The Montreal-area residential real estate market is currently experiencing unprecedented levels of demand, particularly for single family dwellings outside of the city’s core. While in the past, a vendor could expect the process of finding a purchaser to be a months-long endeavour, nowadays many single family dwellings placed on the market end up the object of a bidding war.

One of the side effects of this surge has been a marked increase in the number of sales that exclude the legal warranty of quality. Traditionally, sales of single family dwellings that excluded legal warranty were rare and usually only occurred in the presence of special circumstances, such as an estate sale. However, the peace of mind that is afforded the vendor by selling a property without regard for what issues may be lying in wait to appear months or years down the road, is an attractive proposition. As a result, many vendors have recently taken up this opportunity by specifying in their listings that the property is being offered without any warranty.

While the effects of a properly drafted waiver of legal warranty between the vendor and purchaser are well known, there has been considerable debate when it comes to the effects of such a waiver with respect to both prior and subsequent transactions. In recent years, the Court of Appeal rendered two key decisions on the subject, the last of which confirmed that, in the presence of an intact chain of legal warranties, a purchaser can exercise a claim against any or all of the prior vendors, inasmuch as the latent defect existed at the time of each such sale[1].

In a recent judgment of the Superior Court rendered March 25^th, 2021[2], the Honourable Bernard Tremblay was called upon to determine whether a waiver of warranty by a purchaser’s author prevented that purchaser from pursuing a latent defect claim against previous vendors who had sold the subject property with legal warranty.

In this case, the language used to exclude legal warranty employed a standard phrasing, namely that the property was sold “without legal warranty, at the risks and perils of the purchaser”[3]. Justice Tremblay, after performing a commendable review of past cases, found that this language was clearly intended to waive legal warranty, not only with respect to the immediate vendor, but to any previous vendors.

While not part of the principal reasoning of his decision, Justice Tremblay makes an important comment:

[TRANSLATION] Nevertheless, the Court can easily conceive that a purchaser might stipulate that he is waiving the legal warranty of his immediate vendor only or, when purchasing, for example, a property via a sale by judicial authority, the purchaser may deem it necessary to stipulate that he does not waive the warranties benefitting him from prior sales.[4] [our emphasis]

Concretely, this should be viewed as an opportunity for purchasers, faced with a vendor wanting to exclude legal warranty, to retain some form of protection against latent defects. By specifying in their offer (and ensuing deed of sale) that the waiver of legal warranty applies only to their immediate vendor and that they do not waive the warranties benefitting them from prior sales, a purchaser can somewhat mitigate the risk of waiving legal warranty.

Of course, the decision on whether to waive legal warranty, in whole or in part, may have serious consequences and ought to be taken on an individual basis. Such a decision must take into consideration the risk of serious problems being discovered and the purchaser’s capacity to cope with such problems.

For any questions regarding real estate matters, do not hesitate to contact the author, Michael Schacter, or any member of Kaufman’s real estate team.

[1] Dupuy c. Leblanc, 2016 QCCA 1141. See also Hay c. Jacques, 1999 CanLII 13323 (QC CA).

[2] Ouellette c. Blais, 2021 QCCS 1084. N.B. Subsequent to the drafting of this article, an inscription in appeal was filed before the Court of Appeal in the matter 200-09-101342-217.   

[3] Original text: « sans aucune garantie légale aux risques et périls de l’acquéreur »

[4] Original text: « Toutefois, le Tribunal peut aisément concevoir qu’un acheteur puisse stipuler qu’il renonce à la garantie légale de son vendeur immédiat seulement, ou encore, lorsqu’achetant par exemple un immeuble lors d’une vente sous contrôle de justice, cet acheteur juge nécessaire de stipuler qu’il ne renonce pas aux garanties lui résultant des ventes antérieures. »