Real Estate Talk:
How to acquire warranty

Obtaining warranty when the property is sold without one

By Joseph Marovitch

August 10, 2023

A property is rarely sold without warranty since this causes concern for buyers. A property is normally sold with warranty. This means the seller is warranting the property against hidden defects that cannot be detected in a normal house inspection.

Qualified home inspectors report only what they can see or detect with a thermal imaging device. Home inspectors do not open the walls or tear up the floors. Therefore, what cannot be seen, such as cracks in the foundation, interior walls, fireplace, plumbing, or electrical issues, are covered by the warranty, which means the previous owner would be liable and must repair or pay for the damage.

In some cases, it is better to sell without warranty so the buyer cannot hold the present seller accountable for hidden defects.

A property is normally sold with warranty. This means the seller is warranting the property against hidden defects that cannot be detected in a normal house inspection.

Selling without warranty is good for the following reasons:

1. The house was inherited, and the beneficiary knows nothing about the condition.
2. The seller is advanced in years, entering a retirement home, and does not need the headache.
3. The seller is moving far away, such as overseas, and does not want to deal with the issue.
4. The buyer is a contractor who intends to fully renovate the property.
5. Other reasons

For a home to be sold without warranty, a clause must be placed in the listing, the brokerage documents, the promise to purchase, and the deed of sale. They must state the following: “This property is sold without legal warranty as to quality and at the buyer’s risk and peril.”

By selling without warranty, the seller breaks the chain of prior owners who sold with warranty unless a clause is placed in the promise to purchase.

How to acquire warranty when the property is sold without warranty

In a recent amendment by the OACIQ (Organisme d’autoréglementation du courtage immobilier du Quebec), the government body regulating the actions of real estate brokers, a new rule is in effect that allows the buyer to exclude the current seller from warranting the property but not any of the previous owners.

In a normal sale where the property is sold with warranty, the seller and all the previous owners that are alive also warrant the property against hidden defects. If the current seller cannot be found after the sale, the buyer can hold the prior owner responsible for hidden defects.

‘In a recent amendment by the OACIQ …  a new rule is in effect that permits the buyer to exclude the current seller from warranting the property but not any of the previous owners.’

However, if the following clause is placed in the promise to purchase, the current seller can sell without warranty but the prior owner, who sold with warranty, can be held liable: “This sale is made without legal warranty of quality, at the risk and peril of the buyer as to the actual owner, but the sale is with legal warranty as to the previous owners.”

In French: “La présente vente est faite sans garantie légale de qualité, aux risques et périls de l’acheteur quant au propriétaire actuel, mais la vente est avec garantie légale quant au propriétaires précédents.”

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Next article: The market’s moving barometer and how to manage it

State of the market

Bank of Canada rate today: 5%
Canada inflation today: 2.8%

According to the Quebec Professional Association of Real Estate Brokers (QPAREB), home sales rose in July by 1% over last year at this time. Other economists are warning not to be too enthusiastic about the market since interest rates and inflation could rise again.

However, all economic indicators show a thriving comeback economy, which would indicate future interest rate drops and increased property prices. Currently, there is no reason to raise interest rates unless Russian aggression on Ukraine escalates, causing a slowdown in the supply chain, or another serious pandemic hits the population.

‘… all economic indicators show a thriving comeback economy, which would indicate future interest rate drops and increased property prices.’

Currently, even with interest rates at 7 plus percent for a 5-year closed mortgage, buyers are still buying, and prices are still rising.

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