Caveat Emptor ("buyer beware") will not protect a seller who actively conceals a latent defect

Typical factual scenario. Litigant moves into property, and a few weeks or months after closing realizes there is a water leak in the basement and discovers evidence of a history of flooding. Does “buyer beware” apply? Can the litigant recover damages for materials and any repairs carried out by his or herself?

The key case is Whaley v. Dennis (2005) CanLII 26328 (ONSC). In Whaley, the court held that "where a vendor actively conceals a latent defect he or she can take no protection from the doctrine of caveat emptor ("let the buyer beware") and the purchaser is entitled to sue for rescission or damages. In other words, a latent defect known to a vendor must be disclosed to a purchaser."

This case is a best kept secret since a lot of litigants (particularly defendants) are under the misapprehension that “caveat emptor” governs these situations. Caveat emptor will not apply if there is active concealment of a latent defect. In para. 27, the court found that the basement leak would not have been discovered by the plaintiffs on a routine inspection, and that answers in the Sellers Info Questionnaire that were stated to be "unknown" were in fact "Machiavellian".

Interestingly enough, the case also dealt with the question of whether one can recover damages for one's own time spent doing repairs. The short answer appears to be "no". In Whaley, there was both a septic system and basement leak issue in play. Para. 37 states: "The plaintiff seeks a sum for landscaping..., but I find that Mr. Whaley performed this work himself." The reasoning taken by the court appears to be that a litigant's own time repairing something is not an out-of-pocket expense. However, the cost for materials was recoverable, and had the plaintiff paid someone this would be in principle recoverable as well.

Notwithstanding the above, a litigant’s own efforts in repair work can be used as mitigation evidence.

In lieu of damages for the plaintiff's own time, the litigant might also consider general damages for the seller concealing the latent defect, and punitive damages to deter similar behavior in the future. These are separate heads of damages.

Disclaimer: this blog does not constitute legal advice. If you have a potential claim or need to prepare a defence relating to such matters as breach of an agreement of purchase and sale or contractual dispute in the real estate context, or a claim for defective workmanship (e.g. roofing company did faulty repair work leading to flooding) it is best to contact a lawyer. Please do not hesitate to reach out for a consultation and/or quote: colin@cuttresslaw.com