Found Mold or Leaks After Closing in Ontario? Can You Sue the Seller?

Frequently Asked Questions from Clients

1. First Distinction: Patent Defects vs. Latent Defects

The courts first distinguish between two categories of defects:

Therefore, for issues discovered after closing, the first step is to assess: could they have been discovered if a thorough viewing and home inspection had been conducted initially?

2. Under What Circumstances is the Seller Liable?

A latent defect alone does not automatically impose liability on the seller. Ontario courts generally find the seller liable under the following circumstances:

Conversely, problems that the seller genuinely did not know about generally do not constitute seller liability. In such cases, an alternative direction to consider is whether the home inspector was negligent, though home inspection contracts typically limit liability and require specific review.

3. What to Do Immediately After Discovering the Issue?

• Secure Evidence Before Repairs: Take photos and videos, record the date, location, and scope; necessary emergency mitigation (such as stopping a leak) can be performed, but try to have professionals present before extensive demolition and restoration.
• Obtain Professional Written Reports: Reports from plumbers, waterproofing companies, structural engineers, or mold testing agencies detailing the cause of the problem and how long it has likely existed serve as important evidence to prove "the seller ought to have known."
• Collect Transaction Documents: Listing details and photos, SPIS, home inspection reports, Q&A records from viewings, chats and emails with real estate agents, and the Agreement of Purchase and Sale.
• Understand Property History: Statements from neighbors, past repair receipts, insurance claim records, and municipal permit records may all indicate that the seller knew long beforehand.
• Retain All Repair Invoices: Necessary for calculating damages in the future.

4. Limitation Period: Generally 2 Years

Under the Ontario Limitations Act, 2002, the general limitation period is 2 years from the date the claim is discovered. "Discovery" refers to the point in time when the buyer knew or ought to have known that damage had occurred, who caused it, and that a lawsuit was an appropriate means to seek remedy. Additionally, there is an ultimate 15-year limitation period from the date of the event.

The longer the delay, the harder it is to preserve evidence, and the more prone limitation issues are to dispute.

5. Which Court to Sue In?

Prior to filing a lawsuit, a lawyer typically issues a demand letter to the seller outlining the issues, evidence, and claims for compensation; many disputes can be resolved through negotiation at this stage.

6. How to Prevent Issues Before Submitting an Offer?

• Try to include a home inspection condition; even if waived during bidding wars, consider conducting a home inspection prior to submitting an offer.
• Ask critical questions in writing: whether there has been water intrusion, whether waterproofing was done, and whether basement renovations have permits, by submitting questions in writing through your agent and keeping the responses.
• Read the SPIS carefully: if the seller fills it out, they are responsible for its contents; if the seller refuses to fill it out, that in itself is a signal to consider.
• Pre-closing Re-inspection: Agreements typically provide buyers an opportunity to view the property before closing, focusing on areas that were blocked by furniture or storage during viewings.

7. How H. Law Firm Can Assist

H. Law Firm features both a real estate team and a civil and commercial litigation practice. We can review the Agreement of Purchase and Sale, SPIS, and transaction records to assess whether the seller bears liability, assist in issuing demand letters, negotiate settlements, and represent clients in Small Claims Court or Superior Court litigation when necessary. Fee estimates and itemized lists are provided prior to engagement; all services commence upon signing a formal retainer agreement.

This article provides general legal information and does not constitute legal advice for any specific situation.