You have worked hard for years to save up enough money to buy your dream home.

You find a property that meets all your requirements; it is a beautiful home, set in a bucolic neighbourhood, close to your family and friends, you think it is safe, secure, and it has not presented any obvious defects.

But when you move into your dream home, you find that all is not well. The house has major problems that the seller did not disclose to you, and no reasonable inquiries from you could have uncovered these issues.

What are your options?

The Un-Royal Treatment of the Crypto King

A recent case from the Ontario Superior Court of Justice, while dealing with a strange and unique case, reconfirmed the law on setting aside an Agreement of Purchase and Sale where the seller has made a fraudulent misrepresentation, or where there is a latent defect in the property.

The case of two numbered companies, 1000425140 Ontario Inc. v. 1000176653 Ontario Inc., 2023 ONSC 6688, was actually a lawsuit brought by Canadian basketball player and Oklahoma City Thunder Point Guard Shai Gilgeous-Alexander to set aside his purchase of a home in Burlington, Ontario.

Gilgeous-Alexander had purchased a luxury home in Burlington that met all of his requirements. It was to be the home where he would start and raise a family. A key factor in his decision to purchase the home was that it was advertised as being “private and secure”.

A few days after he moved in, however, a man knocked on his door and demanded to see an Aiden Pleterski. Gilgeous-Alexander did not know who Pleterski was, so he asked the man to leave. In the days following, menacing people kept showing up to the home and asking for Pleterski.

When Gilgeous-Alexander researched Pleterski, he discovered that this man was known as the “Crypto King” who had allegedly defrauded people of tens of millions of dollars, some of which he had invested into the property that Gilgeous-Alexander had purchased.

There had been threats against the Crypto King, including an instance where he was kidnapped, and some of the threats were to burn down the house that Gilgeous-Alexander had purchased.

Upon discovering these troubling threats, Gilgeous-Alexander moved out of the property, never to return.

The Limits of Buyer Beware

At the outset of his analysis, the Judge in this case confirmed the general principle that a buyer cannot presume that there are no problems with a property they are about to purchase.

As a general rule in Ontario, the buyer must make inquiries, including an inspection of the property, to confirm that there are no major problems. If a buyer waives inspection, then they are stuck with the deal.

However, there are exceptions to this general rule, including fraud and latent defects.

Setting Aside a Purchase for Fraud

In finding that the Agreement of Purchase and Sale should be set aside on the basis of fraud, the Judge found that Gilgeous-Alexander successfully met all elements of the legal test for establishing a fraudulent misrepresentation:

  1. The seller had made a false representation of fact, which in this case was the claim that the property was “private and secure”;
  2. The seller knew that the statement was false or was reckless to its truth, as there was clear evidence that the seller through his son knew the Crypto King personally and knew about the threats;
  3. The seller made the false representation knowing that the buyer would act upon it;
  4. The buyer relied and acted upon the statement, as here Gilgeous-Alexander, a famous NBA basketball player wanted a private and secure property; and,
  5. The buyer suffered damage as a result.

Setting Aside a Purchase for Latent Defects

The Judge also ruled that the property had a latent defect, such that the Agreement of Purchase and Sale should be set aside.

The Judge held that a latent defect is “some fault in the structure that is not readily apparent to an ordinary purchaser during a routine inspection”, however a defect is not latent just because it is not visible to the purchaser. These is still a duty to make reasonable inquiries to find the defect.

The Judge ruled that the threats to the property could not be found by reasonable inquiries, such as speaking to the neighbours or the realtor making inquiries.

Gilgeous-Alexander’s agents had spoken to some of the neighbours who had said that a “scammer” used to live at the property, but the Judge held that this fact alone would not have alerted a reasonable person to the bigger threats facing the property.

This was not a case of superstition – like claims of a haunting or the house having a dark history – that would impede Gilgeous-Alexander’s enjoyment of the property. The treats were real and serious.

Waking up from the Nightmare

While this case presented a unique set of circumstances that most people will likely never encounter, the case does provide a helpful reminder of how an Agreement of Purchase and Sale can be set aside for a home that becomes a nightmare.

At Mills & Mills LLP, our litigation lawyers serve clients who wish to set aside Agreements of Purchase and sale due to fraud or latent defects. If you require assistance with your specific matter, please contact a lawyer in our litigation group.

At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business lawreal estate lawestate lawemployment law, health law, and tax law. For over 130 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125. The material provided through the Mills & Mills LLP website is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.

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