Selling Your Home With or Without Legal Warranty

by Broady Windsor Group on Wednesday, September 23, 2020
What you need to know

"Should I sell my home without legal warranty?"

We get this question a lot from prospective sellers. Many have heard the horror stories of buyers coming back to sue a previous homeowner for large sums of money, years after the sale has closed.

The rule is quite simple. Every property in Quebec is sold with a warranty regarding the quality of the building. Hence the term – Legal Warranty of Quality.

It is under this law that a buyer who has taken possession of a property can sue the seller if he discovers defects that he could not have reasonably known about at the time of the transaction. In other words, he has to prove that the defect existed at the time of the sale; that it was not easily identifiable through a visual inspection; and that had he known about it, he would not have paid as much for the property. The problem must be significant in terms of the cost to repair it compared to the value paid for the property.

Buyers in Quebec have three years from the discovery of a latent defect to claim the legal warranty — not three years from the date of sale. This means that as a seller, you could be sued many years later for a defect that is discovered by a future buyer. An underground oil tank is one example. This chain of responsibility can go back four or five owners, with several lawyers getting involved. Even the home’s builder can get sued. 

One way to avoid this risk is to have both parties agree that the property is sold “without legal warranty of quality”. This means the buyer is acquiring the property at his own risk and waives the right to take legal action against the seller in the event latent defects are discovered. A seller who knowingly fails to disclose a defect, however, could still be sued for acting in bad faith, even if the property was sold without legal warranty.

Buyers in these situations often benefit from a discount on the price to make up for the additional risk they are taking on. 

So this begs the question: "Should you attempt to sell your home without legal warranty of quality at the risk of the buyer?"

Generally, this would include sellers with limited knowledge of the home, such as liquidators of an estate or bank repossessions. It is also quite common for elderly homeowners, on fixed incomes, who don’t want to worry about being sued. 

It is rare for a homeowner to remove legal warranty for no particular reason. In our experience, it will raise a red flag for prospective buyers. The reaction tends to be one of suspicion that there are underlying problems with the home. This can result in a much lower sale price or the loss of potential buyers who otherwise would have been comfortable making an offer. 

If you are thinking of buying a home that is being sold without legal warranty of quality, be sure to have the home inspected by a qualified building inspector. We also recommend you enlist the help of a licensed real estate broker who can tell you of what you might be getting yourself into. 

For more advice on the ins and outs of legal warranty, feel free to reach out to our team for a private consultation. We would be happy to answer your questions without any obligation. 

-Sean, Kim, Scott & Megan