House Fire Before You Move – Now What?

It could happen to you.

After months of fruitless searching, you finally find a house in Vancouver that suits your family. It’s in your price range, has a “mortgage helper” basement suite, and doesn’t need substantial renovations you can’t afford. An elementary school for your young kids, your wife’s workplace and temple are nearby, as are family members. So in early December, 2016, you agree on a price with the seller and sign the purchase contract. The deal is set to complete in early February, 2017.

But when you go to look at the house a few days before the closing date, you notice some recent fire damage. You go again the next day to have a closer look, and find the fire damage is quite serious – the kitchen cupboards in the suite burned, the floor is burned, you can’t even access the upper floor to see the damage because the stairwell is destroyed. The seller hasn’t told you about the fire, and its cause is a mystery.

You might still want to go through with the deal, but you want more information from the seller first. What insurance does the seller have? Has the insurer done a damage assessment? Will the seller agree to a price reduction or holdback from the sale proceeds for repairs, so a way can be found to make the deal work?

The seller knows you can cancel the contract and suggests that you got a good deal anyway. He doesn’t provide the information you want and basically says “take it or leave it.” If you want to go through with the deal, he wants the full sale price (without making repairs or giving you any insurance proceeds). Otherwise, he says you can cancel the deal and walk away.

Though you’re prepared to go ahead if there’s a reasonable solution regarding the fire, your mortgage company yanks the mortgage funds back the last minute due to these unresolved problems. The closing doesn’t happen, and after attempts to make the transaction work, you start a lawsuit.

The court dealt with just such a case recently. It pointed out that the contract said the seller had to deliver the house in substantially the same condition as the buyer saw it before signing the contract. Here, because of the fire damage, the seller couldn’t meet that obligation. The seller also wasn’t justified in simply taking a “take it or leave it” position. Since the fire issue only came up just days before completion, he had to be reasonable and give the buyer time and the information the buyer needed to decide what to do.

So in this case, the buyer was awarded “specific performance” (meaning he got the particular house the family wanted, not just money compensation) and a price reduction of over $130,000, based on the estimated repair costs.

If you run into issues with a house purchase, your real estate lawyer can advise you on your options and steps you can take to protect your legal position.

Written by Janice and George Mucalov, LL.B.s with contribution by COBBETT & COTTON. This column provides information only and must not be relied on for legal advice. Please contact COBBETT & COTTON for legal advice concerning your particular case. Names of the parties in reported cases have been changed or removed to protect their identity. Lawyer Janice Mucalov is an award-winning legal writer. “You and the Law” is a registered trade-mark. ©Janice and George Mucalov.

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