Last week, the CBC reported on a couple who bought a newly built home in Fort Erie, Ontario, four years ago and are now faced with having to spend $500,000 to tear it down. The house is so poorly constructed that engineering specialists have recommended that it be completely demolished and rebuilt. They purchased the house in 2021, from the original owner who sold it only one year after completion. The 100-house subdivision was developed by Marina Homes. However, after experiencing leaky windows and roof, causing extensive water damage and mould, they discovered that the foundation itself was not strong enough to support the house. All new homes built in Ontario are provided a warranty through a company called Tarion. The warranty provides financial protection against construction deficiencies/defects yet has certain limitations. The maximum coverage available is $300,000 – hardly enough to tear down a home, and rebuild the foundation. While the case is making its way through the court system (the owners have filed a civil suit against the Town of Fort Erie for negligence relating to the issuing of building and occupancy permits, the original architectural designer, and the builder), occupying the home comes at a risk of health issues caused by mould, ongoing issues continue to persist, and the owners cannot afford to relocate. This bungalow was meant to be their retirement home. Certainly, I feel for anyone in this situation, but two parts of the story jumped out immediately to me: 1. HOME INSPECTION – because of the competitiveness of the market at the time of purchase, the buyers decided against doing a home inspection before submitting an offer on the home. Understandably, it is nearly impossible to maintain competitive with a home inspection condition in an offer against other offers that are condition-free, but “buyer-beware” is a very costly lesson to learn. Whether you depend on the home inspection report provided by the seller, or investing that $600-$800 in obtaining that home inspection report prior to making an offer, either are more advisable than going in blindly. I also want to note that many buyers feel that doing a home inspection report on a new or newer property is not necessary and I would strongly recommend it anyway. New does not mean correct, especially since today’s construction projects are being rushed to completion amidst delays. While the scope of a standard home inspection typically would not include engineering reports on the actual structure or foundation, surely it could’ve discovered clues on water issues and mould remediation. 2. TARION WARRANTY – in the first 7 years of construction completion, the warranty can be transferred from original owner to new buyer. (The warranty also applies to any property which has been significantly renovated as well as condo conversions, by the way.) However, Tarion does not release any information relating to previous claims, until the transfer of warranty is completed. For these buyers, it was only then that they learned that the original owner did file several claims for repairs and mould remediation. Lastly, the one thing that the CBC story does not address is disclosure obligations of the seller. You may be wondering whether the seller (the original buyer of the new house) had an obligation to disclose the mould issue as it is a latent defect (hidden). The seller was clearly aware of the mould issues, but disclosure depends on the severity of the mould, whether it affects the structural integrity of the house, or whether it renders the property unhabitable. The onus is on the Buyer to find out about the condition of the home, and ultimately the Buyer’s Agent’s responsibility to ask these questions. The Buyer also has the burden of proof that the Seller knew about the issue and purposely deceived the Buyer. So if there was mould remediation in the property immediately before the house was listed for sale, is there a mould issue to report? If you have any questions about the pros and cons of buying new construction, please reach out to us for more information!
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