In an action by a buyer of an immovable property for latent defects, what is
the extent of the legal obligation of the buyer to give notice to the vendor?

On August 25, 2005, R sold a residential property to B. The sale was preceded
by an inspection, which was generally favorable.
A few weeks after taking possession of the property, the buyer noticed the
presence of water infiltration in the basement. An inspection by a plumber who
was called to inspect the pipes revealed no irregularities.
In November 2005, the buyer hired Pro-solage to repair three (3) cracks in the
foundation that had been identified by the inspector. Pro-solage also discovered
that the wall near the patio was not waterproofed and was in the process of
eroding. The estimate to repair this problem was $14,300.
On December 21, 2005, the buyer informed the vendor by telephone of the
issues that had arisen since the transfer of possession.
On January 9, 2006, the buyer gave formal written notice of the hidden defects of
the property.
On January 18, a heavy rain resulted in water infiltration in the basement. The
same day, the buyer hired an engineer to determine the cause.
In his report, the engineer attributed the cause of the water infiltration to the
absence of a waterproof membrane between the wall and the patio.
On February 10, 2006, a second engineer was hired by the buyer to provide a
second opinion. In his report, the second engineer concluded that the water did
not come from the exterior but rather from an overflow of the hot water reservoir.
He estimated that the corrective work would cost $3,500.
On May 12, 2006, the buyer hired a foundation specialist to obtain an estimate
for corrective work, including excavation, structural work, demolition, and
reconstruction of foundation for the part of the wall next to the patio.
On July 27, 2006, a formal demand letter was sent to the vendor, the buyer
declaring that she would proceed with the corrective work on July 31, 2006.
However, the vendor was on vacation until August 12, 2006 and upon her return,
most of the work had already been completed.
The vendor never had the opportunity to verify the nature of the defect nor the
extent of the work required to correct it. The vendor did not have the opportunity
to verify the feasibility of having the work done at a lesser cost.
Although the law is clear regarding the obligation of the buyer to give notice of
the existence of a hidden defect, the extent of the notice will vary depending on
the circumstances.
The purpose of the notice is to protect the rights of the vendor, who is no longer
in possession of the property and to prevent abuse on the part of a buyer in bad
faith.
To be valid, the notice must:
i) be given within a reasonable delay;
ii) be sufficiently precise to permit the vendor to identify the nature
of the defect and the corrective measures required to remedy it;
iii) permit the vendor to establish that the defect existed prior to the
sale, and
iv) allow the vendor to remedy the situation himself.
However, these principles are not absolute and are subject to exceptions, such
as matters of urgency, repudiation by the vendor of any responsibility or upon
evidence that the objectives of a formal notice have been met in other ways.
In the case at bar, the Court held that the notice did not allow the vendors to
identify the nature of the defect, whether or not it existed prior to the sale, and the
corrective measures necessary to remedy it at the least cost. The notice given by
the buyer did not respect the vendor’s legal rights. Although the notice of January
9, 2006 was given within a reasonable delay, the vendor did not have an
opportunity to evaluate the nature and the extent of the hidden defect nor to
assess the appropriate corrective measures and their cost.
In such circumstances, the Court has discretion to either reject the buyer’s claim
for latent defects altogether, or to reduce it, which is what the Court chose to do
in the present case.
Béique –vs- Rodier EYB 2009-157651
(April 20, 2009 (Lalonde, J.S.C.)

IS AN OFFER TO LEASE THAT IS CONDITIONAL UPON THE SIGNING OF A FORMAL LEASE, A LEGALLY BINDING CONTRACT?

The parties signed an offer to lease which provided, inter alia, that they would sign a
formal lease within ten (10) days containing all of the clauses found in the offer.
Upon receipt of the accepted offer, the landlord entered into negotiations with the
existing tenants for the purpose of relocating them in order to accommodate the new
tenant. The landlord thereupon retained the services of a general contractor to proceed
urgently with the leasehold improvements to the premises.
The landlord submitted a draft lease which contained some clauses that did not appear in
the accepted offer, including:
• Movable hypothec;
• Non-publication of Lease;
• Prohibition by tenant to sell its business without the consent of the landlord;
• Requirement for a personal guarantee of the tenant’s alter ego.
Upon receipt of the draft lease, the tenant notified the landlord that because the draft lease
was not consistent with the written offer and because a proper lease had not been signed
within the stipulated ten (10) day delay, the tenant considered the offer to be null and
void for all legal purposes.
After receipt of the notice of cancellation, the landlord’s attorneys responded that to the
extent that any clauses in the draft lease were inconsistent with the accepted offer, the
landlord agreed to have them deleted. Nevertheless, the tenant maintained its position that
the offer was null and void.
The tenant argued that the acceptance of the offer did not result in a binding agreement
but merely a promise to enter into a contract subject to certain conditions. The Court did
not agree and condemned the tenant to pay damages.
The Court concluded that the offer contained all of the essential elements of a lease,
which required no formality to be legally binding. The leased premises were clearly
described as well as the intended use. The amount of the rent and additional rent was
specified. The occupation date and term of the lease were also clearly indicated. The
annex to the offer detailed the leasehold improvements that the landlord had undertaken
to complete.
Although the offer specified that a lease had to be signed within ten (10) days, it was not
automatically cancelled if the delay was not respected.
The Court also held that although the tenant’s unhappiness over the contents of the draft
lease was not unjustified, the latter had a legal obligation to notify the landlord of its
objections and reiterate its preparedness to sign a lease in conformity with the terms and
conditions of the accepted offer. Furthermore, there was nothing exceptional or abusive
about the objectionable clauses contained in the draft lease. The tenant, in acting as it did,
was in breach of the offer as well as its legal obligation to act in good faith.
The landlord satisfied its obligation to minimize its damages by finding a tenant for half
of the space in question. The tenant was ordered to pay the landlord, inter alia, the sum of
$33,000 for damages equivalent to the lost rent, and $1,000 for inconvenience and trouble
resulting from the default.

(2424-8643 Québec inc. c. Sam Lévy & Associés inc. 2008 QCCS 2789)

BLUE AVENUE CLOTHING INC.

When a related party pays the rent on behalf of the tenant, does that related party tacitly become legally responsible in its own right as a tenant?
This issue was recently dealt with in the case of 162702 Canada Inc. vs. Blue Avenue Clothing Inc. and Forecasts Brands Inc., 2009 QCCQ 2695.
The results in any particular case will turn on the particular facts. In Blue Avenue Clothing, the Judge dismissed the action against the related party who made the rent taking into account the following circumstances:
1.
Although Forecast had some stock on the premises, it did not have any employees or carry on any activities there.
2.
There was no evidence of any express agreement in the nature of the sublease or assignment between the tenant and Forecast.
3.
The tenant continued to occupy the premises at all relevant times and maintained a substantial inventory there.
4.
Only the tenant is mentioned in the invoice.
5.
The Civil Code of Quebec specifically provides for the possibility of payment being made by someone other than the debtor.
6.
The factual elements are equally consistent with the tacit creation of a tenant’s obligation, as well as the advance of funds by Forecast to the tenant, who was facing liquidity problems. Since the burden of proof is on the landlord, Forecast prevailed.
7.
The landlord argued that the relationship between the parties was one of assignment or sublease and that the acceptance of the rent by the landlord from Forecast was equivalent to the consent to the assignment or sublease. The Trial Judge held that the continued occupancy by the tenant and the ambiguity of the discussions regarding the nature of the relationship between the tenant and Forecast lessened the probability of the existence of a sublease or an assignment of the tenant’s interest in the lease to Forecast.
From the landlord’s perspective, the payment of rent by someone other than the tenant should constitute a red flag of impending future trouble.
In such circumstances, good credit management (and problem prevention) would mitigate in favor of the landlord investigating the financial viability of the tenant and, if found wanting, to obtain further security to guarantee the tenant’s obligations pursuant to the lease, including but not necessarily limiting to, formally adding the related party as a tenant or guarantor.