Anyone involved in a transaction involving houses built close together in the 1970s and 1980s need to conduct due diligence, writes Bob Aaron. The problem can be below ground.
Imagine buying a house which was advertised as a fully detached home and finding out before closing that it was in fact only semi-detached — physically attached to the home next door.
That’s what happened last year to two clients of Toronto lawyer Greg Weedon. His clients signed an agreement to purchase a home for $850,000 only to find out before closing that, although the property appeared to be completely detached above ground, the foundations were actually attached below ground.
The link house style was popular in the 1970s and 1980s. Typically, the attachment that joins two adjacent houses consists of one or two rows of underground concrete block footings at right angles to the foundation walls.
The concrete links were unnecessary for structural reasons but allowed the builders and municipality to pretend — wink wink — that the houses were semi-detached for zoning purposes.
The subdivision lots on which these houses were built were designated, sized and zoned for semi-detached models, but viewed from the street, the houses are separated and appear completely detached.
Records of the municipality and of the Municipal Property Assessment Corporation disclose that the properties are semi-detached. As well, the plans of subdivision registered on title show the foundations of pairs of adjacent houses with two thin connecting lines indicating that the footings are attached.
The problem is that buyers and sellers of link semis may not know that a house has connected footings unless they perform the required due diligence, or unless the buyers’ lawyer carefully examines the plans obtained with the title search.
Detached homes have no shared walls or footings above or below the surface. They carry a significant price premium over semi-detached homes. But when the foundations are attached below ground or the shared walls are attached above ground, the value is significantly less.
An early instance of misrepresentation involving a link semi was the 1984 Bogojevski case. The purchasers specifically wanted a detached house but due to a language barrier among the buyers, seller and agent, the buyers did not understand that the house was semi-detached.
In her ruling on the case, Justice Mabel Van Camp decided that the conduct of the seller’s agent was an innocent representation that induced the buyers to sign the purchase agreement. The agent failed in his duty to explain to the buyers exactly what a link house was. The seller’s claim for damages against the buyers was dismissed and the buyers were awarded the return of their deposit.
In the case of Weedon’s clients last year, he was able to negotiate a price reduction of $42,500 — coincidentally the same amount as the typical five per cent agent commission on similar transactions.
The lesson here for anyone involved in a transaction involving houses built close together in the 1970s and 1980s, is to conduct the appropriate due diligence before the house goes on the market or before an agreement is signed.
My own solution for a similar case is more practical. The owners can hire a contractor with an excavator to cut a break in the underground concrete link — which of course serves no practical purpose whatever. Problem solved.