Defects in Dark Corners

Hidden problems with how homes have been built or renovated account for growing number of court cases

Saturday, December 29, 2007
The Montreal Gazette

When Frederic Hore bought himself a small bungalow in Dorval, he knew there were a few things to fix up. But Hore didn’t mind. He had previously built his own house and was savvy enough with his hands to be hired in the CBC’s engineering department to supervise the tradespeople.
He inspected the house himself before he bought it in 1994 and thought he knew what to look for. In fact, even a trained house inspector wouldn’t have caught most of the problems that arose over the next years, he said.
That’s because they were what is known as hidden or latent defects—problems hidden behind walls or under floors that are difficult or impossible for an inspector to see.
“The problems only started after I moved in and the snow melted,” said Hore, 55.
One of the first things he noticed was the sagging floor in the bathroom.
“I thought, ‘This was strange,’” he said.
The reason for the sagging, he discovered, was someone had cut away two-thirds of the supporting joists that held up the floor from underneath.
Hore said he also found six layers of shingles on the roof—well over the limit allowed in the building code. The excess layers were too heavy for the roof to bear and had caused the shingles to curl, Hore said.
Other repairs included overloaded electrical circuits, a lack of insulation and rotting drywall. He estimated the total bill at $13,000—a sum Hore said would have been far higher if he hadn’t done most of the work himself.
Just as bad, he said, is it’s taken him 13 years to make all the fixes.
Hore is one of a growing number of homeowners finding themselves with hidden defects often costing tens of thousands of dollars. It’s the dark side of the real-estate boom.
“There are more and more cases,” said Michel Rocheleau, a Montreal real-estate lawyer for whom hidden defects make up 75 per cent of his practice.
“It’s without end. I start a new case practically every week.”
Jean-Pierre Deguire, a lawyer at the Boucherville firm Lecompte Deguire who acts as a court-appointed mediator in the small-claims division at the Quebec Court, is also seeing more cases. The reasons: a booming number of real-estate transactions and the fact that, in 2003, Quebec raised the maximum limit for small-claims cases to $7,000 from $3,000.
This caused many hidden-defects claimants to turn to small-claims court with their cases because, there, clients don’t need lawyers.
Deguire said hidden-defects cases today make up 60 percent of the small-claims cases he receives for mediation.
Another reason for more cases, according to Rocheleau: more shoddily built houses. Urban sprawl has pushed real-estate development onto land less suited for housing, he said, while corner-cutting developers have left some homeowners to deal with defects that become apparent only 10 or 15 years later.
The cases can involve massive sums. The biggest sources of defects are foundations (responsible for 75 per cent of Rocheleau’s cases) and roofs (making up another 15 per cent), with the average bill ranging from $30,000 to $60,000.
And that’s not including the cost of presenting the claim itself, which, Rocheleau said, averages $5,000 to $10,000 for legal bills and another $5,000 to $7,000 for hiring experts, like engineers and contractors, to testify.
The astronomical costs are a big reason Rocheleau advises clients to try to settle out of court if possible. He said half his cases are resolved that way.
Many claimants also voluntarily reduce the amount they seek in order to qualify for small-claims court so as to avoid the cost of hiring a lawyer.
Even then, however, expert witnesses can still cost hundreds of dollars. There might also still be some legal costs to bear. Rocheleau advises claimants and defendants alike to meet a lawyer for an hour or two before the case in order to prepare and make sure they understand the rules of evidence.
The reason: many home buyers and sellers are unaware of their rights and responsibilities when it comes to hidden defects, Rocheleau and Deguire both said.
The biggest mistake sellers make, Deguire said, is thinking that because they didn’t know about a hidden defect, they aren’t responsible for it.
Rocheleau said he sees this mistaken reasoning all the time.
“People often take it as a criminal allegation or a sign of dishonesty, but the defect can often be unapparent for years,” he said.
On the other hand, if a vendor did know about the problem and didn’t tell the buyer, the buyer can sue not only for the cost of repairs but also damages under the Quebec Civil Code.
For home buyers, the biggest mistake is not having an inspector or other qualified expert check out the house before signing a deal, Rocheleau said.
“Many people are imprudent,” he said. “They often buy because they fell in love (with the house), and there’s not much that can stop them.”
Quebec has no legal requirement that buyers must use a home inspector, but Rocheleau said it’s wise to do so to avoid problems later. Also, in court, the testimony of an inspector may be essential to showing a defect was really hidden.
Buyers who believe they’ve discovered a hidden defect must be able to show the problem couldn’t have been reasonably found during a pre-purchase visit to the house.
For example, if a potential problem area is obscured by material like boxes, the buyer or their inspector is obliged to move the items or ask the buyer to do so, Rocheleau said.
That’s what one house buyer wishes her inspector had done when she bought a three-bedroom house in Châteauguay in 1999.
Boxes in the basement had concealed a poorly installed electrical box with exposed wires. The buyer only discovered the dangerous wires when she called in an electrician to figure out why her circuits kept blowing.
He found not only the exposed wires but also a highly overloaded fuse box.
“You should have seen the look on the electrician’s face. It was total shock,” said the homeowner, a nurse and writer who didn’t want her name used because she wants to put the problems in the past.
The previous owner had done the electrical wiring himself. The entire house had to be rewired at a cost of $4,000, she said.
The new owner said she didn’t try to pursue the previous owner because he had left the country and it didn’t seem worth the trouble to her family.
As for Hore, he didn’t go after the vendors of his house either; they had also left the country.
“It’s almost like that movie The Money Pit with Tom Hanks and Shelley Long,” Hore said, “only I have not fallen through the stairs—yet!”

Hidden defects: What to do

Say you just bought a home and discovered a leaky foundation or shoddy roof. What do you do?
Legal experts say buyers must follow some specific steps in order to recover the cost of repairs from the previous owner: 
First, inform the seller of the defect as soon as possible after discovering it. This can be done verbally.
If you’re not satisfied with the seller’s response, you must send a registered letter outlining the claim, including an estimate of the repair cost. The seller should be given 10 to 60 days to respond, depending on the urgency and gravity of the case. Sellers have the right to get their own estimate and have the defect repaired at their own cost by their own contractor.
If there’s still no amicable settlement, you can do the repairs yourself and file a court claim to recover the costs—as well as for damages if you think you can prove the seller knew about the defect. Cases of $7,000 or less are filed with the small-claims division of the Quebec Court, from $7,001 to $70,000 with the Quebec Court’s civil division and above $70,000 with Superior Court.
In a bona fide case, the judge usually awards nearly the entire cost of repairs to the buyer, albeit depreciated in accordance with the age of the house. The seller is also usually ordered to pay the buyer’s court costs, but the amounts were set back in 1971 and often account for only 10 to 15 percent of actual legal costs.