In this article, we will be discussing the importance of signing an offer with a legal warranty when selling a property in Quebec. While it is strongly recommended by lawyers to include a legal warranty, there are certain circumstances where it may not be necessary. We will also explore the differences between hidden and latent defects and the criteria that must be met for a legal warranty claim. Additionally, we will touch on the concept of due diligence and its significance in real estate transactions. Finally, we will discuss the options available to buyers who discover defects after purchasing a property.

Selling with a Legal Warranty

A legal warranty is a protection for buyers that ensures the property is free from defects. It is highly recommended by lawyers to include a legal warranty when selling a property. However, there are exceptions to this recommendation. In cases where the property is being sold as part of an estate or by an elderly seller who may not have knowledge of the property, selling without a legal warranty may be more appropriate. It is important to consider your circumstances and consult with a real estate agent to determine what is best for you.

During the COVID-19 pandemic, many sellers chose to sell their properties without a legal warranty and at a lower price. This was due to the high demand in the market and the willingness of buyers to accept properties without a legal warranty. However, it is important to note that some buyers may have encountered issues with these properties, as inspections were not always conducted and defects may have been overlooked.

Hidden and Latent Defects

In Quebec, the terms "hidden" and "latent" defects are often used interchangeably within the legal realm. However, what the courts care about the most is whether the five criteria for a legal warranty claim have been met.

The five criteria for a legal warranty claim are as follows:

1. The defect must be serious. Minor issues, such as a crack in a fireplace ceramic or a leaking toilet, may not qualify as serious defects.
2. The defect must be hidden. It cannot be visible in plain sight or detected by a visual inspection. It may be something that is behind a wall or described as such in an expert report.
3. The defect must be unknown to the buyer. The seller must not have brought it to the attention of the buyer through any real estate documents or verbal communication.
4. The defect must exist prior to the sale. It cannot arise after the sale has been completed.
5. The buyer must provide legal notice to the seller. A formal notice must be sent to the seller in order to initiate a legal warranty claim.

Filing a Claim for Hidden Defects

If you discover a hidden defect and wish to file a claim, it is important to know which court to go to. In Quebec, there are different levels of court depending on the amount being claimed.

• Small Claims Court of Quebec: For claims of $15,000 and less.
• Civil Division of the Court of Quebec: For claims over $15,000 and below $75,000.
• Superior Court or Civil Division of the Court of Quebec: For claims between $75,000 and below $100,000.
• Superior Court of Quebec: For claims over $100,000.

It is important to note that in small claims court, lawyers are not allowed. However, for claims above $15,000, you have the right to hire a lawyer to represent you.

The Importance of Due Diligence

Due diligence is a crucial aspect of real estate transactions in Quebec. It refers to the buyer's responsibility to conduct thorough research and inspections before the closing date of the sale. This includes obtaining financing, reviewing documents, checking for zoning laws or title issues, and most importantly, having the property inspected for defects.

Due diligence is not explicitly mentioned in the Quebec Civil Code, but it is widely recognized by courts through case law. It is essential for buyers to perform due diligence to ensure they are fully aware of any potential issues with the property they are purchasing.

Case law has established the buyer's obligation to do their due diligence, especially when purchasing an older property. In a notable case in 1989, the Court of Appeal overturned a lower court decision and imposed the obligation on buyers to have a property inspected due to its old age. This case set a precedent for the importance of due diligence in real estate transactions.

Options for Buyers Discovering Defects

If a buyer discovers a defect after purchasing a property, they have several options depending on the circumstances. These options include:

• Specific Performance: The seller is obligated to repair the defect as agreed upon in the contract.
• Damages: The buyer can claim damages, which may include a price reduction.
• Rescission of the Contract: In extreme cases, the buyer may choose to cancel the contract and seek a refund.

It is important for buyers to be aware of their options and to consult with a lawyer to determine the best course of action.

In summation, signing an offer with a legal warranty is highly recommended when selling a property in Quebec. However, there are exceptions to this recommendation, and it is important to consider your circumstances and consult with a real estate agent. Hidden and latent defects are important considerations in legal warranty claims, and the buyer must meet certain criteria to file a claim. Due diligence is a crucial aspect of real estate transactions, and buyers have a responsibility to thoroughly inspect the property before the closing date. If a defect is discovered after the purchase, buyers have options such as specific performance, damages, or rescission of the contract. It is important to be aware of these options and consult with a lawyer for guidance. Real estate is a significant investment, and taking the necessary precautions and conducting due diligence can help protect buyers from potential issues and disputes in the future.

Sources:

Quebec Civil Code

Court of Appeal of Quebec

Small Claims Court of Quebec

Superior Court of Quebec

Broady Windsor Group