigation, and in my view agents who promote it are doing themselves and their clients a huge disservice by exposing everyone to needless litigation.

Bob McLean, director of communications at OREA, the publisher and promoter of the SPIS disclosure form, emailed me last week to say that the association had declined my request to interview a spokesperson but would shortly be providing me with a written statement about its position on the SPIS.


Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818. Visit the column archives at http://aaron.ca/columns/toronto-star-index.htm for articles on this and other topics.

David Pylyp: We are asked to include this in the bundle of documents that are provided to the Seller at each listing appointment. I ask simply, that they consult with their lawyer prior to completing the form. Invariably during the first week of the listing I am told that under the advice of counsel, They will not be completing the SPIS.

My job is not always to tell you what you want hear, but what you need to hear.

Add your comments .. would you complete these forms?

Licensed Home Inspectors Make Perfect Sense

British Columbia has become the first province in Canada to license home inspectors in order to protect buyers by ensuring qualified inspections. The B.C. model could well serve as a template for similar legislation in Ontario.

In announcing the move last week, B.C. Solicitor General John van Dongen said, "A home is the single biggest investment most British Columbians make but financial risk can be the result of an incorrect or misleading report from an unqualified inspector. Whether they're buying their first condo or starter home, dream or retirement home, consumers need to have confidence that the person who is doing the inspection has the qualifications to make a professional assessment."

To date, home inspector training has been voluntary across Canada. As a result, homebuyers may not know whether a home inspector is qualified and trained to complete an inspection properly.

Following stakeholder consultations, B.C. opted for licensing under the Business Practices and Consumer Protection Authority (BPCPA). The model adopted by the government is intended to minimize paperwork and costs in order to maximize compliance.

At the end of next month, the BPCPA will help protect the province's consumers by:
assessing the qualifications of, and requiring mandatory licences for, home inspectors
receiving and responding to complaints from consumers, and monitoring compliance, with penalties that can range as high as $5,000.

To become licensed, home inspectors will need to meet the qualifications of one of three professional associations of B.C. home inspectors. A criminal record check will be required, as will mandatory insurance.

John Winters, president of the B.C. Chamber of Commerce, is quoted in a provincial announcement as saying, "While most inspectors are dedicated professionals, under the current system they may have little or no qualification, which can create problems for legitimate real estate transactions. Requiring inspectors to be licensed provides sellers and buyers with confidence that all inspections will be carried out by a qualified professional."

In Ontario, a private member's bill approved in December 1994, established the Ontario Association of Home Inspectors (OAHI). As a non-profit corporation, OAHI is dedicated to enhancing the technical skills and professional practice of home inspectors, and maintaining high professional standards through education and discipline.

Members are entitled to use the designation R.H.I., for registered home inspector.
Unfortunately, membership is not compulsory and virtually anyone who takes an online course can set up shop as a home inspector. The industry calls these players "cowboys."

Terry Carson was one of the five founding directors of OAHI. He told me earlier this week that licensing was one of the long-term objectives of the group, "an extension of our self-regulation."
"The current system works quite well," he added, "but the cowboys are always going to be a problem."

Bill Mullen is past president of the Canadian Association of Home and Property Inspectors. He told me that he is "quite pleased" with the B.C. move, and that his group is in favour of mandatory licensing as long as it establishes a high enough standard.

Alberta and Quebec are expected to implement licensing in the near future. I don't know whether the Ontario government has an appetite for creating a self-governing regime of licensed home inspectors, but it seems to me that it is badly needed in this province, and that the OAHI would be the perfect body to take over the job.

Regulating Ontario home inspectors could be implemented in much the same way as the province recently legislated the regulation of paralegals by the Law Society of Upper Canada.
The government could follow the B.C. example and let OAHI, or a government body similar to the BPCPA, set up a regulatory framework involving training, testing, licensing, regulation and insurance.

Ontario's homebuyers are entitled to the same protection as their counterparts in B.C.
Bob Aaron is a Toronto real estate lawyer and a director of the Tarion Warranty Corporation.

He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818. Visit the column archives at http://aaron.ca/columns/toronto-star-index.htm for articles on this and other topics.

Buyer gets Frosty Welcome

A recent decision of the Small Claims Court in Winnipeg illustrates whether the buyer or seller is responsible for damage to a home, which is discovered on closing.

Hazem Alzawawy was interested in buying a small house in Winnipeg. He found a tiny 612-square-foot, one-bedroom bungalow that was described in the listing with the Winnipeg Real Estate Board as having forced air, natural gas heating.

When he inspected the house there was a furnace in the basement. He assumed it was in working condition because of the information on the listing.

There were also five or six space heaters in the house, but Alzawawy didn't think anything of it since it was not uncommon in Winnipeg to use space heaters as an additional heat source.
In February last year, Alzawawy made an offer to buy the house for $35,000. The offer was accepted and closing took place on April 1, 2007.

On the afternoon of the closing day, the buyer entered the house to find pieces of ice hanging from the faucets and the water in the toilet bowl frozen. All of the space heaters had been removed and the house was extremely cold inside.

Two days later, the new owner discovered a tiny sticker on the furnace indicating that it had been turned off two years earlier. An inspector came from Manitoba Hydro and reported that the furnace was "currently unsafe."

Alzawawy later had the furnace replaced at a cost of $2,750. The work to correct the damage caused by the frozen pipes cost $7,500.

Claiming that the seller – Amelia Mesa – left the house without a working furnace or other heat source, Alzawawy sued for the cost to replace the furnace and repair damage caused by frozen pipes.

At trial, the seller argued that the presence of the space heaters should have alerted Alzawawy to the fact that the furnace was not working, and that the doctrine of caveat emptor (buyer beware) applied to the case.

Justice Shawn Greenberg disagreed.

"In my view," she wrote, "it was reasonable for Mr. Alzawawy to assume, considering the representation in the listing agreement, that the furnace he saw in the house was working. ... I think it is reasonable for a person buying a home in Winnipeg (especially when the purchase and possession are in winter) to assume that the home has a heat source. Mr. Alzawawy was left with a home with none."

Greenberg noted the owner did not testify, and there was no explanation why the listing showed the house had forced air, natural gas when in fact the furnace had been turned off two years earlier.

In holding the seller responsible for $10,000 in damages (the dollar limit in Manitoba Small Claims Court), the judge ruled that the risk of damage passed to the purchaser at 9 a.m. on the day of closing. But since Environment Canada records showed that the temperature was above freezing on that date, she concluded that the freezing must have occurred sometime before the time of closing, "as a result of the defendant's failure to heat the house."

Several lessons may be learned from the case:

• Purchase agreements should always provide for an inspection just before closing.
• Always have an expert or a home inspector check the furnace and air conditioning, especially if you're buying off-season.
• Make sure the purchase agreement contains warranties that the mechanical systems are in good working order.
• If you're leaving the house for a holiday in the winter, remember that if the furnace fails or a circuit breaker trips or fuse blows, the heat will turn off – resulting in frozen pipes. Shut the water off at the source and turn a tap on to bleed the pressure out of the system.
• Make sure your insurance policy covers damage from frozen pipes.

Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818. Visit the column archives at http://aaron.ca/columns/toronto-star-index.htm for articles on this and other topics.
Alzawawy v. Mesa, 2008 MBQB 248 (CanLII)