NOTE: I am not a lawyer. This blog post contains my informed opinion as a professional real estate broker. It is not intended to be legal advice.
If you’ve been house hunting recently, you will have no doubt noticed that many listings include the clause “sold without legal warranty”. What is a legal warranty and what does it mean for you, the buyer?
In Quebec, there are two types of legal warranties applicable to the sale of a house:
1.Legal warranty of title/ownership.
The property is free of all rights except those declared by the seller;
The seller has discharged the property of all hypothecs, except for those assumed by the buyer;
The property is not subject to any encroachment on the part of the seller or a third person; and
The property does not violate any restrictions of public law, except those declared by the seller or those that the buyer should have discovered.*
2.Legal warranty of quality, meaning good working order.
Seller warrants the buyer that the property is free from defects, existing at the time of the sale, that would render it unfit for the use for which it is intended or which would so diminish its usefulness that the buyer would not have bought it or paid so high a price if he had been aware of them.*
You cannot sell a home without a legal warranty of title – you have to own the title in order to sell the house.
However, it is possible to remove the legal warranty of quality and sell the home “as is”. The relevant clause on the Seller’s Declaration will read as follows: “This sale is made without legal warranty of quality, at the buyer’s risk and peril.” Essentially, what this means is that the vendor will not guarantee the condition of the property.
There are many reasons a vendor might sell a property without a legal warranty of quality. Companies, landlords, estates and banks typically sell their properties without legal warranty of quality because they have never lived in the property and cannot guarantee it’s condition. Owners of older homes may choose to sell them without warranty because an old house can have surprises hidden behind the walls. A house with recurring issues will also be sold without warranty. For example, if the basement floods once a year, no vendor will offer a warranty. Finally, the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) recommends older homeowners sell without warranty in case of future memory loss.
So what does this mean for the buyer?
The legal warranty protects the buyer from what is unknown at the time of the sale – a latent defect that may become apparent only after the buyer moves into the home.
When a property is sold WITH a warranty, the buyer can legally pursue the seller for money to repair the problem that existed when they purchased the property, even though no one was aware of it at the time of the sale. The burden of proof lies with the buyer, or now new owner, to prove the problem existed when they bought the property, no matter how long ago. Claimants can go back to past owners as well, until it can no longer be proven that the problem existed when the past owner purchased the house.
In an effort to curb endless legal pursuits that can potentially cost the parties involved thousands of dollars in legal fees with no satisfactory resolution, homes are being listed without legal warranty more often. When they agree to this condition in the purchase contract, buyers are acknowledging that they’re foregoing the ability to pursue the seller for hidden defects in the home.
However, there’s a big difference between a home sold in good faith that has some unexpected issues and a home whose issues have been intentionally hidden in order to sell or to obtain a higher sales price. Sellers can’t hide behind the veil of no warranty in that situation. The buyer/new owner still has recourse against the previous owner if they don’t declare an issue they know about, even if they sell without legal warranty.
As a buyer considering making an offer on a home without a legal warranty of quality, it’s important to have a thorough inspection done. In addition, check with the town for any potential zoning or boundary issues. The more information you have about the current condition of the home and the potential problems it might have, the better protected you’ll be.
Working with an experienced real estate broker who knows the area and is familiar with some of the more common potential problems you might encounter, such as iron ochre or seasonal flooding, can also be extremely helpful.
Once you have done all that and are happy with the results, you can negotiate the price to compensate for the added risk of buying a home with no warranty. No home will be perfect, but doing your due diligence can help you avoid big problems.
NB The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.