Date Issued: January 23, 2019

File: SC-2018-001933

Type: Small Claims

Civil Resolution Tribunal

Indexed as: Harrison v. Scheelar, 2019 BCCRT 97

Between:

Michael Harrison

Applicant

And:

Dennis Scheelar

Respondent

INTRODUCTION

1.      This is a dispute about failure to disclose deck rot in the sale of a house. The applicant buyer, Michael Harrison, alleges the respondent seller, Dennis Scheelar, failed to disclose the deck rot, and says that this was fraudulent because the respondent indicated on the Property Disclosure Statement (PDS) that there was no water damage or structural damage. The applicant claims $2,338.76 for deck repairs.

2.      The respondent denies having knowledge of structural problems or water damage at the time he signed the PDS. The respondent also says the deck problems were patent defects, in that they were visible to the applicant and his inspector before he bought the house. The respondent claims $428.40 in legal fees, as a dispute-related expense.

3.      The parties are each self-represented. For the reasons that follow, I dismiss the parties’ respective claims.

JURISDICTION AND PROCEDURE

4.      These are the formal written reasons of the Civil Resolution Tribunal (tribunal). The tribunal has jurisdiction over small claims brought under section 118 of the Civil Resolution Tribunal Act (Act). The tribunal’s mandate is to provide dispute resolution services accessibly, quickly, economically, informally, and flexibly. In resolving disputes, the tribunal must apply principles of law and fairness, and recognize any relationships between parties to a dispute that will likely continue after the dispute resolution process has ended.

5.      The tribunal has discretion to decide the format of the hearing, including by writing, telephone, videoconferencing, email, or a combination of these. In the circumstances here, I find that I am properly able to assess and weigh the documentary evidence and submissions before me. Further, bearing in mind the tribunal’s mandate that includes proportionality and a speedy resolution of disputes, I find that an oral hearing is not necessary. I also note the recent decision Yas v. Pope, 2018 BCSC 282 at paragraphs 32 to 38, in which the court recognized the tribunal’s process and that oral hearings are not necessarily required where credibility is in issue.

6.      The tribunal may accept as evidence information that it considers relevant, necessary and appropriate, whether or not the information would be admissible in a court of law. The tribunal may also ask questions of the parties and witnesses and inform itself in any other way it considers appropriate.

7.      Under tribunal rule 126, in resolving this dispute the tribunal may: order a party to do or stop doing something, order a party to pay money, or order any other terms or conditions the tribunal considers appropriate.

ISSUE

8.      The issue in this dispute is whether the respondent improperly failed to disclose deck rot when he sold his house to the applicant, and if so, what is the appropriate remedy.

EVIDENCE AND ANALYSIS

9.      In a civil claim such as this, the applicant bears the burden of proof, on a balance of probabilities. I have only referenced the evidence and submissions as necessary to give context to my decision.

10.   The bungalow house in question was 41 years old at the time of the parties’ July 2017 contract. The contract provided for an August 22, 2017 date of possession.

11.   The applicant says “perhaps a week” after buying the house he noticed rot in a number of areas on the deck. The applicant says the entire deck must be repaired or replaced, which the respondent disputes.

12.   The respondent relies on the contract’s inspection condition, which was that the buyer could obtain and approve an inspection report “against any defects whose cumulative cost of repair exceeds $5,000.00 and which reasonably may adversely affect the property’s use or value”. In other words, the respondent says that even if he should have disclosed the deck rot, the value of the deck rot had to be over $5,000 in order for the buyer to terminate the contract. The respondent says nothing in the contract allowed for compensation for repairs that cost less than $5,000.

13.   On this issue, I disagree with the respondent. I say this simply because the contract’s conditions were “for the sole benefit of the buyer”, which includes the term about the home inspection. Nothing in that inspection clause determines whether the respondent reasonably was required to disclose deck rot nor does it determine whether or to what extent the applicant is entitled to a remedy.

14.   Instead, as discussed further below, I find this dispute turns on the PDS and whether the deck rot was a “patent defect”, meaning it was readily discoverable on inspection. The respondent says the applicant’s claim should be directed towards his home inspector.

15.   In the June 20, 2017 PDS, the respondent initialed “no” to the questions: a) “3.G. Are you aware of any structural problems with any of the buildings?”, b) “3.L. Are you aware of any damage due to wind, fire or water?”, and c) “Are you aware of any material latent defect”, which is defined as something that cannot be detected through reasonable inspection of the property, including anything that makes the property dangerous or potentially dangerous or unfit for habitation. The respondent signed the PDS based on his “current actual knowledge” at the time. The PDS was incorporated into the parties’ contract.

16.   The applicant’s July 14, 2017 inspection report did not specifically disclose deck rot problems. In the preamble to the report, among other things it states that the report does not address dry rot. It also says that the condition of certain systems and components would be randomly sampled, such as for signs of moisture ingress. At the end of the report, in a checklist the inspector indicated “yes”, the deck appeared to be “solid” and securely attached to the house.

17.   That said, the inspection report concludes that the condition of the deck and its steps is “satisfactory to poor”, and to “please consult a qualified contractor” for each of the deck and its steps. The report’s author also noted that inspection of the deck was hampered by restricted access from below and clutter/storage. The report further recommended extending downspout at the deck edge to “better control surface water”.

18.   Despite the inspection report’s findings, the applicant buyer removed the inspection subject clause and proceeded to complete the purchase. The applicant submits that he thought the overall inspection was good. I find this conclusion with respect to the deck to have been unreasonable, given the “satisfactory to poor” rating and given the inspector expressly recommended the applicant consult a qualified contractor. The applicant has provided no explanation for why he did not follow that recommendation.

19.   The applicant provided a December 15, 2017 photo of the deck surface that shows cracking through the paint around a post. He also provided other May and June 2018 photos that appear to show rotten wood, after the paint surface and a post were removed. I accept the deck was rotten and was likely rotted at the time of the parties’ July 2017 sale, which is not particularly disputed. However, as discussed below, that fact is not determinative.

20.   In a real estate transaction, a purchaser is expected to make reasonable enquiries and conduct a reasonable inspection of the property. Unless the seller breaches the contract, commits fraud or fails to disclose a latent defect, the purchaser assumes the risk for any defects in the condition or quality of the property. This principle is referred to as the doctrine of caveat emptor or “buyer beware”, and is very much alive and applicable in the context of BC real estate transactions: See Nixon v. MacIver, 2016 BCCA 8; Paniccia v. Eckert, 2012 BCSC 1428.

21.   A latent defect is one which cannot be readily discovered through a reasonable inspection of the property, including a defect that renders the property dangerous or unfit for habitation.

22.   In contrast, a “patent” defect is one that can be discovered by conducting a reasonable inspection and making reasonable enquiries about the property: Cardwell v. Perthen, 2006 BCSC 333, aff'd 2007 BCCA 313.

23.   A seller has no duty to disclose patent defects to purchasers, although they must not actively conceal them: Cardwell; Rogalinski v. Scorey, 2011 BCSC 1050.

24.   In general, there is a significant onus on the purchaser to inspect and discover patent defects. This means that a defect which might not be readily apparent on a casual inspection can nevertheless be “patent” if it would have been discovered on a reasonable inspection by a qualified person. In some cases, a purchaser is expected to retain the appropriate expert to inspect the property (such as an electrician or a carpenter). See for example Eberts v. Aitchison, 2000 BCSC 1103.

25.   Based on the evidence before me, I find the deck rot was a patent defect. I say this because of the inspection report, and that had the applicant hired a qualified contractor as recommended, the deck rot would likely have been identified. My conclusion is supported by the applicant’s evidence that the inspector returned and said that he was surprised and disappointed that he had missed the deck rot problems. This indicates that a reasonable inspection, together with the recommended contractor consultation, would have disclosed them.

26.   The question then becomes whether the respondent’s answers on the PDS were false with respect to the deck and if so whether that amounts to a breach of the parties’ contract entitling the applicant to damages. The respondent says his statements were true in the PDS, that he was not aware of any structural problems with the buildings or any damage due to wind, fire or water.

27.   Contrary to the applicant’s allegation, the respondent has not acknowledged that he knew of deck rot and chose not to disclose it. The respondent’s statement in the Dispute Response at the outset of this proceeding was that the problems with the deck (which the respondent to some extent now accepts, given the rot disclosed by the applicant) were visible to the applicant and his inspector. In that same Dispute Response, the respondent stated that he was not aware of structural problems or damage due to wind, fire, or water, and that his PDS statements were therefore true. Given the latter statement, I find it would not make sense to read the respondent’s first statement as being an acknowledgement that at the time of the sale he knew about the deck rot.

28.   The evidence shows the respondent had filled holes and cracks on the deck with wood filler. The applicant says “once rot starts you have to remove”. However, the evidence before me is that the respondent filled holes where wooden deck posts had been removed and replaced with aluminum railing, and that this was done at least 18 months before the house was sold.

29.   In these circumstances, I cannot agree with the applicant that the respondent’s approach to filling deck surface holes amounts to knowingly or recklessly completing the PDS. The respondent submits that when he used the storage space under the deck, there was no rot or water damage noted on the floor joists or on the stored items. On balance, I find the applicant has not proved the respondent actively concealed the deck rot or that he fraudulently completed the PDS.

30.   Given these conclusions, that the deck rot was a patent defect and that the respondent honestly completed the PDS, I find the applicant’s claims must be dismissed. I therefore do not need to address his damages claim in any detail.

31.   The respondent claims $428.40 for reimbursement of legal fees, as a dispute-related expense. Tribunal rule 132 says that except in extraordinary cases, the tribunal will not order payment legal fees. This follows from the general rule in section 20(1) of the Act that parties are to represent themselves in tribunal proceedings. This is not an extraordinary case and so I decline to order the claimed reimbursement.

32.   In accordance with the Act and the tribunal’s rules, as the applicant was unsuccessful in this dispute I find he is not entitled to reimbursement of $125 in tribunal fees.

ORDERS

33.   I order the applicant’s claims dismissed.

34.   I order the respondent’s claim for dispute-related expenses dismissed.