- Ontario resale transactions generally operate on the principle of "buyer beware" — sellers don’t have a blanket duty to volunteer every fact about a property.
- Expect these questions, directly or through your realtor: - What caused the damage, and when did it happen?
A pipe burst, a storm took part of the roof, a small kitchen fire — and before the insurance claim is fully wrapped up, life moves and you need to sell. An active insurance claim doesn’t stop a sale from happening, but it does change what needs to be disclosed, negotiated, and documented before closing.
Buyers, their lenders, and their lawyers will all want to understand what happened, what’s been fixed, and what’s left outstanding. Handling that clearly, early, tends to produce a smoother closing than hoping nobody asks.
This article walks through disclosure, common ways an open claim gets addressed in the Agreement of Purchase and Sale, and how to coordinate your insurer and your lawyer.
Do You Have to Tell Buyers About an Open Claim?
Ontario resale transactions generally operate on the principle of "buyer beware" — sellers don’t have a blanket duty to volunteer every fact about a property. But that principle has real limits: a seller cannot actively conceal a known defect, and known defects serious enough to make a property dangerous or unfit to live in generally must be disclosed.
An unresolved insurance claim is strong evidence that you have actual knowledge of property damage. Treating that as something you can simply avoid mentioning is a risk even where the general disclosure duty is narrow — and it’s a risk that tends to surface at the worst possible time, after closing, when a buyer discovers the history. Talk to your lawyer about how to handle disclosure before you list, not after an offer comes in.
What Buyers and Lenders Will Want Answered
Expect these questions, directly or through your realtor:
- What caused the damage, and when did it happen?
- What is the current physical state of the repair — complete, partially complete, or not started?
- Has the claim been adjusted and settled, or is it still open with the insurer?
- Is a contractor currently owed money for repair work already done?
- Is there any risk of a construction lien being registered against the property because a repair contractor hasn’t been paid?
A mortgage lender financing the buyer’s purchase will generally want these questions answered clearly too, since unresolved damage or an unpaid contractor can affect the security they’re taking on the property.
Three Common Scenarios and How Each Is Typically Handled
| Scenario | Typical approach |
|---|---|
| Claim fully resolved and repairs completed before listing | Disclose the history, provide documentation (adjuster report, contractor invoices), and proceed largely as a standard sale |
| Claim resolved but repairs not yet finished | Address it directly in the Agreement of Purchase and Sale — a price adjustment, a commitment that the seller finishes repairs before closing, or a holdback of funds at closing |
| Claim still open and unresolved with the insurer | Requires active negotiation — options include assigning insurance proceeds to the buyer, holding back funds until the claim settles, or adjusting the closing date |
Insurance Proceeds and Your Mortgage Lender
Where damage isn’t fully repaired by closing, a buyer and seller can agree that the seller assigns the right to any remaining insurance proceeds to the buyer, or that a portion of the sale price is held back until the claim is settled or repairs are complete.
If you have a mortgage on the property, your lender likely has its own interest in insurance proceeds relating to damage on the property — many mortgages name the lender as a loss payee or additional insured on the property policy. Discharging your existing mortgage and closing your sale may both depend on getting your lender’s sign-off on how the claim proceeds are handled, so this needs to be raised with your lawyer early, not left until closing week.
Coordinating Your Insurer, Realtor, and Lawyer
- [ ] Notify your insurer that you intend to list and sell the property.
- [ ] Request a written claim status summary — adjuster reports, current repair estimates, and payment history.
- [ ] Give your lawyer copies of everything as soon as you have it, not just when an offer arrives.
- [ ] Discuss with your lawyer how the claim should be addressed in your Agreement of Purchase and Sale before you accept an offer.
- [ ] Confirm your mortgage lender’s interest in the claim proceeds if the mortgage remains active during the claim.
Frequently asked questions
Can I still sell my home while an insurance claim is open?
Generally, yes. Nothing automatically prevents a sale, but the open claim needs to be addressed openly in the transaction rather than left unmentioned — how it gets handled is usually a matter of negotiation between buyer and seller.
What if I already used insurance money to complete repairs before listing?
Disclose the history and keep your documentation — adjuster reports, invoices, and proof of completed work. A well-documented, completed repair is generally far less of an issue for a buyer than an unresolved or poorly documented one.
Does the buyer take over my insurance claim when we close?
No. A property insurance claim generally belongs to the policyholder who owned the property at the time of the loss. A buyer typically can’t "take over" your claim, though remaining proceeds or repair obligations can be addressed contractually between you as part of the sale.
What happens if damage related to the earlier claim is discovered after closing?
Liability in that situation depends heavily on what was disclosed and how the Agreement of Purchase and Sale addressed the claim — this is exactly the kind of dispute where facts matter enormously. Contact a lawyer promptly rather than trying to resolve it informally with the buyer.
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