 |
| Harjot Atwal |
To disclose or not to disclose, that is the question? Still not really.
As per my last piece, patent defects are readily observable, whereas latent defects are not. A good example in the context of septic systems is here, where the buyers noticed a strange smell and seepage coming from the septic field of their new home, whenever they used toilets, washers and bathtubs. While the type of smell described in that article is certainly noticeable, it is not visually observable.
As it is not visible as required to be a patent defect, the B.C. judge ruled it was a latent defect that should have been disclosed and ordered $15,000 for misrepresentation for not including mention of this in what is likely akin to the Seller Property Information Statement (SPIS) in Ontario. On the other hand, patent defects need not be disclosed.
This is the fourth in a series of articles about various ways in which my knowledge of residential real estate has been enriched by my pursuit of a realtor license with the Real Estate Council of Ontario (RECO). The series addresses shared wells and rural real estate, condominiums and Kitec plumbing, asbestos and urea formaldehyde foam insulation (UFFI), disclosure of septic systems, and lot sizes and damages. A further series will be written when I complete the commercial real estate part of the RECO course currently offered by Humber College.
When properties are not connected to municipal sewer systems — whether they are combined (storm and sanitary sewers combined into one in older neighbourhoods) or separate (in more modern areas, sanitary sewers carry waste, whereas storm sewers carry rain and snow melt) — private onsite sewage systems are used. There are five types. Class four is a septic tank and leaching bed system.
Generally speaking, the tank breaks down solid waste and the leaching bed distributes it into the soil. More specifically, the steps in the mechanism are as follows:
1) Via an underground pipe, household wastewater leaves the home and enters a buried septic tank;
2) Solid waste is broken down into a liquid within the septic tank. Heavier solids sink as sludge down to the bottom, whereas lighter materials — usually oil and grease — float to the top as scum. Both are removed when the tank is pumped, usually recommended to be done every three to five years;
3) The liquid waste moves into the leaching bed via a pipe, and the baffles and screens act as a sieve preventing the scum waste from entering it; and,
4) The effluent is dispersed via a series of buried perforated pipes in the leaching bed; it then seeps into the ground where it is broken down even further by bacteria and other organisms.
2) Solid waste is broken down into a liquid within the septic tank. Heavier solids sink as sludge down to the bottom, whereas lighter materials — usually oil and grease — float to the top as scum. Both are removed when the tank is pumped, usually recommended to be done every three to five years;
3) The liquid waste moves into the leaching bed via a pipe, and the baffles and screens act as a sieve preventing the scum waste from entering it; and,
4) The effluent is dispersed via a series of buried perforated pipes in the leaching bed; it then seeps into the ground where it is broken down even further by bacteria and other organisms.
To further complicate matters, deciding which type of leaching bed is used can involve special considerations, since some soils are more suitable for leaching than others. Percolation tests can determine the water absorption rate of a particular kind of soil to see if it is appropriate for a leaching bed. The RECO materials describe three kinds, namely: conventional (where stone-filled dug trenches can be installed below ground level on well-drained land), raised absorption bed (where special sand and soil filtering materials are used to create a raised bed above ground), and a filter bed (where special filtering sand that enables close placement of pipes together is utilized due to limited space).
In a similar fashion to my last article, I decided to use the fact pattern illustrated by Bob Aaron’s article here. He writes of a situation where sellers felt as though they needed to “shut up and get out,” as it pertained to the disclosure of septic systems while unloading their properties. It appears they felt that full disclosure of issues with their septic systems would very significantly discourage sales of their properties, such that the status quo became to rely on the law of caveat emptor or “buyer beware.”
Apparently, in 2004 (and perhaps this has changed somewhat in the last 20 years or so), it was not possible to construct septic systems that met the requisite standards set by the Ontario Building Code very easily in the city mentioned in the article. One family — the Bells — constructed such a septic system that did not meet standards but was apparently functioning very well. The question thus became: do we still need to disclose?
On the one hand, as Aaron describes, a prudent buyer and co-operating broker should insert conditions regarding getting the septic system tested by an appropriate third-party professional. Warranties as to whether the septic system is in good working order should also be included. Of course, negotiating power between buyers and sellers is not always equal. For instance, in a seller’s market where demand exceeds supply, offers are usually made with less conditions to make them appear more attractive to the existing selling homeowner.
On the other hand, and in consideration of the fact that much if not almost all of the septic system is below ground, we have to consider them to be latent defects if not functioning correctly in the same manner as described in the above $15,000 misrepresentation case. Section 5 of the Code of Ethics of the Real Estate and Business Brokers Act, 2002 (now renamed the Trust in Real Estate Services Act, 2002) details a realtor’s obligation to not “be a party to misrepresentation or any unethical practice,” which would include disclosing any latent defects a realtor may become aware of (regardless of any seller client instruction to the contrary).
So, to summarize, buyers should err on the side of conditions, warranties and inspections, whereas sellers should err on the side of disclosure. Speaking of erring, I like the following closing thought by Marcus Tullius Cicero: “Any [person] is liable to err, only a fool persists in error.”
This is the fourth part of a five-part series. Part one: Lessons from RECO: Shared wells and rural real estate; part two: Lessons from RECO: Condos and Kitec plumbing; part three: Lessons from RECO: Asbestos and UFFI.
Harjot Atwal is a real estate lawyer. In 2023, he opened up his own shop, Atwal Law Firm. For legal matters, you can reach him via email at harjot@atwallawfirm.ca. He is also a mortgage agent (level 1) with Pineapple Financial Inc. (FSRA #12830) and currently pursuing his realtor licence with RECO. His phone number is 647-967-6548, and you can also reach him on LinkedIn.
The opinions expressed are those of the author and do not reflect the views of the author’s firm, its clients, Law360 Canada, LexisNexis Canada or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
Interested in writing for us? To learn more about how you can add your voice to Law360 Canada contact Analysis Editor Peter Carter at peter.carter@lexisnexis.ca or call 647-776-6740.