When parties enter into an Agreement of Purchase and Sale for a residential home, the purchasers will commonly make the transaction conditional on receiving a satisfactory home inspection. In addition to the purchaser’s efforts to ensure the quality of the home, the vendor will often make representations as to the condition of the property and the building. The vendor must be sure of the warranties they are making, as depending on the language of the clause, they can be held liable for misrepresentation if their guarantees are proven to be inaccurate. Further, misrepresentation could be a legitimate reason for a purchaser to rescind a contract, putting the transaction itself into question.

In a recent decision by Ontario’s Court of Appeal, the Court held that when a warranty or representation affects a material aspect of the property, rescission of the contract may be a valid remedy.

Square Footage Significantly Misrepresented

In the case at hand, a first-time homebuyer was looking for a property for himself and members of his family. When he viewed the listing for the home in question, the property was indicated as being between 2,000 and 2,500 square feet. When he spoke with the real estate agent, who represented both the buyer and the seller in the transaction, the agent confirmed that the home was 2,100 square feet.

The buyer then visited the home in person twice to inspect it himself, and when meeting with the vendor, the vendor amended the square footage and said the home was 2,000 square feet in total.

The buyer later obtained an appraisal of the home as part of his requirements to obtain a mortgage. The official appraisal assessed the size of the home as 1,450 square feet, nearly three-quarters of the size originally stated by the vendor. The buyer then brought an action against the vendor, the agent and the brokerage to rescind the Agreement of Purchase and Sale and for the return of his $50,o00 deposit.

Did the Buyer’s Inspection Override the Representations Made by the Vendor?

In some cases, an obvious discrepancy between a representation and what is visible upon inspection may mean that the misrepresentation is moot once the buyer has viewed the property. For example, if the vendor claimed the floors were all hardwood, and upon viewing the property, the buyer could see that half the floors were carpeted and yet proceeded with the transaction, it could be said the buyer was fully aware of the discrepancy. However, in the case at hand, the trial judge considered the buyer’s inexperience with real estate and his young age and determined that a visual inspection would not necessarily alert him to the discrepancy with respect to the size of the home.

As a result, the judge ordered. a rescission of the Agreement of Purchase and Sale and a return of the buyer’s deposit, plus interest. The agent and the brokerage appealed the decision, arguing that the buyer’s inspection of the property should have set aside the warranty made by the vendor as to the size of the home.

Size of the Home was a Material Aspect of the Property

The Court of Appeal upheld the lower court’s decision, finding that the size of the home was a material factor and the vendor’s claim that the home was 2,000 square feet in size induced the buyer to go ahead with the purchase. The Court further concluded that it was fair to assess the age and inexperience of the buyer in the final decision. The Court maintained that rescission was a fair result in the case at hand.

Contact Tierney Stauffer LLP for Experienced Representation in Residential Real Estate Disputes

Unlike most firms practicing real estate law, our firm has a comprehensive litigation practice. This means we can represent our clients in-house in the event they find themselves in a real estate dispute like the one described above. This saves clients time and cost because our teams can collaborate and share knowledge quickly and easily if litigation or alternative dispute resolution methods become necessary.

At Tierney Stauffer LLP, we pride ourselves on our client-focused and personalized approach to residential real estate matters. Our real estate law team has extensive and broad experience representing clients on a variety of real estate matters and will ensure nothing is overlooked leading up to the closing of a transaction. Call us at 1-888-799-8057 or contact us online to set up a consultation with an experienced real estate lawyer.


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