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Consequences of Seller's "Representations"

In the recent Court case of Beatty v. Wei, 2017 ONSC 3478, the Buyer and the Seller had entered into an Agreement of Purchase and Sale in May, 2016. The Sellers had owned the Property since 2009. In the APS the Sellers Represented and Warranted that to the best of the Seller’s knowledge and belief, the use of the property and the buildings and structures thereon had never been for the growth or manufacture of illegal substances. Before Closing, the Buyer discovered, as verified by Police Reports, that the property had in fact been used as a marijuana grow-op in 2004.The Buyer took the position that there had been a material misrepresentation and claimed a right to terminate the Agreement and demanded return of their $30,000.00 deposit. The Sellers did not know about the prior illegal use of the Property. The Sellers therefore refused the return of the Deposit and took the position that there had been no misrepresentation on their part. The Sellers eventually re-sold the Property for $87,000.00 less than the Price they had with the Buyers. The Sellers then sued the original Buyers for release of the Deposit plus the additional loss on the sale of the property on the basis that the Buyers had no right to refuse to close. The Buyers counter-sued for the return of their Deposit on the basis that they had a right to treat the Agreement as being void and had no obligation to Close. The Court held that the Buyers had relied on the material representation made in the APS and that when this representation turned out to be untrue the Buyer’s had a right to treat the APS as being void even if the Seller’s had no knowledge of the prior illegal use of the Property. The fact that the Representation was untrue and that it was material to the Buyer was enough to render the APS void ab initio and the Buyer was therefore entitled to the return of their Deposit and to pursue the Sellers for any other Costs and Damages they had suffered as a result of the Seller’s actions.

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