Common risks in residential real estate

.I have been practicing residential real estate law for 14 years and have closed hundreds of transactions.  I also offer free 30 minute consultations.  As a result I have been speaking with clients over the years about their real estate law related questions.  The following issues are the ones that come to mind for me and some potential preventative measures and remedies as a result.

Flooded basement

This is the most common.  Previous owners experience flooding in the basement.  Prior to sale they install new drywall and flooring to cover the defects.  They run a dehumidifier before and after showings.  They won’t provide an SPIS or, worse, provide one that doesn’t disclose the previous water damage.  Nothing shows up on the home inspection.  The buyers close and a few weeks later the smell of mould starts coming out of the basement.  Following a storm the basement floods wrecking the new drywall and carpet.  It will also destroy whatever possessions the buyers have stored in the basement.  Their new home has created a nightmare situation and they are furious.

In terms of prevention the best hope lies in a good home inspector.  Working with an experienced realtor can allow buyers to tap into their network. This may save tens of thousands in time and frustration.  You could ask the vendor’s to swear an affidavit that states that there has never been any flooding during their ownership of the property.  Examine the conditions of the soil and foundation surrounding the house.  Do your diligence and make sure that the basement is dry before waiving all conditions on your purchase.

Your post-closing remedy involves building a case against the former owner.  Google “patent defects” versus “latent defects.”   The challenge that you will have to face is providing evidence that the owners knew about the flooding and didn’t disclose it.  Sometime a good strategy is to talk to your neighbours and get them to swear affidavits.  Typically when people go through a flood they complain to their neighbours about it and have service people come and go.  This can be important evidence to build your claim and create leverage against the vendor.

Fight with neighbour

You’d be amazed how many fights can erupt between neighbours.  Fence lines, noise, parking spots and disruptive behaviour are the most common.  If you feel a dispute beginning to ferment with your neighbour it is important to “nip it in the bud.”  There are trained conflict resolution specialists in Ontario that you can hire to help deal with disputes between neighbours.  Each party would have to pay around $500.00 for a full day to face the problem head on and build a consensus.  Most people shy away from this option because they either don’t feel it will be successful or don’t feel that they should have to pay because it’s really all the neighbours fault.  The problem is that these fights tend to linger and escalate and are difficult to get away from as they are right next door.  Litigation is $20,000 to $100,000 and never really a great option for these kinds of disputes, and mediation is definitely the way to go.  Do not underestimate the damage that  these disputes can cause – the clients I have advised going through them struggle mightily.

Pre-closing conditional repairs

Relators are deal makers and will use conditions to get the vendor and the purchaser to come together on an agreement of purchase and sale.  Window in poor repair?  No problem, we’ll put a condition in that it be repaired prior to closing.  When you have repairs or work included as a condition then issues can arise with respect to whether the work was completed in a satisfactory manner.  This can lead to holdbacks, additional legal fees for the work required to resolve the dispute, and uncertainty surrounding the closing. It turns the buyer’s dream home into a problem from day 1 and can spoil their purchasing experience.  I routinely advise realtors to use a price adjustment in lieu of a repair clause.  Reduce the price by the cost of installing a new window and have the buyer do the work.  Real estate is always the most successful when it’s “clean” – anything overly complex or lacking certainty will often lead to conflict.