During your research to purchase real estate, you have certainly read the words "sale without legal warranty, at the buyer's risk and peril ".
This practice is mainly done in the case of property that we may have received as an inheritance or other and in which we would not have lived and for which we have very little information. However, this is an increasing trend, among others, for "regular" single-family homes. In fact, during the first months of 2021, 32% of sales of "ordinary" single-family homes in Quebec were made without legal warranty, according to the JLR study. This corresponds to an increase of 6% compared to 2020 and 15% compared to 2014.
“At the buyer's risk and peril”, these are scary words and it is important to understand what exactly they mean. Here are some important points you should know about a sale without legal warranty.
What is a legal warranty?
The legal guarantee includes both the warranty of quality and the warranty of the right of ownership.
The legal warranty of quality exists by the sole effect of the law and any person who sells a building is required to ensure its guarantee. It guarantees that the property is free from defects. In other words, the warranty of quality protects the buyer against "defects" which have not been disclosed by the seller. This warranty, however, excludes defects already known to the buyer.
The warranty of the right of ownership concerns defects in the title of ownership. For example, this could relate to a default on the mortgage related to the property before the sale.
Exclusion of the legal warranty of quality
The seller has the option of excluding the legal warranty from the sale. Where applicable, it must be clearly indicated in the promise to purchase and the deed of sale that the sale is made " without legal warranty, at your risks and peril ". Thus, you will not be able to be "surprised" by this clause.
What to do when a property says "sale without legal warranty"?
If this is the property of your dreams, you probably won't want to give up the opportunity despite the lack of legal warranty. You also don't want to risk getting into a giant trap. Here are some suggestions to make sure you make the best decision about buying the property.
Get support from a real estate broker
First, get support from a real estate broker who will know how to guide you in order to make an informed decision about the desired property. It will make it clear to you what options are available to you and how to make the most of the situation.
Have a more in-depth pre-purchase inspection
The purpose of a building inspection is to assess the interior and exterior of a property. In the case of a purchase without legal warranty of quality, your real estate broker will strongly advise you to proceed with a more in-depth inspection than usual to make sure to reveal any imperfections or hidden defects.
Negotiate the sale price
The exclusion of the legal warranty of quality gives you leverage to negotiate the sale price. Your real estate broker will represent you during negotiations with the aim of obtaining the property at the best price, which will probably be below its value depending on the situation and the market context with the comparables available as well as the real estate cycle.
In the event of a hidden defect during a sale without legal warranty
In the event that a hidden defect is discovered after the purchase of a house, in the absence of a legal warranty, no recourse against the seller is possible, except in rare exceptions that only your legal advisor can explain to you. The only way to come back against a seller is to be able to prove that the seller knew about the defect at the time of the sale. If the seller was aware of a hidden defect, but did not disclose it during the sale, even without legal warranty, he runs the risk of being sued.
Be very careful and on your guard when it comes to this type of sale of real estate. By hiring a Sutton real estate broker, you will make sure you have the support and help you need to make your home buying project a success.
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