5 facts you should know about legal protection in real estate

Many homeowners mistakenly believe that doing business with a real estate broker will protect them from unpleasant surprises. But in fact, all real estate transactions get exactly the same legal protection in Quebec, whether they are done through an agent or not.

Surprised? You’re not alone! There is a lot of confusion about this among consumers, who sometimes have difficulty making sense of the laws. But in fact, selling with a broker does not protect you in case of hidden defects or if a buyer backs out. It also does not replace a professional property inspection and does not exempt you from needing a notary to finalize the transaction. And in the event of an issue, your avenues of recourse are essentially the same.

To help you make an informed decision, here are 5 facts you should know about the legal protection that applies to all real estate sales in the province.

Contents

• 1. Hidden defects
• 2. Buyer backing out
• 3. Home inspection
• 4. Finalizing the transaction
• 5. The Real Estate Brokerage Act
• Real estate law applies to everyone

1. Hidden defects

From the legal point of view, buyers are automatically protected by two components of the legal warranty under the Civil Code of Quebec: the warranty of ownership and the warranty of quality. The first component guarantees the buyer that the item being purchased is free of any rights other than those declared, e.g., that it is not bound by a previous mortgage. The second protects the buyer from defects present in the building at the time of purchase and that were not known to the seller. The legal warranty therefore allows buyers of a single-family house, a condo or a multiplex to demand repairs (paid for by the former owner) if a hidden defect is discovered after the sale. If repairs are not possible, the transaction could even be cancelled.

You should be aware however that a seller cannot be held responsible for a problem that is indicated in the Declaration of the Seller or that was revealed during the pre-purchase inspection. As Diane Leblanc, a real estate coach at DuProprio, put it, “Transparency in real estate will ensure you sleep well at night.”

Sale without legal warranty

In some cases, property may be sold without a legal warranty. This condition must be very clearly stated in the offer to purchase and in the deed of sale. If the warranty of quality is excluded, the buyer cannot hold the seller responsible for any hidden defect discovered after the sale.

However, if you have proof that the former owner wilfully hid information, and that knowledge of the defect(s) would have considerably influenced the selling price or even your decision to buy, then you could seek a legal remedy.

What about the real estate broker in all this?

Whether the transaction is done directly or through an agent, the same laws apply to protect the parties involved. A real estate agent adds no additional legal protection in the event of a lawsuit for hidden defects. In these cases, sellers have to defend themselves alone or with the help of a lawyer. Being transparent is therefore in the seller’s best interest when selling a home that needs renovations.

2. Buyer backing out

Sadly, a buyer can breach their obligations and back out of a sale, either when it comes time to fulfill the conditions in the offer to purchase or even once the property is considered sold and you’re waiting to go see the notary. In this situation, whether or not the homeowner is represented by a broker, the legal recourse will be the same. The owner can choose to take legal action against the buyer who withdrew or simply find a new buyer. When a buyer backs out, this leads to delays and sometimes financial losses.

3. Home inspection

While the seller must guarantee that the home is free of hidden defects, the buyer must demonstrate caution and vigilance. During the buying process, the buyer must take reasonable steps to check the quality of the real estate, notably through the services of a professional building inspector.

You should be aware that having a broker involved in the transaction does not guarantee the quality of the immovable good and does not replace the work of a building inspector. A pre-purchase inspection will reveal problems you might not have noticed when you visited the property, despite you asking the buyer questions. An inspection is even more important if a home is being sold without a legal warranty.

4. Finalizing the transaction

Before handing over your keys to the buyer, you have to go to the notary’s office. “During a property sale in Quebec, the owner and the buyer are obligated to conclude the transaction in the presence of a notary,” clarified Maria Elena Bejan, a notary at DuProprio. “It’s the notary who reviews the titles and closes the deal, not the real estate broker.”

In other words, the notary is a legal professional who makes sure the transaction is done properly. The notary advises both parties equitably, that is, both for the purchase of a home and its sale. The notary’s many verifications avoid costly errors.

5. The Real Estate Brokerage Act

Selling with a real estate broker protects you only from damage that would result from fraud or a professional error committed by the broker themself. The brokerage profession is overseen by the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) and by the Real Estate Brokerage Act. To practice in Quebec, a broker must have successfully completed the required training, have a valid licence and follow the rules that apply to real estate brokers.

In the event of a professional error by the broker, you would be covered only if the real estate indemnity fund (FICI) or the professional liability insurance for Quebec real estate and mortgage brokers and agencies (FARCIQ) decides the claim is admissible.

In short, the public is only protected against certain actions committed by brokers themselves, but the Real Estate Brokerage Act does not provide any additional warranty against hidden defects or against a buyer backing out, for instance. When you choose to sell with the help of DuProprio’s services, this additional professional protection is therefore not required, since no broker is involved in the transaction.

Real estate law applies to everyone

No one is protected from unpleasant surprises. What’s important to remember is that the protection offered by the Civil Code of Quebec applies to all real estate transactions, whether or not a broker is involved in the process. The legal recourse available is the same for everyone. To reduce your risks, it’s best to put the odds in your favour by being vigilant and transparent.

DuProprio offers you the tools, tips and support you need to sell your home. Call us at 1-866-387-7677 to learn about our services or watch our informational webinar.