Thursday, January 12, 2012

Home Inspector Misses the Basement Floor Drain ~ Any Liability?


Home Inspector Misses the Basement Floor Drain ~ Any Liability?


Ontario Real Estate Source


By Brian Madigan LL.B.


This is an interesting situation. A buyer is concerned about buying an older home, one that is about 80 plus years old. It was renovated about 5 years ago and is situated in a fashionable part of the city.

Naturally, his agent recommends a home inspection. One of the main worries is whether the house will pass the “water test”. Is any water getting in through the roof, windows, doors, basement or any other place.

The home inspector gives the property an A+.

The home inspection clause is waived, the deal closes and 4 days later there is water in the basement around the boiler in the furnace room.

Further inspection reveals that there was water damage, mould, and a hidden floor drain.

Several months earlier there had been a major sewage backup. The sewage entered the basement through the main drain. It damaged the broadloom. So, here’s what happened:

1) the carpeting was removed,

2) the place was cleaned up,

3) a subfloor was constructed,

4) laminate was installed over the plywood subfloor.

With all this new construction, the floor drain was covered up. It was still there, under the subfloor and the laminate.

Certainly, if there were another sewage backup, the water, moisture, resulting mould and odours would likely be trapped by the laminate and the subfloor.

So, the basic question is this: was the home inspector responsible?

There was no other drain in the basement. Should the home inspector comment on this and point out the fact that there was no drain to be found? And, perhaps mention to the buyer that a drain in the basement should be installed?

Now, I appreciate that you can’t see where it is once it’s hidden under the subfloor, but should it not at least appear on the checklist.

The specific issue that concerned the buyer in the first place was water, and this risk materialized.

Do you think there is any liability on the home inspector?

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888

http://www.ontariorealestatesource.com/

Sunday, January 8, 2012

Seller’s Disclosure: the Rules


Seller’s Disclosure: the Rules



By Brian Madigan LL.B.


Real estate professionals are obligated to conduct their own due diligence when taking a listing. That is part of their “professional responsibility”.

They owe that obligation to their clients, themselves and the public.

Here is an excerpt from the RECORD a publication of the Real Estate Council of Ontario (RECO), the governing body, dealing with sellers and taking a listing , made in its Fall 2011 issue:


“Working with sellers


When acting as a listing representative it is possible that the material facts may already be known by the client/ seller, but the obligation to determine and disclose still exists and is relevant because the seller may not appreciate the potential impact of the material facts.


For virtually all material facts, the “reasonable steps” required for determining those facts will go beyond simply accepting the seller’s verbal representations. Some research and supporting documentation will be necessary.


In addition, the “fairness and honesty” provisions of the Code of Ethics oblige a seller’s representative to disclose known material facts to a buyer’s representative.”


Comment


The seller may not appreciate the potential impact. That means the disclosure, or failure to disclose or even the concealment or deceptive representation that may go along with that.


Honesty is the best policy, but some sellers unfortunately will often try to trade-in a little honesty for a higher sale price.

The role of the listing agent is to address that matter and have a full and frank discussion.


Agency is one matter. That means acting in the best interests of the client. But, joining in any arrangement for active concealment or misrepresentation is not allowed. The real estate agent is a professional and must adhere to the rules of their profession. The Code of Ethics applies and prevails over any allegiance one might have to the seller. The truth must be told!


If the seller chooses not to reveal certain facts, the real estate professional must determine whether those facts are material. If they are, then the professional is under an obligation to disclose them. But, not the seller. So, the seller may choose to go it alone. Sell as a private sale. Follow the “wild west” approach for “FSBO’s” and remain silent.


When it comes to sellers, while they may in certain cases have the right to remain silent, silence is not always golden. Silence drives the price down. Just ask any “power of sale” vendor. They are sophisticated, and they have chosen to offer the minimum in terms of information. That translates into the price. No information, and everyone wants a discount.

A real estate professional may have to disclose. The reason is simple: the Code of Ethics. The result then is clear:


1) accept the listing, and agree to make the disclosure,


2) reject the listing.


It is important to note that just acceptance of the seller’s comments is not enough. Questions must be asked, and satisfactory answers must be given. Then, at a certain point, the “professional” will conclude that they have enough information. But, until then, the investigative inquiry must continue.

It is no longer sufficient to say: “the vendor didn’t know”. That may be fine, but what’s the “professional answer”.



Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888

http://www.ontariorealestatesource.com/