Sellers of property with quality issues (ie; grow ops, electrical or plumbing problems, foreclosures) often sell a property on an “as-is” basis to avoid future/ downstream liability (being sued later by the Buyer). A Seller can claim protection from later suit where it has but the Buyer on notice to do its own examinations (caveat emptor – buyer beware) and often this is done with the use of a “As Is, Where As” clause in a contract.
Can the use of a “As Is, Where As” clause discharge a Seller’s obligation to disclose a Latent Defect in a Property?
1) What is a Latent Defect?
A latent defect is a defect which reasonable careful inspection will not reveal (Roberts v. Corrigal (1993) (B.C.S.C)). These are normally unknown to the purchaser before they enter into a purchase contract. The purchaser has an obligation to inform themselves by carrying out a reasonable inspection of the property (ABB Inc. v. Domtar Inc., 2007 SCC 50, [2007] 3 SCR 461).
If the vendor fails to disclose, conceals, or makes non-innocent misrepresentations about a latent defect, they may become liable to the purchaser for damages as a result of the latent defect. There is an obligation for the party who knows about the defect to disclose this (Miller v. Jamieson, 2007 BCSC).
2) The “As Is Where As” Clause>
This no-warranty clause provides for no disclosure by the vendor to the purchaser. The purchaser may be entitled to perform their own investigations, but if they choose to proceed the purchaser will be responsible for any claims that may arise.
3) A Latent Defect “Trumps” As Is Where As….
The vendor has an obligation to disclose the latent defects of the property to the purchaser (General Motors Products of Canada v. Kravitz, [1979] 1 SCR 790) Although the vendor may include the ‘as is where is’ clause in the contract, they may become liable to the purchaser if they have concealed, misrepresented or failed to disclose a latent defect that causes the property to be rendered dangerous or unfit for its intended purpose (Cresswell Investments Ltd. v. Pavone, 2011 BCSC 1069 (CanLII)).