Wednesday, April 21, 2010

Is the presence of contaminated wooden beams used in the construction of a house a hidden defect that could entail the cancellation of a sale?

In a case decided by the Superior Court, district of Beauharnois, on February 17, 2009, the buyer purchased the house in May 2002 and noticed a strange odor upon taking possession. A doctor was consulted for his daughter’s health problems and measures were taken to improve the ventilation of the house.
The buyer consulted an expert who informed him that the structure of the house was made of wood that was contaminated with toxins and in order to remove it, it was necessary to completely demolish the house.
A lawsuit was filed against the Vendor in November 2004.
The vendor owned the house for approximately 1 year (2001 to 2002). The previous owner (vendor No. 2) owned the house for approximately 11 years (1990 to 2001). The previous owner (vendor No. 3) owned the house for 9 years (1981 to 1990) and the previous owner (vendor No. 4) built the house in 1967 and occupied it for 23 years until 1990. All of the previous vendors were sued in warranty by their respective buyers and testified at the trial.
Although at least two (2) of the sale transactions were preceded by professional inspections, none of the professionals noticed the presence of toxic contamination.
The Court noted that if the house were built today according to current standards, the contaminated beams would not be allowed to be used in the construction.
After hearing many ordinary and expert witnesses, the Court decided to dismiss the action but not on the ground that the contamination did not constitute a hidden defect. The Court concluded that the contamination was indeed a hidden defect. However, the evidence did not permit the Court to conclude that this defect was serious enough to justify the cancellation of the sale.
There were two (2) very important elements that weighed against canceling the sale. First, prior to the acquisition of the property by the current owner, the property had been occupied by previous owners for over 40 years without adverse issues arising. All of the previous owners testified and confirmed that they had no significant problems with the odor or air quality of the house. Second, air quality tests that were conducted on the part of experts named by both sides in the case came to similar conclusions namely, that the levels of contaminants found in the treated wood were not present in any significant quantities in the air. Consequently, the air quality was not adversely affected by the contaminated wooden beams.
The Court noted that the mere presence of a hidden defect does not by itself render the vendor in breach of the statutory warranty of quality (Article 1726 of Civil Code of Quebec). For there to be liability, the hidden defect must be sufficiently serious to render the property unfit for the use for which it was intended or which so diminishes its usefulness that the buyer would not have bought it all or paid so high a price if he had been aware of it.
For example, the presence of urea formaldehyde insulation (UFI) does not automatically give rise to the cancelation of the sale at the request of the buyer. The insulating characteristics of UFI are recognized and seven years after its application, UFI no longer emits any noxious gas and, consequently, would have no adverse impact on the usefulness of the property.
Although in the circumstances, the sale could not be cancelled, the Court did not rule out the possibility that a reduction in price could have been granted, had the buyer requested it and proven
that had he known of the existence of the hidden defect at the time of the sale, he would not have agreed to pay so high a price.

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