Can a Buyer Sue You for Hidden Defects After Closing in Alberta?

A message arrives after closing: the basement leaks, the wiring is faulty, or a permit was never closed. The buyer says you should have told them. Now you are wondering whether they can actually sue you, and whether the sale is really final.

The answer depends on what you knew, what you said, and what the contract promised. This article explains the general Alberta starting point, the situations where sellers do become liable, and the time limits. It is general information, not advice on your situation.

This article covers the law of Alberta.

The starting point: buyers take the home as it is

The common-law starting point is caveat emptor, meaning "let the buyer beware." Without an express warranty, a contractual condition, a collateral contract, fraud, or a fundamental mistake about what was sold, the buyer takes the land with its defects after the sale is completed and cannot reopen the contract.

There is also no implied warranty that a house already finished at the time of sale is fit to live in. So a buyer cannot usually win just by showing the home turned out to have a problem. They need something more.

When a seller can be held responsible

The protection of caveat emptor does not cover a seller who commits fraud or misrepresentation, gives an express warranty, or makes a collateral contract. Commentary on this area also notes that the doctrine has been eroding and that its exceptions are growing.

Cancelling a completed land sale (rescission) is not generally granted for an innocent misrepresentation, and nothing short of fraud will suffice. A buyer seeking to undo the whole deal faces a higher bar than a buyer who only complains about repair costs.

• Fraud or misrepresentation: the usual caveat emptor protection does not cover a seller who commits either.
• An express warranty: a warranty given by the seller, which takes the situation outside the usual caveat emptor starting point.
• A collateral contract: a separate contract connected to the sale, which is another exception to the usual caveat emptor protection.
• Other situations: whether something else could make a seller responsible depends on your facts, so it is worth confirming with a lawyer.

What counts as a latent defect and what must be disclosed

Under the Real Estate Act Rules, a material latent defect is one that cannot be discerned through a reasonable inspection. It also includes a defect that makes the property dangerous or potentially dangerous to occupants, or unfit for habitation.

A seller's licensee acting as sole agent must disclose to all buyers any material latent defects the licensee knows of. The seller's licensee must also tell the seller, in a timely manner, all relevant facts affecting the transaction that the licensee knows of. Sellers cannot hide defects or mislead buyers about the property's condition, and a defect can be more than physical, such as lacking the appropriate building or other permits.

Disclosure duties attach to material latent defects and similar facts, not every fact a seller knows. For example, a seller has no obligation to tell buyers that the home is conditionally sold when accepting offers.

Time limits for a buyer's claim

A buyer must generally seek a remedy within 2 years of when they knew or ought to have known of the injury, that it was caused by the seller's conduct, and that a proceeding is warranted. Claims are also barred 10 years after the claim arose, and whichever period ends first applies.

• The 10-year limit is suspended while a defendant fraudulently conceals the injury.
• The periods are suspended while the claimant is a person under disability.
• A purchase contract cannot shorten the buyer's time to sue, although the parties may agree to extend it.

A buyer who learns of a problem and then keeps acting as the owner for a long time may be treated as having confirmed the sale, which can bar cancellation even where fraud is alleged. Whether that applies depends on the facts.

What to do next

• Do not ignore the buyer's message, and do not reply with admissions or denials before you understand your position.
• Gather the listing documents, any inspection reports, repair invoices, permits, and your messages with your realtor and the buyer.
• Write down what you knew about the problem, and when you learned of it.
• Check the purchase contract for any warranty or promise about condition.
• Note the date the buyer first discovered the issue, since time limits may run from then.
• Speak with a lawyer before responding in detail.

Frequently asked questions