Buying property without legal warranty
After intensive research during the real estate boom, you’ve finally found your dream home. The only drawback: it’s for sale without legal warranty. What does that mean exactly? We'll try to help you make an informed decision.
What is a legal warranty?
In Quebec, the law provides that the sale of a property is accompanied by a legal warranty.
That means when you buy real estate, sellers must guarantee that the property has a valid title and no hidden defects, other than those mentioned at the time of sale or following a pre-purchase inspection.
The current housing market is on fire . More and more house listings include a disclaimer that a property is being sold without legal warranty and at a buyer’s risk and peril.
We’d wager a guess that seeing words like ‘risk’ and ‘peril’ could dampen your enthusiasm. And for good reason. If you were to buy a property in its current state, with all its qualities and defects, you will have zero recourse against sellers in the event of hidden defects. You would therefore have to cover any and all costs.
Good to know: selling without legal warranty doesn’t allow sellers to bypass legal requirements and act in bad faith. So, if sellers fail to inform you about hidden defects, known or unknown, you can take legal action against them. This gives you some leeway.
A sale without legal warranty, is it on the up and up?
Yes, any seller has the right to exclude a legal warranty when they sell a property.
Some do take advantage of it, especially during an estate sale or repossession or when a property is old or rundown.
Since the pandemic, many sellers have chosen to exclude a legal warranty. Their goal is to avoid being held responsible for any hidden defects of which they say they’re unaware. They're hoping to circumvent any legal action.
Reasons laid out in black and white
Regardless of their reasons for opting out of a legal warranty, sellers must inform you at the outset. They must include this in the seller's declaration or in the offer to purchase.
If an agreement has been reached, they must include in the seller's declaration that the sale is ‘without legal warranty, at your risk and peril.’
What’s a hidden defect?
Imagine you’re chilling in the comfort of your new home. But less than a year goes by before you start to notice mould appearing on the walls in several places. The thing is, you could swear there was no indication of mould when you bought the place.
Outcome: this is undoubtedly a hidden defect. In fact, hidden defects include all defects, known or unknown to the seller, that existed at the time of purchase and that were not communicated to you. For instance:
- cracked concrete slab
- water infiltration in the basement
- poor insulation
- termite damage
These are serious defects that could negatively impact your quality of life and put a dent in your savings.
Of course, that doesn’t mean the roof will collapse on your head if you buy a home without a legal warranty. But there are some risks associated with renouncing this warranty.
On the flip side, it could be worth it to go ahead with the sale if you have a talent for renovating. The choice is yours!
You’ve decided to buy a house without legal warranty of quality
Follow these steps before you go all in:
Inspection
- Plan a proper pre-purchase inspection.
- Hire a member from one of the following associations:
- Quebec Association of Building Inspectors
- Organismes d’autoréglementation du courtage immobilier du Québec
- National Association of Building Inspectors and Experts
- International Association of Certified Real Estate Inspectors of Quebec.
- Specify that the property is being sold without legal warranty of quality.
- Make sure he or she:
- has liability insurance.
- uses a recognized inspection service agreement.
- carries out inspections in accordance with the lastest professional practice standards.
- Require a written report at the end of the inspection.
- Choose a person other than the one recommended by the seller’s broker. You will avoid any conflict of interest that way.
- Talk to your notary or lawyer to know your rights and learn what risks you could face.
You’ve decided to buy a house without legal warranty of right of ownership
Before signing on the dotted line, ask your notary to conduct an examination of titles required to make the sale official.
Pulled between reason and passion
Buying property is the biggest investment you’ll ever make. Your emotions can sometimes keep you from seeing things clearly. For example, you love love love the huge deck so much that you overlook the awful state the windows are in. It can happen to anyone./p>
So how to make an informed decision? Weigh the pros and cons. Yes, this house does check all the boxes at first glance. But can you really afford it? Crunch the numbers to find out for sure.
Are your heartstrings still being pulled? Consider that, in return for the financial risk, the asking price may be lower than similar homes on the market. That’s no small feat in itself.
Also remember that a trusted pre-purchase inspection will reveal the current state of the property, including costs that may be involved. You will then have a clearer view of the situation.