Selling or Buying a House with an Unsavoury History

This blog will discuss the disclosure that is required in a real estate transaction when a home has a stigmatized history.

The case which highlights this issue is Wang v. Shao, 2018 BCSC 377.

The facts of this case were as follows:

• The case surrounded the purchase of an upscale home in Vancouver in 2009 (the “Shaughnessy Home”)
• The seller of the Shaughnessy Home was Ms. Wang (the “Seller”) who was an immigrant from China
  • The Seller lived with her daughter, Ms. Yuan, Ms. Yuan’s husband Raymond Huang and their children
• In 2007, Raymond Huang was shot to death on the sidewalk in front of the property
  • It was believed that this was a gang affiliated attack
• As a result of the murder, the children were asked to leave the private school they were attending and started attending a private school in West Vancouver
• Yuan then purchased a house in West Vancouver
• The Seller meanwhile had gone back to China and Ms. Yuan moved to West Vancouver, meaning the Shaughnessy Home was empty and as a result, put on the market
• When the Shaughnessy Home was put on the market, Ms. Yuan asked the realtor whether it was necessary to disclose the murder to prospective purchasers and the realtor said that unless a prospective purchaser specifically inquired about a death, there was no need to disclose
• The eventual purchaser was a Ms. Shao (the “Buyer”) who received this answer when asking why the seller was selling:
  • the reason for selling was that the daughter had moved to a school in West Vancouver where she would have a better chance to practice her English
• Eventually, a contract of purchase and sale dated September 3, 2009 was signed specifying a price of $6,138,000 and a closing date in November, 2009
• On September 30, 2009, the Buyer learned through a friend that “a death had occurred” at the front entrance of the property. The Buyer then conducted a Google search and discovered that an alleged gangster had been shot fatally near the front entrance of the Shaughnessy Home
• The Buyer informed the Seller that she would not be not be completing the transaction due to a breach of the Contract of Purchase and Sale
  • The breach being that the Seller expressly stated that there were no latent defects on the property that render the property dangerous or potentially dangerous to the occupants
• The Seller then initiated a claim against the Buyer for breach of contract and the Buyer filed a counterclaim for fraudulent misrepresentation

There were two issues that the court had to decide on:

• whether there was a latent defect on the property; and
• whether there was a fraudulent misrepresentation

On the first issue, the court determined that there was not a latent defect on the property relying chiefly on the caveat emptor doctrine which basically means buyer beware.   The court reasoned that subjective concerns of this kind were not amenable to measurement on an objective standard and would impose an impossible standard of disclosure in circumstances such as this.  The court also said that latent defects dealt with defects or imperfections in respect of the property itself or any measurable condition or quality of the property and that the murder did not affect the property itself.

On the second issue, the court determined that the incomplete representation was a misrepresentation upon which the Buyer relied to her detriment. The court accepted the Buyer’s evidence that she would not have agreed to purchase the property had she known that a reputed gang leader had been murdered at the property’s front gate. The fraudulent misrepresentation vitiated the contract for purchase and sale and the Seller’s action was dismissed.

However, there was an appeal, Wang v Shao, 2019 BCCA 130.

The latent defect issue was not appealed and the fraudulent misrepresentation was overturned.

The court reasoned that If the law were now to be modified to require that upon being asked a general question like the one asked in this case, vendors must disclose all of their personal reasons and explain the causes for those reasons, even when they bear no relationship to the objective value or usefulness of the property, the door would be open to a huge number of claims. Buyers, perhaps unhappy with their purchases, could claim that information was ‘concealed’ or that a misrepresentation by omission had occurred — despite the fact the undisclosed information is, on an objective view, completely irrelevant to the value and desirability of the property.

In conclusion, latent defects are only those defects that affect the actual property and are not discoverable through reasonable inspection and if you have any particular concerns about the property you should ask outright.

It should also be noted that leave to appeal has been filed in the Supreme Court of Canada.