Homebuyers need more protection: report

Homebuyers in Manitoba need more protection in real estate transactions, according to a report released by the provincial government on Thursday.

The provincially ordered review looked into what buyers can do when the property they purchased is seriously defective and to what extent the seller has a responsibility to disclose defects.

The review also considered how the buyer can obtain satisfactory relief through legal means and whether that process can be improved.

Real estate lawyer John Neufeld, who wrote the 57-page report, concluded that current laws strongly favour of the seller and more needs to be done to protect the buyer.

'What I'm proposing is that the offer to purchase that's made by the buyer says that it won't be binding until the buyer has received a satisfactory property condition statement.' — Real estate lawyer John Neufeld

He recommends the province observe what is happening in Britain, where the government is implementing a process that requires sellers to provide home information packages to buyers.

"I believe we should keep a close eye on English developments to see if similar home information packages should be crafted in Manitoba and even eventually become mandatory if necessary," Neufeld wrote.

Some people in Manitoba are concerned so-called Property Conditions Statements could lead to more lawsuits. But Neufeld said in an interview that they have actually reduced litigation in the United States "and increased buyer satisfaction with property because more information is given to them before they buy it."

"What I'm proposing is that the offer to purchase that's made by the buyer says that it won't be binding until the buyer has received a satisfactory property condition statement or, in fact, the statements made by the seller in that document are incorporated into the contract," he said.

The problem is, in hot real estate markets, sellers who have more than one offer can choose to ignore the ones that request a PCS. As a result, buyers may feel pressured to make offers without asking for that document.

Decades-old problem

Neufeld noted in his report that similar steps were considered in the province more than three decades ago.

"In 1973 the Manitoba Law Reform Commission issued a working paper that said the doctrine of caveat emptor [buyer beware] should be challenged and, where reasonably possible, eradicated as it has long since ceased to be a socially acceptable doctrine of the law of a civilized country," Neufeld wrote.

"The Manitoba paper said it was a matter of high priority in 1973 and yet nothing significant has been done about in Manitoba. I would recommend that the Manitoba Law Reform Commission look at the issue again."

The proposed document would encourage sellers to also be duly diligent before exposing property for sale, Neufeld suggested.

He admits there would be some cost associated with requiring sellers to disclose known defects to buyers, but "it is much more expensive to require buyers on their own, without the benefit of having occupied the premises for some time, to discover such defects on their own."

The review stems from a home that was damaged in the 1997 flood. It was eventually resold but there were significant problems, Finance Minister Rosann Wowchuk said, adding: "The government has since decided to no longer sell flood-damaged homes."

Public input sought

Wowchuk said the province will study Neufeld's review and determine what steps it should take.

"We are taking a serious look at the review and we have asked the Manitoba Securities Commission to consult with a broad base of stakeholders on its recommendations by summer 2010 and report back on how to improve current practices for homebuyers," she said.

Manitobans who would like to provide input should contact the MSC. All comments received on or before Jan. 29 will be considered.

Comments will become part of the public record of the MSC and will be published on the commission's website.

Neufeld's full report is available on the MSC website by clicking the link at the top right of this page.