Selling without Legal Warranty: What You Need to Know As Buyer or Seller
When purchasing a home in Quebec, you are protected by the Warranty of Quality. This Warranty is essentially a promise from the seller to the buyer that the property, and any extension of it, such as a pool, shed, chimney or garage, is free and clear of any undisclosed defects. If you discover a hidden defect – meaning any defect or deterioration that was not obvious upon visual inspection and not disclosed by the seller – you may have legal recourse against the seller.
For a full explanation of what is considered a hidden defect under the law, see our article, Hidden Defects and the Warranty of Quality.
Selling without legal warranty has become increasingly common in a market where sellers are looking to preemptively limit their liability after the sale. But buyer and seller be warned! There are exceptions to the Warranty of Quality you should know if you’re involved in buying or selling property in Quebec, and some who try to sell without warranty find their attempt doesn’t hold up in court.
First, let’s look at the 3 exceptions to the Warranty of Quality:
3 Exceptions to the Warranty of Quality
1. Defects Caused by the Buyer
The Warranty of Quality does not apply if the alleged defect is believed to have been caused by the buyer. If you move into a home, and your actions cause, for example, plumbing problems, you cannot claim the problem is a hidden defect and take legal action against the seller.
What this means is that if you discover a hidden defect in a property you’ve purchased, you should immediately stop any renovation work and document the defect with photos and/or video. For a full list of the specific steps to take to cover your legal bases, get our free report, 9 Steps to Follow If You Discover A Hidden Defect.
2. Sales Under Judicial Authority
Whenever a bank, municipal authority, or any other such entity that never had possession of property puts said property up for sale, the Warranty of Quality does not apply. While the owner of a house, according to the law, is believed to be familiar with his or her property and thus presumably knowledgeable about any non-obvious defects it may harbour, a third party that has never owned or lived in the property is presumed to have no knowledge of such defects. For this reason, all sales of property by banks, municipal authorities or other such entities occur without legal warranty.
3. Succession Sales
When buying a home from an estate as part of a succession sale, in most cases, the Warranty of Quality does not apply. As is the case for sale under judicial authority, the liquidator(s) or relatives of the deceased usually did not reside in the property before or around the time of sale and thus, cannot possess knowledge of defects that may exist therein.
If you buy from a succession sale, you buy at your own risk.
Private Sales: Sellers Without Warranty or Buying At Your Own Risk
For home sales between two parties that don’t fall into the above categories, it may be desirable to remove the Warranty from the equation altogether. The parties involved in a real estate transaction can choose to limit the Warranty of Quality or exclude it altogether if they wish by mutually agreeing to do so and stating the precise limitations clearly in the contract.
But to successfully limit or exclude the Warranty of Quality, correct terminology in the contract is essential.
While it has become common to see the phrase “sold without legal warranty” or “at the buyer’s risk and peril” in listings and contracts, be careful! When real estate disputes have gone before the courts, judges have deemed language imprecise and declared the clause null and void.
For this reason, should you intend to exclude the warranty of quality, it’s a good idea to work with experienced real estate professionals and legal counsel to make sure the appropriate language is being used and any documents or contracts are tailored to your specific circumstances.
Remember that even in the case that a buyer purchases a property “at his own risk and peril”, the seller is still bound by law to disclose any known defects. As such, selling a property “at your own risk” does not necessarily absolve the seller of his or her liability and the Warranty of Quality may still apply. If a home is sold with a warranty limitation and the buyer discovers a hidden defect the seller knew about and did not disclose, the seller can still be held responsible and obligated to compensate the buyer.
Who CAN’T Sell with Legal Warranty?
While attempts to sell “without legal warranty” have become more and more common as post real estate transaction litigation has skyrocketed, there are some parties that are barred from doing so.
A “professional seller”, someone whose main profession consists of purchasing and selling property for profit, such as a real estate developer or a flipper, is, by law, prohibited from selling a property without warranty. If you’re purchasing a new condo for example, the developer cannot sell it to you at your own risk, and will be liable for any defects. Buy a new condo and you’re protected by the Warranty of Quality.
In a sale by a professional seller, a defect is presumed to have existed at the time of the sale if the property malfunctions or deteriorates prematurely in comparison with identical property or property of the same type. But remember; such a presumption is rebutted if the defect is due to improper use of the property by you, the buyer.
The Warranty of Quality protects buyers of property in Quebec, but if you’re making a purchase, make sure you know when it does not apply. And if you’re looking to limit the Warranty with a contract, make sure you do it right.