HOUSE & HOME
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
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
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