Can a Vendor’s Agents be Held Liable to a Purchaser for their Client’s Non-Disclosure of a Major Latent Defect?

When/whether the Vendor’s agent will be held liable to the Purchaser for latent defects?

Consider, if you will, that you purchase a property and many months after the closing, you find out about a defect that was not discovered through the standard home inspection you conducted nor was it disclosed to you by the vendor. What legal recourse do you have?

Ontario jurisprudence establishes that you can potentially sue the vendor, your own real estate agent, and the home inspector you retained – assuming it was a defect that went towards danger, habitability, or health (“major latent defect”).[1][2] But caselaw remains largely silent on whether you have any recourse against the vendor’s agent. This article will explore and assess whether a purchaser can successfully claim against a vendor’s agent for any losses suffered.

This issue was considered in 2016 by the Ontario Superior Court of Justice (“ONSC”) in Fischer v Volpe decision. In that case, the plaintiff, Frederick Fischer – who unwittingly purchased a property that was previously used as a marijuana grow operation (“grow op”) – brought a claim against the vendor, the vendor’s agent, and his own agent. He then moved for summary judgment.

It was undisputed that the previous use created an increased risk of mold and electrical damage to the property, and therefore constituted a major latent defect.[3] However, the issue in dispute was the level of knowledge of each defendants with respect to the grow-op and applicable standard of care. The complicating factor in that case was the fact that the vendor’s agent died prior to the motion.[4] As such, although the court engaged in a discussion of the caselaw surrounding agent responsibility, ultimately it was not able to determine the potential duties owing by the vendor’s agent to Mr. Fisher regarding disclosure of latent defects.

Ontario courts have, in recent years, increased the scope of responsibility of vendors’ agents to ensure that the clients they represent meet their disclosure obligations towards purchasers. For instance, in the landmark decision of Krawchuk v Scherbak, the court held that the vendor’s agent was liable for not taking adequate steps towards preventing the vendor from making material misrepresentations towards the purchaser.

We believe the future trend we can expect to see by the courts is a further expansion of the Krawchuk ruling, that is to say, in certain circumstances, we can expect to see a finding that the vendor’s agent can and will be held liable vis-à-vis the purchaser, for not taking reasonable steps towards ensuring full and proper disclosure was made by the vendor of any known major latent defects.