Paying Less: At Your Own Risk
We all want to pay less. The idea is appealing, especially when large amounts of money are at stake, such as the purchase of a property. There are a number of homes sold with “no legal warranty” on the market. What does that mean? Is it really beneficial?
First and foremost, it’s important to know that in Quebec, any property is sold with basic protection: the legal warranty. The seller guarantees before the law that the property belongs entirely to them and that it’s in good general condition. Of course, the property may have major defects, but the owner must notify the purchaser of them before the sale, in order to avoid hidden defects.
A property with no legal warranty means the seller will provide you with no warranty on the quality nor the title of the property. This clause in the sales contract protects the seller from being sued if something goes wrong, once the property is sold. Often, liquidators of a succession are advised to sell without legal warranty, as they are not familiar with the building’s condition and want to avoid any liability. Prices are often more attractive, but potential buyers deprive themselves of an important remedy.
Be Cautious
The purchase of a property without legal warranty should be preceded by a thorough inspection of the premises by a building professional. It’s also important to have the property titles checked by a notary. You don’t want to find out later that a storm sewer runs through the easement on your land. A title defect could also include a situation where the former owner has not made all their mortgage payments on the property.
Latent Defect, With or Without Legal Warranty
With no legal warranty, is it possible to take legal action over a latent defect? Despite popular belief, yes! An owner must disclose any problems of which they are aware (roofing, electricity, insulation, water infiltration, mould issues, etc.). In the event of a dispute, it must be proven that the seller knew of the defects and deliberately failed to disclose them. This is extremely complex and costly, not to mention time and energy consuming.
Although real estate sold with no legal warranty has increased over the last five years, it is definitely wise to do your homework and be accompanied by professionals who can support you with the purchase of your dream home. Otherwise, the initial plan of saving money could cost even more.
Resources :
Real Estate: The Role of the Notary (Educaloi)
The Legal Warranty: Automatic Protection for Consumers(Educaloi)