RECORD HOME SALES
There were 12,085 sales in April 2016, which represented a record for the month of April which was up by 7.4% in comparison to April 2015. For the TREB market area as a whole, annual sales growth was experienced for all major home types except semi-detached houses. In the City of Toronto in particular, sales were down for detached and semidetached houses, as well as townhouses on a year-over-year basis. This dip in sales was due to a lack of low-rise listings. Many would-be buyers were not able to find a home that met their needs. While there was a new record set in April, that number could have been even higher if we had benefited from more supply.
In the City of Toronto in particular, some households have chosen not to list their home for sale because of the second substantial Land Transfer Tax and associated administration fee. The lack of available inventory, coupled with record sales, continued to translate into robust annual rates of price growth. The average selling price was up by 16.2%.
“As we move into the busiest time of the year, in terms of sales volume, strong competition between buyers will continue to push home prices higher. A greater supply of listings would certainly be welcome, but we would need to see a number of consecutive months in which listings growth outpaced sales growth before market conditions become more balanced,” said Jason Mercer, TREB’s Director of Market Analysis.
LATENT AND PATEND DEFECTS – BUYER BEWARE!
You’ve just purchased your dream home. Upon moving into the home, you discover that there is a large watermark on one of the basement walls. You couldn’t view the watermark during your previous visits to the property as the Sellers’ contents were blocking the area.
You further discover that the water mark is being caused by a leak, and mould may have developed behind the basement walls. That initial excitement of living in your dream home has turned quickly into a nightmare. Unfortunately, situations like this are all too common.
Who is responsible for remedying such defects? In real estate transactions, the doctrine of caveat emptor, or “buyer beware,” applies. Absent fraud, mistake, misrepresentation, or a contractual term which protects the Purchaser from such defect, or a duty of the Seller to disclose (such as dangerousness and unfitness for habitation), the Purchaser will be responsible for any previously undisclosed defects.
Undisclosed defects can be broken down into two categories: patent defects and latent defects. A patent defect is an obvious flaw that would be ordinarily discoverable or easy to observe on an inspection. If the Purchaser is able to observe the defect, they are also able to raise concerns or include contractual terms to account for the defect. A Seller is not liable to a Purchaser for a patent defect.
A latent defect is one that is not known to either the Seller or the Purchaser at the time of sale. A Seller cannot be liable for a defect that they had no knowledge of. However, if the Seller did have knowledge of the defect, and deliberately
failed to disclose, misrepresented, or tried to conceal it, then the Seller may be liable for such defect. The key consideration in determining liability is the knowledge of both the Seller and the Purchaser.
For example, in our leaky basement scenario, if the Purchaser could easily observe the water mark, the Seller cannot be held liable for it. Furthermore, there is no liability if both Seller and Purchaser have no knowledge of the defect. If, however, the Seller had knowledge of the water mark and actively tried to conceal it, the Seller may be liable.
A Purchaser can best be protected from latent and patent defects prior to closing by:
• Having the Seller complete a Property Information Statement • Asking the Seller relevant questions about the history and quality of the property. Ensuring that the Agreement of Purchase and Sale is conditional upon an inspection of the property. Completing a professional inspection of the property, including moving furniture which may otherwise cover up potential problems. Including terms in the Agreement of Purchase and Sale to protect against certain concerns such as water seepage
In hot housing markets such as Toronto, it can be tempting for a purchaser to submit an offer without an inspection condition. Before submitting such an offer, speak to your realtor and lawyer to better understand the risks in doing so, as the doctrine of caveat emptor will apply.
Garry Shapiro and Evan Shapiro