For most people, buying a house is the biggest purchase they’ll ever make. Yet surprisingly, most people purchasing property in the Yukon these days are doing so without even asking the sellers some of the most basic questions one might want to know about a house.
Have you ever had water in your walls or basement? Does your roof leak? Ever done any work without a permit?
Then, a few years down the road the new owner notices some water seeping in through the basement walls. They pull away the drywall to discover evidence that this has obviously happened before and someone did only a sloppy fix. Facing a big bill to remediate the problem (this kind of seepage is rarely covered by insurance), they begin to wonder why the seller didn’t disclose this information to them. Many people simply assume that this would be something the seller would have to tell them.
Then they learn the hard truth — the obligation to disclose a property’s flaws is surprisingly limited. How limited? Well that is a complicated question, but as a buyer the message is that you shouldn’t count on the law to provide you with any legal remedy to your situation. The onus is on you to look out for your own interests.
At its core, the purchase and sale of property is a matter of contract between buyer and seller. Unlike in other areas of commerce there is no body of consumer protection law ensuring that buyers are getting a quality product and that serious concerns are properly disclosed.
The general rule surrounding the purchase and sale of land is buyer beware. Subject to some limited exceptions, when it comes to the sale of land, whatever is not written down is not legally binding. And if you don’t actually ask the question the seller doesn’t have much obligation to tell you.
You always can (and should) get a home inspection before buying a house, but you need to understand the limitations. There is only so much a home inspector can see without tearing the place apart. It is surprisingly easy to conceal moisture and water related issues with some fresh drywall and paint.
You may be wondering how this is fair. After all, the seller has owned the property all these years and they would know if there have been any problems. Why are they allowed to just offload their problems onto an unsuspecting buyer?
Thankfully there is a workaround to this information imbalance — the property disclosure statement. A property disclosure statement is essentially a series of questions that the seller has to answer about the property. And if they don’t answer the questions to the best of their knowledge there can be legal repercussions down the road if the problem resurfaces and the buyer is forced to spend money to deal with them.
To be clear, a property disclosure statement is far from a guarantee.
Even if you discover a problem down the road you would still need to prove that the seller knew about it. That can be difficult — especially if the property has been owned by a succession of different owners. A property disclosure statement is not some sort of lifetime warranty and proof of the seller’s knowledge is crucial.
You also need to find the seller, which can be a significant challenge particularly if they have left the Yukon. And then you may need to go through the often expensive and time consuming litigation process to recover your damages.
But it is still better than nothing. At least it provides you with some options if a problem develops. That and it puts the seller in the hot seat for a few minutes. And since most people are honest, they’ll usually answer the questions accordingly. Then you can at least go into the transaction with eyes wide open.
Unfortunately, property disclosure statements are underused in the Yukon and have become the exception rather than the norm. A small claims court case from several years ago seems to have spooked a lot of people. The judge found that sellers completing the statement are obliged to disclose problems that existed in the past even if they thought they had fixed it.
But the solution — to throw the baby out with the bath water and abandon disclosure altogether — is hardly the answer. It has left purchasers in the dark with few options when sellers conceal superficial and incomplete fixes and pass on problems to unsuspecting purchasers. A better solution would have been to advise sellers to answer the questions to the best of their ability and err on the side of openness.
Whatever the norm may be it doesn’t need to be the case for you. If you’re looking to buy a house you can and should require a property disclosure statement from the seller — particularly if the property has been on the market for some time and you come to the table with some bargaining power.
You can also insist that it be made a condition of your contract that you get to review the answers before locking in.
And if the seller refuses to complete the property disclosure statement, give serious thought to what they might be hiding.
Kyle Carruthers is a born-and-raised Yukoner who lives and practises law in Whitehorse.