Caveat realtor?

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Caveat realtor?
Do vendors and real estate agents have a duty to alert potential buyers
to the pedophile next door?
What’s New In...
Real Estate?
By Carol Neshevich
ROBERT JOHANNSEN
W
hen Jason Dennis and Rebecca
Bound purchased a house in
Bracebridge, Ont., in June of
2010, they had no idea that a
man who had been convicted of
possession of child pornography was living
across the street. They only found out after the
sale was completed, and as parents of two
young children they didn’t believe it was safe to
move in. The couple sued the vendors and the
vendors’ realtors, arguing that they should have
disclosed this information, which Dennis and
Bound soon learned was common knowledge in
the neighbourhood.
Their lawyer, Arnie Herschorn of Toronto
firm Minden Gross LLP, argued that the presence of this neighbour is a latent defect: a
defect that’s hidden or not apparent upon a
reasonable inspection, but one the vendor knows about,
and could render the home uninhabitable. Typically, real
estate transactions operate under the doctrine of caveat
emptor — Let the buyer beware — where it’s up to the
buyer to rely on his own reasonable inspections and
inquiries before agreeing to purchase a property. But a
seller who fails to disclose a known latent defect can
incur his liability.
This isn’t the first time the latent defect argument has
been used in relation to something unrelated to the actual dwelling. In the well-known Ontario case Sevidal v.
Chopra, the vendors were found liable for failing to tell
buyers that radioactive material was being stored at a
location near the house. Still, using the latent defect
argument in relation to a convicted criminal in the neighbourhood breaks new ground.
In March of this year, the vendors of the Bracebridge
house made a motion to have the claim dismissed, arguing that it didn’t disclose any cause of action known to
law. But Madam Justice Alexandra Hoy of the Ontario
Superior Court ruled that the case could potentially succeed. This led to the beginning of a settlement discussion
which had not concluded at press time. The case will go
forward if a settlement is not reached, Herschorn says.
A different argument is being made in a very similar
case involving a London, Ont., couple with three children
who bought a home next door to a father and son who
were both convicted of possession of child pornography.
In 2009, Michelle and Phillip Mercer, sued the vendors,
who knew about the convictions. The twist was that the
vendors were real estate agents selling their own property.
“So our claim, unlike the latent defect claim, has been
asserted on the basis of section 32 of the [Ontario] Real
Estate and Business Brokers Act, which requires all real
Octobre · Novembre 2011
estate agents divesting themselves of an interest in real
estate to provide a written statement advising all parties
to an agreement to sell such real estate that the registrants
are sales persons, and containing full disclosure of all
facts within their knowledge which affect or will affect
the value of the real estate,” explains Mavis Butkus of the
London firm McKenzie Lake. If the vendors were not
agents themselves, she says she likely would have
advanced the latent defect argument.
[U]sing the latent defect arguHer clients argue that
ment in relation to a convicted
the presence of these
neighbours affected the criminal in the neighbourhood
value of the house; they breaks new ground.
were upfront with potential buyers about the convictions and it took almost a
year for the house to finally sell. They got $30,000 less
than their original purchase price. A trial is set for the fall.
These cases have been making big waves, both in the
media and among real estate agents. As Herschorn notes,
realtors are concerned about any case that adds to the
duties of a real estate agent. As lawyers for the buyers in
both cases, Butkus and Herschorn both contend that having a child pornographer living nearby should legally be
disclosed, particularly if the vendors know the potential
buyers have children. To call something a latent defect,
says Herschorn, “the defect has to be so substantial that
it renders the property uninhabitable. That really isn’t a
stretch to parents with young children.” Butkus adds that
the “inherent danger” in living near someone with such a
conviction when one has children must be considered.
William Harrington, corporate counsel for the Ottawabased Canadian Real Estate Association, isn’t so sure.
“Socially, disclosure is a good idea,” he admits, “but here
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Quoi de neuf en...
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le droit de l’immobilier?
Vice de voisinage
Le vendeur et l’agent d’immeuble doivent-ils divulguer à l’acheteur potentiel qu’un
voisin a été condamné pour possession de pornographie juvénile? En Ontario, deux affaires
soulèvent la question — et la réponse est loin d’être évidente.
Q
uand Jason Dennis et Rebecca
Bound ont acheté une maison à
Bracebridge en Ontario, en juin
2010, ils ne savaient pas qu’un homme
habitant de l’autre côté de la rue avait été
condamné pour possession de pornographie juvénile. Ils ne l’ont appris qu’une fois
la transaction conclue et comme parents
de deux jeunes enfants, ils ont jugé qu’il
n’était pas sécuritaire d’y emménager. Le
couple a poursuivi les vendeurs et leurs
agents immobiliers, affirmant que la présence de ce voisin était un vice caché.
En Ontario, il revient à l’acheteur de
faire preuve de diligence et d’inspecter
l’immeuble. Mais l’omission de divulguer
l’existence d’un vice caché du vendeur et
qui pourrait rendre la résidence inhabitable peut entraîner sa responsabilité.
Ces vices ont déjà été invoqués pour
des éléments extérieurs à la propriété,
comme la présence d’un entrepôt de
matériel radioactif à proximité. Mais un
vice caché lié à la présence d’un criminel
dans le voisinage: nous sommes en territoire inexploré.
Cette cause de Bracebridge n’est pas
la seule: une autre, semblable, est
actuellement débattue à London, en
Ontario, où les parents de trois enfants
ont eux aussi acheté une maison, mais
cette fois-ci à côté de celle d’un père et
de son fils qui ont tous les deux été condamnés pour possession de pornographie juvénile. En 2009, Michelle et Phillip
Mercer ont poursuivi les vendeurs, qui
étaient au courant des condamnations.
Fait intéressant: ces vendeurs étaient
eux-mêmes des agents d’immeuble qui
vendaient leur propre propriété. Les
demandeurs dans ce dossier ont donc
fait valoir que l’article 32 de la Loi de
2002 sur le courtage commercial et immobilier exige des agents ontariens qui
se départissent d’un bien personnel
qu’ils divulguent par écrit tout ce qui
pourrait en affecter la valeur.
Dans la première affaire, des pourparlers pour en arriver à un règlement ont
été entamés, mais aucune entente
n’avait été conclue au moment de mettre
sous presse. Dans la deuxième, une date
de procès a été fixée pour l’automne.
Arnie Herschorn, de la firme torontoise Minden Gross LLP, et qui représente le couple de Bracebridge, dit par
ailleurs comprendre la réticence des
agents d’immeuble à voir leur fardeau
de divulgation augmenter. « Ils s’inquiètent du fait que si on s’engage dans
cette voie, il sera difficile de dire où on
devra s’arrêter, dit-il. Aurez-vous l’obligation de divulguer la présence d’un
pitbull agressif dans le voisinage? »
Ainsi, on ignore où ces deux causes
mèneront. Mais une chose reste claire:
les agents d’immeuble ontariens et ceux
d’ailleurs au Canada suivront leur évolution avec attention. N
we have a legal system that doesn’t require that.” Legally, he
thinks applying the term latent defect to a sex offender in the
neighbourhood is “really, really stretching the law as it exists
now… certainly ‘material latent defect’ has a meaning and I don’t
think it fits in this case. So they’re trying to create new law here.”
The impact of having a neighbour with a child pornography
conviction is too subjective to be considered a latent defect that
must be disclosed under current law, he suggests. To sidestep those
murky waters entirely, Harrington thinks a publicly available sex
offender registry, like the one in the United States, would help.
Buyers with small children could do their research themselves so
realtors and vendors wouldn’t have to wrestle with these issues.
Bob Aaron, a Toronto lawyer who specializes in real estate at
Aaron & Aaron Barristers and Solicitors, believes the two cases
fit into the category of “stigmatized real estate,” whereby the
stigma attached to an element of a house could affect its value.
In this category, he includes homes that had been used as grow
houses, where murders or suicides occurred, or even homes
believed to be haunted. “You’re travelling into the area of stigmatized real estate where it’s very, very difficult to firstly establish rules on whether it should be disclosed, and secondly to
quantify the loss, if any, because it’s so subjective,” he explains.
Herschorn admits that he does understand the fear in the
real estate world about the potential slippery slope if latent
defect is stretched to include the existence of a neighbour convicted of possessing child pornography. “They’re worried that
if you start, where do you stop? Will you have to disclose a
nasty pitbull in the neighbourhood?”
It’s certainly not clear where these cases will lead, but one
thing is certain: real estate agents in Ontario and across Canada
will be watching closely to see how they turn out. N
Carol Neshevich is a freelance writer based in Toronto.
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