Silver and Gold Magazine Spring 2015 - Page 26

HOUSE & HOME RISKY REAL ESTATE Negligent disclosure of flooding risks can pose future liability – By Joanna Kyriazis & Laura Zizzo Zizzo Allan DeMarco LLP Property sellers could be exposed to significant legal liability for not warning buyers about past damage and potential risks to their property relating to natural hazards. In a recent case, the Ontario Superior Court of Justice found sellers of a home and their real estate agent liable for tens of thousands of dollars in damages for failing to disclose past flooding and other water-related problems to the buyer. In 2008, Vance and Dorothy Overacker listed their Thunder Bay home for sale. Prior to selling, they experienced significant water problems for the three years that they owned their home. In 2005, the Overackers’ basement flooded, costing their insurance company $35,000 in repairs. From 2005-2008, the Overackers also experienced problems with their sump pump system and septic field. The Overackers sold their house to Daniel Fors for $392,000. Prior to closing, their real estate agent Jack Mallon assisted the Overackers in completing a Seller Property Information Statement (SPIS) for the buyer – a form that is not required by law but that must be completed honestly and accurately if the seller opts to fill it out. When completing the SPIS, Mallon advised the Overackers that they were not required to disclose problems that had already been addressed, such as the 2005 flood. Following this advice, the Overackers did not disclose the 2005 basement flood or subsequent problems they experienced with the sump 26 pump system, the septic field, moisture in the basement or leakage from the skylight. After the close of sale, Fors, the buyer, experienced similar water-related problems in the house. Having not been informed of these issues prior to purchase, Fors sued the Overackers for negligent misrepresentation in completing the SPIS, alleging that certain of the answers the Overackers provided on the SPIS form were false. The Overackers, in turn, brought a third party claim against Mallon, their real estate agent, for providing them with poor advice. The Court awarded Fors $117,830.50 in damages (representing about 30% of the purchase price of the house) against the Overackers, finding that the Overackers acted negligently in completing the SPIS form. The Court also allowed the third party claim against Mallon, granting the Overackers $42,459.75 in damages relating to Mallon’s negligent advice. The Fors case is one of many litigations concerning seller liability relating to disclosure of property defects. Often the defects at issue relate to past flooding or water problems, which, in light of climate change, will only become more prevalent. Particularly in the face of rising sea levels and increased storm surges, cases like this raise some interesting questions regarding what type of property information should be disclosed by More articles, recipes & resources: