Buying a home without a legal warranty… is it worth the risk?
You finally found the home of your dreams, but it’s sold without a legal warranty? Should you still buy it? SSQ Insurance tells you a little more about this clause and what to do in this situation.
What is a legal warranty?
There are 2 types:
- Warranty of Quality
- Warranty of Ownership
Warranty of Quality
It refers to a property’s hidden defects (whether known or unknown to the seller) that were not mentioned at the sale.
Typically, a home is sold without a warranty of quality when it is being liquidated by the estate or if it was repossessed, in which case the owner cannot guarantee the fitness of the home having not lived there.
Increasingly, elderly people who give up their property to go to a residence with services insert this clause into the contract so they don’t have to worry about being sued by the new owner.
In any case, the seller is legally obligated to declare all known problems of the property, with or without a legal warranty.
Warranty of Ownership
It applies to the deeds of ownership, and guarantees that:
- The property is free of all rights except those declared by the seller (mortgage, servitude, right of use, etc.)
- The seller has reimbursed (or will reimburse) the property of all debts
- The property does not encroach on a third person
- The property does not violate any laws, except those declared by the seller or those that the buyer should have discovered
In general, the seller must provide the following documents when an offer is made:
- Location certificate
- Copy of sales contract
- Copy of all deeds
What does waiving the legal warranty mean?
This means that you waive your right to sue the owner for hidden defects.
If for example you uncover major foundation or insulation issues that the seller omitted to mention during the sale you will have to live with the consequences.
However, this exception is not ironclad. If the seller neglected to mention hidden defects that they were aware of or should have known about, you can still take legal action.
How to protect yourself?
If you want to buy property without a legal warranty
Make sure to have the building inspected.
Call on a qualified building inspector who is a member of one of the following associations (French only):
- Association des inspecteurs en bâtiments du Québec
- Organisme d’autoréglementation du courtage immobilier du Québec
- Association nationale des inspecteurs et experts en bâtiments (ANIEB)
- Association internationale des inspecteurs immobiliers certifiés du Québec
Make sure the inspector:
- Has civil liability insurance
- Uses a recognized inspection service agreement
- Performs inspections in compliance with the latest industry standards
- Gives you a written inspection report
Never have property inspected by someone who was recommended by the seller’s agent; this could lead to a conflict of interest.
Prior to inspection, it’s important to tell them that the property is being sold without legal warranty.
Obviously, at this step, it’s crucial to speak to a lawyer about what buying a home without a legal warranty entails.
If possible, speak to the neighbours to find out more about the home you’re planning to buy.
Ask Hydro-Québec about the monthly electricity bills. This will give you an idea of how well insulated the home is.
If you’d like to buy a home without a legal warranty of ownership
With or without a legal warranty, the notary that you choose will check all the deeds required for the transaction.
Be careful when choosing a notary and don’t hesitate to get a referral.
Keep your cool
Buying property is a major investment and you definitely don’t want to buy a money pit.
It’s also an emotional purchase, which means that common sense is sometimes in short supply.
Stay calm and focused. Do your calculations because you might be spending more than you think to make this dream home compliant with the latest standards.
Assess your willingness to take legal action because that will cost lots of time and money. If you tend to avoid conflict, then think twice about what might happen if the transaction goes sour.
However, the financial risk aside, the selling price might be negotiated down compared to
similar properties. So, go ahead and hone your sales skills…
Note: This blog post is provided for information purposes only. It is not a substitute for professional legal, financial or fiscal advice. For advice specific to your personal situation, always speak with your advisor. SSQ Insurance cannot be held responsible for any decision made as a result of reading this blog post.