Can you really cancel a promise to purchase after an unfavorable inspection in Quebec? The answer depends on the extent and seriousness of the defects. According to court rulings, cancellation of a promise to purchase is not automatic, and the criteria for such retraction are strict. The key question is whether the defects identified during the inspection are sufficiently serious to affect the value of the property or significantly increase its cost.
When is a defect enough to cancel a promise to purchase?
A defect or problem revealed by an inspection does not always entitle the buyer to cancel the promise to purchase. For a buyer to legitimately withdraw, the factor invoked must have the capacity to significantly reduce the value of the property or increase future expenses related to its maintenance or repair. The mere fact that a defect is found is not enough; it must be significant enough to cause a reduction in the price of the property or an increase in maintenance costs.
The scope of defects allowing cancellation of a promise to purchase is similar to that of latent defects as defined by article 1726 of the Civil Code of Quebec. The latter stipulates that defects affecting a property must diminish its usefulness to such an extent that the buyer would not have acquired it, or would not have paid the agreed price, had he been aware of them. Thus, in the case of a promise to purchase, if the defects identified by an inspection are sufficiently serious to alter the decision to purchase or justify a reduction in the sale price, the buyer may validly retract.
The promise to purchase: a firm but conditional contract
The promise to purchase is a contract that commits the buyer and seller to conclude the transaction according to the agreed terms. However, it often includes an inspection clause that allows the buyer to withdraw if the inspection reveals serious defects. But this is not automatic. The courts require that the defects found be significant enough to justify cancellation, as a simple concern or minor defect is not enough.
Lefrançois v. Kottaras: The case of minor defects
In Lefrançois v. Kottaras, the buyers attempted to withdraw from a promise to purchase, citing water infiltration and cracks in the foundations of an ancestral home. However, the court ruled that these defects were not significant enough to warrant cancellation of the promise. Although these problems had been mentioned in the inspection report, the court considered that they were part of the normal wear and tear of an old house and had no substantial impact on the value of the property.
The court emphasized that for a defect to qualify for cancellation, it must affect the property significantly, by diminishing its value or increasing future expenses. In the absence of such criteria, the buyers were ordered to pay $10,000 in damages to the seller for breaking their commitment without just cause.
Plante v. Secher: A justified retraction
In Plante v. Secher, the buyers were able to validly withdraw from the promise to purchase. During the inspection, they discovered persistent water infiltration around the chimney, despite the seller’s earlier statement that the problem had been resolved. In addition, the inspection revealed other significant anomalies, such as abnormal humidity, lack of ventilation and unprotected electrical circuits.
The court ruled that these defects were serious enough to warrant cancellation of the promise to purchase, as they significantly affected the value of the property and would have required costly work. As a result, the buyer was able to withdraw without having to pay damages, and the seller’s claim was dismissed.
Simoneau v. Bisson: The importance of concrete evidence
In Simoneau v. Bisson, the buyers discovered minor defects during the inspection, such as the absence of a bathroom fan and the lack of a closet in a basement bedroom. They attempted to withdraw from the promise to purchase, but the court concluded that these defects were not serious enough to justify a retraction.
The court insisted that for a retraction to be justified, the defects identified must have a significant impact on the value or expense of the property. In addition, buyers must provide concrete evidence, such as quotes or cost estimates, to support their claim. In this case, the buyers failed to demonstrate that the defects substantially affected the value of the property, and were ordered to pay $87,000 in damages to the seller.
Objective criteria for a valid retraction
Quebec court rulings show that retractions based on an inspection clause must meet strict criteria. Here are the main points to bear in mind:
1. Importance of defects: Only serious or structural defects can justify a retraction. Minor or cosmetic defects are not sufficient.
2. Concrete evidence: The buyer must provide tangible evidence, such as estimates or expert reports, to demonstrate that the defects significantly affect the value or expense of the property.
3. Objective standard: The assessment of the seriousness of defects must be made objectively. It is not the buyer’s subjective perception that takes precedence, but the actual impact of the defects on the property.
4. Impact on value or expenses: Defects must significantly reduce the value of the property, or substantially increase the expense of maintaining or repairing it.
Conclusion: What should I keep in mind before withdrawing from a promise to purchase?
Before attempting to retract a promise to purchase, it’s crucial to understand that only significant defects can legally cancel a transaction. Buyers must provide solid proof that the defects found during the inspection substantially affect the value of the property or future expenses.
The cases analyzed show that abusive retractions, based on minor or unproven defects, are likely to lead to awards of damages. Quebec courts insist that the promise to purchase is a serious contract, and that a retraction is only possible when significant defects are objectively demonstrated and documented. J’ai OK