|Ontario's highest court has ruled that anyone who builds a home that
is dangerous or unsafe whether that person is a professional or amateur
builder is liable to subsequent owners of the house, whether or not they
had a contract with the builder.
Back in 1987, John and Anne Lemstra built their dream home with the help
of a contractor and some sub-trades. Although they obtained a building
permit from the Township of Puslinch, south of Guelph, they moved in
without a final inspection or occupancy permit.
Four years later, the Lemstras sold their house to Sharon Ann Mariani. The
listing agreement described the house as well-built, but the agreement of
purchase and sale contained no warranties.
Unfortunately, the house had two serious construction defects. The centre
structural wall of the house was unstable and made the building
susceptible to shifting under a significant snow load or in a high wind.
Whenever it rained, a breach in the building envelope allowed water
penetration and basement flooding which created a proliferation of mould.
After a nine-day trial, Justice Thomas Dunn ruled that the
3,459-square-foot house was a writeoff, and required demolition. He
awarded Mariani almost $300,000 plus interest and costs 75 per cent
against the Lemstras and 25 per cent against the township. Prior to trial,
Mariani had settled with the Township for $150,000. (See Title Page, July
12, 2003, at http://www.aaron.ca.)
Justice Dunn based his decision and damage award on fraudulent
misrepresentation and negligent misstatement.
The Lemstras appealed. The case was heard by the Ontario Court of Appeal
in April and its decision was released in May. Writing for a three-judge
panel, Justice Robert Sharpe ruled that there were no grounds for
fraudulent or negligent misrepresentation and set aside those findings of
the trial judge.
The most interesting aspect of the appeal decision is that it held the
Lemstras liable for negligent construction, rather than misrepresentation.
Liability was based on a 1995 decision of the Supreme Court of Canada in
the case of Winnipeg Condominium Corporation 36 v. Bird Construction. That
case ruled that a builder owes a duty of care to subsequent purchasers.
The Supreme Court said, "It is reasonably foreseeable to contractors that,
if they design or construct a building negligently and if that building
contains latent (hidden) defects as a result of that negligence,
subsequent purchasers of the building may suffer personal injury or damage
to other property when those defects manifest themselves."
That decision specifically applied to builders, but the Lemstras' case
means the Ontario Court of Appeal has now extended its reach to anyone who
builds a house, whether they are commercial builders or not. Even though
the Lemstras built the house with the intention of living in it
indefinitely, they and anyone who builds a home for their own use must
realize that one day they may have to sell it.
To trigger liability to subsequent owners, the defects must be more than
shoddy workmanship, they must be dangerous. Ontario's highest court has
now made it clear that anyone who builds a house containing hidden dangers
or unsafe conditions will be liable to an endless chain of subsequent
owners. This liability extends to all builders, whether large commercial
concerns or weekend handypersons.
Based on this liability for negligent construction, the court in Mariani
v. Lemstra reduced the damages from the cost of replacing and demolishing
the house to the cost of repairing the defects. Damages were chopped from
about $300,000 to slightly more than $100,000 less $30,000 in costs
payable by the owners because the appeal was successful. Since Mariani had
already recovered $150,000 from the township, it's possible that the
Lemstras got off without paying any damages.
FOLLOW UP: On July 24, I wrote about the case of Emery and Margaret Danko
who had contracted with Marbrook Homes to buy a new house to be built with
a cathedral ceiling. When the house was built with a flat ceiling in the
family room, the Dankos cancelled the deal and successfully sued to get
their $22,200 deposit back. (See http://www.aaron.ca.)
After the column appeared, Margaret Danko called me to report on an aspect
of her case that did not appear in the published law journals. After a
16-day trial, she told me, she is out about $150,000 in legal costs and
still did not have her deposit back at the time of our conversation. The
court ordered the builder to pay a large chunk of her legal bills, but she
hasn't received anything.
Something is seriously wrong with the justice system and with the
protection of the Tarion Warranty Corp. when a homebuyer is subjected to
this type of loss. It's a black eye for the whole home-building industry.
Bob Aaron is a Toronto real estate lawyer. He can be reached by e-mail at email@example.com,
phone 416-364-9366 or fax 416-364-3818. Visit http://www.aaron.ca