Its right in one way but not the other. When you start doing flips you become a professional seller (All people or companies that takes regular profit from the purchase/sale) and the sold as is will not cover you from hidden defects. This is what was explained to me and I have the section of the civil code if anyone interested. I am not a professional just yet, but if I start doing this regularly, I will be one.
You also pay 19-20% tax in a corp versus 40-50% depending on your tax bracket if you hold it personally.
Originally Posted by plaza
Here's a B.C. example:
SALE OF LAND — Misrepresentation — Evidence showing defendant house vendors were aware of significant damage caused by water ingress into the home but failed to disclose their knowledge of latent defects in Disclosure Statements — Court awarding plaintiff purchaser repair costs of $140,005.
Thanks Mukhang! So had the house been in a corp, would the defendants been able to walk away if the company was closed or held no assets?
Originally Posted by Mukhang pera
You cannot compare a BC case to QC because QC has the Civil Code which they abide to. In the above scenario, if the plaintiff can prove the seller was aware of a defect, then nothing can protect you - its considered fraud.
A hidden defect in QC is defined as being a defect which was present at the time the seller was the owner of the property. Regardless if the defect was known by the seller or not, the Civil Code will protect the buyer. For the buyer to win his case, he needs to prove when the defect existed and be able to pin it on the seller. If the defect dates back to the previous owners, then each party will need to sue their counter-part. Its not an easy process and not many cases are won by the plaintiffs.
Enter "Sale with Legal Warranty". The legal warranty is what protects the buyer from hidden defects. Bank repos, successions are automatically sold Without legal warranty making them exempt from such lawsuits.
Selling yourself without legal warranty protects you as well - but not if the defect was intentionally hidden. One can ask, "why doesn't everyone sell without legal warranty then?" Well, it makes the property less attractive and will have to be offered at a big discount. Rentals are often accepted to be sold without legal warranty - but not owner-occupied properties.
That raises a neat question, plaza. It really yields of no clear answer. As Mortgage u/w points out, Quebec law differs, so I cannot address that aspect at all. Here in B.C. the answer would depend, at least in part, on how the representation or lack of disclosure came about. It might also depend on the actual involvement of corporate principals, and whether it was more in the hands of company employees or agents. A number of variables might come into play. Maybe best to take JAG's advice and sue everyone, including Donald Trump and HMTQ.
Originally Posted by plaza
As I have mentioned, it is a general legal principle that a person who commits a "tort" will be liable for it, notwithstanding the interposition of a company. A failure to disclose a defect in a house being sold can, depending on facts, be seen as a fraudulent or negligent misrepresentation. Torts are divided into 2 categories: intentional torts (eg. assault and battery, false imprisonment, trespass to land or chattels, intentional interference with economic relations, etc.) and negligence. Fraudulent misrepresentation would be in the former category, negligent misrepresentation in the latter. The case law suggests that liability for negligent misrepresentation may be limited by contract, but not so in the case of fraud.
I spent a bit of time looking for a case of fraudulent misrepresentation brought against a company and its principals, but did not find one in the short time available (I have to do some paid work today). What I did find were some misrepresentation cases where only the company was sued. See, for eg.:
SALE OF LAND — Misrepresentation — Defendant purchasing 60-acre commercial development property from plaintiff — Alleging the property was worth much less than the agreed price due to several material misrepresentations, defendant refusing to pay final $2 million of purchase price and counterclaiming for damages — Trial judge finding no misrepresentation and awarding plaintiff judgment for $2 million — Court of Appeal finding plaintiff warranted the accuracy of information not known to it, and evidence showing 1/3 of the property could not be developed due to topographical problems and there was strong public opposition to a component of the proposed development — Court finding both were material facts the vendor was required to disclose — Court setting aside trial judgment and remitting matter to trial court for assessment of damages.
The Supreme Court of Canada refused leave to appeal the above Court of Appeal decision.
Here's another case of corporate liability for misrepresentation, with only the company sued:
SALE OF LAND — Misrepresentation — • NEGLIGENCE — Negligent misrepresentation • CONTRACTS — Rectification — Plaintiffs purchasing residential lot and house under construction in defendants’ subdivision — Plaintiffs confirming with defendants at time of purchase and thereafter that a retaining wall at the rear of the property represented the rear boundary — Defendants later discovering wall built in wrong location, giving plaintiffs about 1,000 square feet more land than that included in their contract for a 6,000 square-foot lot — Defendants moving the wall much closer to plaintiffs’ house — Court finding plaintiffs not entitled to remedy based on rectification or estoppel — General entire agreement clause not precluding action for negligent misrepresentation by defendants — Plaintiffs entitled to damages totaling $75,255.
A fraud case:
SALE OF LAND — Misrepresentation — • FRAUDULENT TRANSACTIONS — Fraudulent misrepresentation • TORTS — Deceit — Plaintiffs purchasing 38-acre blueberry farm, in 2 parcels, from defendants in 2008 — At trial plaintiffs proving defendants represented that entirety of the 33-acre parcel was planted with “Duke” variety berries, whereas plaintiffs later discovering about 2 acres of a different inferior variety mixed in with the Duke plants, rendering mechanical picking of the whole impossible and posing other difficulties — Plaintiffs replacing the inferior plants and suing for damages — Court finding defendants fraudulently misrepresented the planting — Defendants liable in both contract and tort for agreed damages of $132,000.
The doctrine of caveat emptor remains of full force and vigour in B.C.:
SALE OF LAND — Misrepresentation — Purchase price of commercial strata unit including a steel mezzanine structure erected inside the unit, creating additional floor space — Plaintiff purchaser learning after closing that the mezzanine had been installed without permits and without compliance with building code — Plaintiff spending $32,286 on corrective measures and suing for damages — Court finding no fraudulent or negligent misrepresentation and finding the matter a patent defect reasonably discoverable by a reasonable purchaser — Doctrine of caveat emptor applying — Action dismissed.
I'll throw this last case in a just a bit of something different:
SALE OF LAND — Misrepresentation — • TORTS — Fraudulent misrepresentation — Defendants dressing up old army barracks to look like a contemporary 3-bedroom rancher and falsely representing compliance with Building Code — Defendants liable to purchasers in damages in contract and tort. • SALE OF LAND — Real estate agents — Duties and liability — Listing real estate agent failing in duty to check client's representation regarding Building Code compliance of renovated old building and becoming party to client's misrepresentation. • SALE OF LAND — Remedies — Plaintiffs paying $80,000 for house represented as complying with Building Code — Representation turning out to be false — Court deducting residual land value of $18,500 from estimated repair costs of $88,214 in assessing damages at $70,262.
Last edited by Mukhang pera; 2017-03-17 at 04:56 PM.
Muska must be a lawyer, he definitely likes to look for little things and blow them up.
I never claimed to have kicked his butt, I just said you admitted it was possible.
I also just used the word lawyer generically to represent a law firm...I agree a lawyer would never go down to registries themselves...their egos would never fit through the doors (it's a joke muska).
As for your statements about what I said, they could equally be torn apart if we wanted to go back there (which I don't).
In the end, we both (seem to) agree that the corporate wall won't always protect you from a lawsuit. Whether or not they'll win and you'll lose remains in the hands of the courts, but that doesn't stop some lawyers from trying.
Originally Posted by Just a Guy
Yes, on that we can agree. There are no absolutes. And yes, some lawyers will try. Nothing wrong with that either, provided one can muster some law to support one's position. No lawyer should assert a near-hopeless cause of action and expose their client to the attendant costs, at least not unless one is dealing with a sophisticated client to whom one can explain the risks. A duly-informed client cannot be heard to complain if made aware early on that their counsel was drawing a rather long bow.