Leaky Basement Post-Closing

If you discover that the basement in your newly-purchased home leaks - what remedies are available to you?

If your new home has a water problem that was not disclosed, one avenue of recovery available to you is to sue the sellers. Pursuant to Canadian common law, the sellers breach the agreement if they know about a hidden (latent) defect, and the defect either renders the property unsafe for living or is actively concealed by the sellers.

In Lippa v. Colletta*, a 2017 decision, the Ontario Superior Court held that water seepage in a basement does not by itself render the property unsafe. So, in addition to proving that the sellers knew about the problem, the purchasers were tasked with having to prove that the sellers also actively concealed it.

Proving that the sellers knew about the problem was fairly easy. The court looked at how substantial the water seepage was, how soon after closing in happened, and how regularly the sellers accessed the basement. It noted that it was extremely unlikely that the very first time the basement flooded was within a month of the closing date. The court also considered the presence of visible water marks and mold indicating that the water seepage had been going on for some time.

Proving that the sellers actively concealed the defect was a much bigger hurdle for the purchaser to overcome. There were some things stored around the basement that blocked the view of the walls and the floor, including a rug covering the water stain.

The sellers argued, however, that purchaser could have moved most of those things to get a closer look. The purchaser also did not have any photos to show where the items were in relation to the foundation cracks through which the water seeped in. Ultimately, the court concluded that the evidence of concealment was lacking and dismissed that part of the claim.

To sum up, if you discover a water issue in the basement of your newly-purchased home, you will be required to prove that the sellers (1) knew about the issue; and (2) actively concealed it. Put differently, the sellers are not obligated to disclose the water problem if they do not actively conceal it from the purchasers.

There are other scenarios where the sellers may be held liable. Those include where a Seller Property Information Statement (SPIS) was provided, and the sellers stated that no water issues existed. If the court finds that the sellers knew of existing water problems, they may be held liable for misrepresentation.

Interestingly, performing an inspection may not have a significant effect on the strength of your claim. While an experienced inspector may be able to spot the telltale signs of water seepage - the peeling paint and white mineral deposits on the walls and floor - if there is no water on the floor, there is no way of telling how much or how often the basement leaks. Moreover, if the inspector is unable to detect any water issues, the sellers might argue that they could not either.

According to the Lippa case, water issues are, at least sometimes, viewed by the Ontario courts as latent (not discoverable) defects. (In that case, an inspection was performed, and did not uncover the defect).

If you purchased a home and discovered that it has a water problem and are wondering about your options, feel free to contact me for a free consultation.

Please note that the above post is for information purposes only and does not constitute legal advice.

*Lippa v. Colletta, 2017 ONSC 1122