Seller Beware: Ontario Court Of Appeal Confirms That A Purchaser's Inspection Does Not Always Relieve The Vendor Of Liabilty For Misrepresenations

• Published date: 11 December 2020
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Real Estate
• Law Firm: WeirFoulds LLP
• Author: Mr Max Skrow

The general rule regarding the purchase of real property is that the purchaser must satisfy himself or herself of the suitability of the property he or she seeks to purchase - Caveat emptor.¹ There are, of course, exceptions. A vendor must disclose defects that would not be obvious upon inspection. Similarly, where a purchaser enters into an agreement of purchase and sale in reliance on a material misrepresentation made by the vendor, that agreement is voidable at the option of the purchaser (i.e. the purchaser can seek the remedy of rescission). Thus, there are circumstances in which a vendor must speak (i.e. where there are defects in the property that are hard to detect upon inspection) and, when a vendor does speak, he or she cannot mislead (even innocently).²

But what happens when the vendor innocently misleads the purchaser about a defect which is immediately obvious upon inspection, but the purchaser fails to notice it? Is the remedy of rescission available to the purchaser?

The Ontario Court of Appeal recently considered this question in Issa v Wilson.³

Background

The plaintiff/respondent, Mr. Issa, was a 26-year-old first-time home buyer who retained the defendants/appellants realty company (Keller Williams Realty Centres) and real estate agent (Mr. Jarrah) to help him find a suitable home to purchase for himself, his parents, and his three sisters. Mr. Jarrah found one such home, the MLS listing for which described the size of the home as being in the 2000-2500 square foot range. Mr. Jarrah, who acted for both Mr. Issa and the vendor of the home, told Mr. Issa that the home size was 2,100 square feet. At one of Mr. Issa's two visits to/inspections of the home, the vendor advised Mr. Issa that the property was about 2,000 square feet in size.

It was not.

Mr. Issa received an appraisal of the property in connection with his application for a mortgage. The appraisal revealed the actual size of the home to be 1450 square feet - a far cry from 2,000, much less 2,500.

Mr. Issa commenced an action against Mr. Jarrah, Keller Williams, and the vendor, seeking a declaration that the agreement of purchase and sale was void. Mr. Issa also sought the return of his $50,000 deposit.

Trial Decision

At trial,⁴ the key issue was whether the discrepancy between the actual and advertised size of the property entitled Mr. Issa to rescission, or whether his two inspections of the property displaced or overrode his expectations such that he ultimately purchased...