CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Patrick Morin, Stikeman Elliott LLP
• has not received notices of legal non-compli - ance, environmental contamination or expro - priation. There has been no developed practice in respect of specific representations and warranties relat - ing to the COVID-19 pandemic. In common-law jurisdictions, no general duty of disclosure is imposed on a seller, and the prin - ciple of caveat emptor (“buyer beware”) applies to the purchaser. However, certain exceptions oblige the seller to disclose matters such as known environmental contamination or defects that render the property dangerous or uninhabit - able. In Quebec, warranties as to ownership and the absence of latent defects apply, unless excluded or limited under the deed of sale. A professional seller may not exclude or limit these warranties in respect of undisclosed defects of which it is aware or should be aware. A non-professional seller, however, may exclude or limit these war - ranties based on the Quebec caveat emptor equivalent. However, all sellers are bound to act in good faith under Quebec civil law, and failure to disclose a known defect would likely amount to fraud. Across Canada, caveat emptor does not apply to fraud. A seller is liable for latent defects where the failure to disclose them amounts to fraudu - lent misrepresentation. In common-law jurisdic - tions, a seller may be liable to a buyer for inno- cent, negligent or fraudulent misrepresentation for which the remedies include rescission (the setting-aside of the contract) and/or damages, depending on the circumstances. Depending on the parties’ intent expressed in their contract, a seller’s representations and war -
ranties may either expire or survive completion for agreed periods. Survival periods tend to be limited as the market or the relevant risks permit. Liability caps are not commonly used unless the specified risks are known, but are sometimes found in larger transactions with institutional par - ties (often subject to certain exceptions for such cap). A purchaser’s remedies for a breach of representation and warranty will be determined by what is in the contract, and may include an unsatisfied condition to closing or the ability to pursue a claim for such breach. Typically, the buyer has no security for the enforcement of remedies. The buyer may con - sider obtaining security in the form of a letter of credit, hold-back, or set-off under a vendor take-back mortgage, or obtaining a guarantee or indemnity from a related vendor party. Rep - resentation and warranty insurance has become increasingly common in Canada. 2.6 Important Areas of Law for Investors An investor will seek comfort that the value of the property and its revenue stream is retained over time. An investor will conduct investiga - tions to determine whether any registered or unregistered agreements affect the land, and whether the land is free from undisclosed liabili - ties impacting use and value. Applicable zoning/ land-use legislation should be reviewed to deter - mine the current and intended uses of the land. Transfer-tax considerations are increasingly impacting real estate transactions in most juris - dictions in Canada – see 2.10 Taxes Applicable to a Transaction . 2.7 Soil Pollution or Environmental Contamination Environmental contamination and remediation of real property is governed by both federal
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