Case Law: A Lesson in Disclosure and Defects

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I assume many of you have heard about this over the last month or so...

Recently, there was an Ontario Superior Court case involving an NBA Star and the purchase of a home in Burlington, Ontario.

It's interesting enough that I thought I would break it down.

The Facts:

NBA Star, Shai Gilgeous-Alexander and his partner, purchased a luxury home on the Burlington waterfront in May 2023.

A few days after moving in, an unknown person came to the front door angrily demanding to see Aiden Pleterski - the self titled "Crypto King".

On further investigation, the couple came to realize that the previous tenant of the home, the "Crypto King", had defrauded some "very bad people" out of more than $25 million. They became concerned for their safety and moved out of the house.

The Sellers on the other hand, were aware of this issue. In June 2022, they became aware that “randoms” were showing up at the Burlington property “every day" with threats and demands for the Crypto King.

They were also aware that he was kidnapped in December 2022 and held for ransom. They were so concerned for his safety, that they moved him into another property owned by the them.

When the Sellers listed the property for sale in 2023, they marketed the property as "private and secure".

The Decision:

The judge ruled in favour of Gilgeous-Alexander and his partner, finding that the Seller made fraudulent misrepresentations and failed to disclose a latent defect.

The Law:

Real estate transactions are subject to Caveat Emptor or buyer beware. Meaning that, as a purchaser, its your job to protect yourself through contract, inspection, and due diligence.

The exception to this rule: fraudulent misrepresentation and latent defect. And in this case, the Sellers were found guilty of both counts.

To prove fraudulent misrepresentation, a plaintiff needs to prove that:

• the defendant made a false representation of fact;
• the defendant knew the statement was false or was reckless as to its truth;
• the defendant made the representation with the intention that it would be acted upon by the plaintiff;
• the plaintiff relied upon the statement; and
• the plaintiff suffered damages as a result.

To prove Latent Defect, the plaintiff needs to prove:

• that the defect was latent;
• that the defendant knew of the latent defect;
• that the latent defect renders the property unfit for habitation or dangerous in itself; and
• that the defendant did not disclose it.

The judge ultimately concluded that because the Sellers had marketed the property as "private and secure" and had failed to disclose the safety risks of the property -`they were guilty of both exceptions.

My Thoughts:

My first question was: how exactly did the REALTOR® market the property as private and secure?

The Judge first references the MLS Listing, pointing out that the first words were "Private Waterfront Estate Property".

Then relies on evidence regarding the communication between the real estate agents. The buyer's agent claimed they they explained to the seller's agent that privacy and security were priorities. They also alleged that the seller's agent assured them the property would meet their requirements but did not disclose the ongoing incidents.

Now, keep in mind, this whole case can be described as a perfect storm. The plaintiff was able to prove a lot of their case because most evidence was uncontested by the Seller.

It's also worth noting that there is no redirection of liability to the REALTOR® from the Sellers. If you look into other cases of fraudulent misrepresentation and latent defects, this is not the norm.

But essentially, we learned that the law of fraudulent misrepresentation and latent defect is alive and well in Ontario.

To read the full case: click here.