Problems Discovered After Closing on an Ontario House: Your Legal Options

The moving truck leaves, you start unpacking, and something feels wrong. Maybe it's a soggy spot in the drywall when the rain comes. Maybe the furnace that passed inspection fails in January. Maybe you discover the basement was waterproofed with sealant painted over mold. Problems discovered after closing an Ontario real estate purchase are surprisingly common — and they span a wide range from minor inconveniences to serious structural failures that cost tens of thousands to fix.

The legal path forward depends on what type of problem you found, what the seller knew, and what you did (or didn't) do before closing. This guide maps the terrain.

Start by Categorizing the Problem

Not every post-closing problem gives rise to a legal claim. Ontario law distinguishes between:

Patent Defects (Generally No Claim)

A patent defect is something you could have discovered through a reasonably careful pre-purchase inspection. Peeling paint, an unlevel floor, a sticking door — these are visible on a walkthrough. If you did a home inspection and the inspector missed something obvious, your claim may lie against the inspector, not the seller.

Latent Defects (Potentially Strong Claim)

A latent defect is one that is hidden, not discoverable by a reasonable inspection, and significant enough that it affects the property's habitability or value. Classic examples: a basement that floods because the seller re-graded soil and re-painted walls to conceal water intrusion; a structural crack hidden behind a finished wall; mold inside a closed wall cavity.

For a latent defect claim to succeed, you generally need to show the seller knew about it and failed to disclose it, or actively concealed it. If the seller genuinely didn't know, the legal path is much harder (though not always impossible — see fraudulent and negligent misrepresentation, discussed below).

Defects Covered by Representations in the Agreement

Sometimes the Agreement of Purchase and Sale or the Seller Property Information Statement (SPIS) contains specific representations about the property's condition. If those representations turn out to be false — the roof is not five years old, there have been insurance claims for water damage — you may have a misrepresentation claim separate from the latent defect analysis.

What You Should Do Right Away

Time and evidence are your most valuable assets after discovering a post-closing problem:

1. Stop and document before repairing: photograph and video the problem from every angle before you touch it. A mold remediation company's report showing how the issue was concealed is far more valuable than a "before and after" you can't explain.

1. Get an independent expert assessment: a structural engineer, a home inspector, a mold assessor, or a plumber — depending on the defect — should provide a written opinion on the nature, cause, and approximate age of the problem. "This moisture damage is consistent with years of water infiltration, not a recent event" is the kind of sentence that wins cases.

1. Preserve all communications: the seller's emails, text messages, anything from the seller's agent. If the seller's agent sent you a listing description saying "no known defects," keep it.

1. Consult a lawyer before contacting the seller: your first instinct may be to call the seller directly. Doing so without counsel can result in you saying something that hurts your case. Let your lawyer communicate.

Who Can You Sue?

Depending on the facts, potential defendants include:

• The seller: the primary defendant in most post-closing disputes. The seller has the duty to disclose latent defects and must not make false representations.
• The seller's real estate agent: if the agent knew of the defect, actively concealed it, or made false statements to you, they can be personally liable. Real estate agents in Ontario have duties under the Real Estate and Business Brokers Act and the common law.
• Your home inspector: if the defect was something a competent inspector should have caught (a patent defect or one discoverable with standard inspection tools), the inspector may be liable for professional negligence.
• A new-home builder: if you purchased a newly built home, the Tarion Warranty (Ontario's new home warranty program) provides specific coverage for workmanship, materials, and structural defects. The timelines and coverage categories are specific — verify current terms with Tarion directly.

What You Can Recover

Your primary head of damages is usually the cost to repair the defect and return the property to the condition you bargained for. You may also recover:

• The reduction in property value attributable to the defect (if you choose to sell rather than repair)
• Consequential costs: temporary accommodation if you had to vacate, the cost of expert reports, insurance deductibles
• In cases of fraud: punitive damages in egregious circumstances

You are expected to take reasonable steps to address safety hazards promptly (you cannot let a mold problem spread and then claim the full remediation cost if you ignored it for two years). But you are not expected to do full repairs before bringing a claim.

The Two-Year Limitation Clock

Ontario's Limitations Act gives you two years from discovery to start a legal proceeding. For latent defects, discovery means when you first became aware (or a reasonable person in your position would have become aware) of the problem and its connection to the seller's conduct.

In practice: if you moved in on March 1 and the basement flooded on April 15, the clock likely started in April. If you ignored signs of moisture for two years and then got a professional to assess it, a court may find you ought to have discovered it earlier.

A Note on "As Is" Clauses

Some agreements contain an "as is" clause. While this shifts risk to the buyer for patent defects, it does not protect a seller who commits fraud or who fails to disclose a latent defect. "As is" means you accept the property as you found it — not that the seller can lie about what you're finding.

Frequently asked questions