Buyers Not Allowed To Terminate Purchase Due To Size Misdescription Or Building Permit Concerns

• Published date: 06 April 2021
• Subject Matter: Real Estate and Construction, Real Estate
• Law Firm: Gardiner Roberts LLP
• Author: Mr James Cook

While the discovery of misdescriptions as to the size of a property or unpermitted renovations may allow a buyer to terminate a purchase transaction, that is not always the case. Whether a description of the size of the property is a material factor not only depends on the written representations as to the size of the property but the buyer's visual investigations. As to building permits, a buyer should proactively investigate any concerns and raise the specific issues in a timely manner. The Ontario Superior Court of Justice addressed each of these issues in Lamba v. Mitchell, 2021 ONSC 1612 (CanLII).

In July 2020, the sellers listed their residential bungalow in Mississauga for sale. The MLS listing represented the interior of the house to be approximately 2500-3000 square feet. This representation overstated the size of the house unless the lower level of the bungalow was included in the calculation, as the main floor ("above grade") was 2155 square feet and the lower level was 665 square feet. A marketing brochure prepared for potential buyers accurately set out the above grade and lower-level dimensions.

A highly experienced real estate agent in Mississauga, who had closed over 2,000 transactions collectively worth over $1 billion, viewed the property with his wife. They made an unconditional offer to purchase the property for $1.2 million within a few hours of their visit, as there were multiple offers being made. Their offer was accepted. The scheduled completion date was September 15, 2020, with a $20,000 deposit.

After the offer was accepted, the buyers learned that the "above grade" size of the house was 2,155 rather than 2,500-3000 square feet. The buyers claimed to have relied on the MLS listing for the dimensions of the property and said that they did not see the marketing brochure when visiting the property before making their offer. The evidence of the sellers was that the brochure and the floor plan were on display in the kitchen during the viewings. The buyers claimed that the difference of 345 square feet was a shocking discovery.

Further, the buyers learned of a prior renovation that built an addition onto the bungalow that almost doubled its original size. The sellers claimed that the renovations were done prior to their purchase of the property and that they did not have copies of any permits relating to the work. The buyers refused to complete the purchase and litigation ensued over the deposit.

The issues before the court were...