Misrepresentation during a home sale carries consequences

By LegalMatters Staff • People selling their homes want to present them in the best light possible. But if they knowingly misrepresent the property to buyers, that can lead to legal and financial repercussions.

“All real estate transactions are expected to be built on a foundation of trust and transparency,” says Edmonton real estate lawyer Peter Ewanchuk. “In a variety of circumstances, sellers may also be legally obligated to disclose information about the property’s condition and history that could materially influence a buyer’s decision.”

If a seller makes a misrepresentation about the property in a home sales agreement and that is discovered later, the consequences will depend on the nature of the misrepresentation and its effect, he says.

“Disclosure is an essential element of real estate transactions,” says Ewanchuk. “Full and honest disclosure enables buyers to make informed decisions about the property’s value, potential risks and suitability for their needs.

“Often, sellers do not want to disclose information that they feel may adversely affect their sale, however, that can have costly consequences,” he adds.

Ewanchuk explains that significant details about a property that may influence a buyer’s decision-making process include a cracked foundation that has been covered up or the presence of lead-based paint, asbestos or mould.

“Poorly done renovations could pose a risk to the home’s inhabitants, such as electrical work that does not meet provincial standards or without permits and proper inspections,” he says. “Or drainage issues, that lead to the basement flooding every time it rains.”

If the seller knows the home has shortcomings and fails to disclose those material facts to potential buyers, the buyer may be able to launch legal action to get out of the purchase and recover their deposit, he says.