The Basement That Was ‘Just Damp’
Priya is the listing salesperson for a 1960s bungalow in Regina listed at $429,900. At the listing appointment the seller mentions that after a heavy rain two years ago water came through the basement wall. A handyman installed interior weeping tile and patched the wall; there was no permit and no receipt, and the seller has not had water since. The seller says: ‘Don’t put that in writing-buyers overreact, and it’s fixed.’ Priya markets the home. A buyer represented by another brokerage makes an offer conditional on inspection. The buyer’s inspector notes efflorescence and asks whether there has ever been water in the basement. The seller tells Priya to answer ‘no known issues.’ Priya knows the repair is unpermitted and undocumented, and the buyer is a first-time buyer who is relying on the inspection condition.
1. Does Priya have a duty to disclose the past water intrusion and unpermitted repair? Explain the legal and regulatory basis.
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Yes. A known material latent defect must be disclosed. Water intrusion through a basement wall is material because it affects use, value, and the buyer’s decision, and it is latent because the buyer cannot reasonably discover the history from a normal inspection-especially where the wall has been patched and the repair is undocumented. The unpermitted repair adds risk because the buyer cannot verify the work. Priya cannot rely on the seller’s instruction to stay silent. A salesperson who knows of a material latent defect and conceals it, or who makes a false statement such as ‘no known issues,’ risks breaching the Real Estate Act, the regulations and bylaws, and the duty of honesty. The seller’s desire to avoid ‘overreaction’ does not override the disclosure obligation. Priya should advise the seller in writing that the history must be disclosed and that a false answer on a property disclosure form or in response to a direct question could create liability.
2. How should Priya respond to the inspector’s question and to the buyer’s brokerage?
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Priya should not answer ‘no known issues.’ She should tell the seller that the direct question must be answered accurately and that she will disclose the known history. She should then communicate to the buyer’s brokerage, preferably in writing, that the seller reported past water entry after heavy rain, that a handyman installed interior weeping tile and patched the wall, and that there are no permits or receipts. She should not speculate that the repair ‘fixed’ the problem. She should recommend that the buyer obtain a qualified basement or structural assessment and verify permits with the municipality. Priya should document the date, what the seller told her, what she disclosed, and to whom. She should avoid overstating the defect, but she must not minimize it either. The goal is to give the buyer enough accurate information to make an informed decision.
3. The seller insists that Priya say nothing and threatens to complain if she ‘kills the deal.’ What should Priya do?
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Priya should escalate to the brokerage’s broker immediately. She should explain that she cannot conceal a known material latent defect and that continuing to market the property without disclosure would put the brokerage at risk. If the seller maintains the instruction, the brokerage should consider refusing to continue the listing or terminating it in accordance with the listing contract and brokerage policy. Priya should not simply withdraw quietly without documenting the reason. She should keep written records of her advice, the seller’s instructions, and the disclosure made. If a complaint is later filed, the record will show that Priya followed the Act and put the buyer’s right to accurate information ahead of the sale. The deal may still proceed if the buyer accepts the risk after proper disclosure and inspection.