SALE OF AN IMMOVABLE: APPLICATION OF EXCLUSION OF LIABILITY CLAUSES IN THE CONTEXT OF VIOLATIONS OF PUBLIC LAW RESTRICTIONS
Some elements may be essential conditions for a purchaser when buying an immovable, whether with respect to the development of a portion of a building in rental housing or the occupation of a portion of a residential building for commercial purposes.
However, municipalities have the power to restrict some of these uses through their regulations, including zoning and construction, which are public law restrictions.
Article 1725 of the Civil Code of Québec provides that the seller of an immovable provides the buyer with a warranty against any violation of public law restrictions affecting the property, which are exceptions to the ordinary law of ownership.
In order to eliminate their liability under this article, it is common for sellers of an immovable property to include a specific clause in the deed of sale to the effect that the purchasers declare having verified with the relevant authorities that the intended use of the immovable complies with the laws and regulations in force.
Plagued with warranty claims brought by purchasers against their sellers, the courts have frequently ruled on the application of this type of clause, particularly since the parties may, in their contracts, add to the obligations of legal warranty, diminish its effects or exclude it altogether.
In this context, the courts have held that exclusion of liability clauses in relation to violation of public law restrictions were valid, but only to the extent that the seller had acted in good faith and was unaware of the violation of a public law restriction. Moreover, the courts developed and applied a presumption that a purchaser has the right to presume that the immovable, as constructed and as occupied at the time it is acquired, complies with all applicable regulations.
However, in 2014 in the case of Vezina v. Lamoureux [1], the Court of Appeal decided to dismiss the exclusion of liability clause without necessarily ruling on the good or bad faith of the seller and instead preferred to apply the presumption mentioned above.
While some judgments followed the framework established by the Court of Appeal in 2014, which did not take into account the notion of good or bad faith of the seller, others preferred to depart from it by continuing to analyze the seller’s conduct (i.e. whether he had been guilty of fraud, reluctant to elaborate or lied). Under this latter case law [2], when a purchaser undertakes to verify with the relevant authorities that the intended use of the immovable complies with the laws and regulations in force, he is deemed to renounce to the guarantee against his seller, depending on the good or bad faith of the latter.
There appears to be some jurisprudential controversy as to the application of the notion of bad faith in the courts’ analysis of the exclusion of liability clauses in the context of violations of public law restrictions. That being said, these clauses must be carefully analyzed in light of their wording and the circumstances of each case. Parties involved in a real estate transaction should therefore pay particular attention to these clauses so that their interests are sufficiently protected and to ensure that their true intention is reflected.
By Mathieu Tremblay
[1] Vézina v. Lamoureux, 2014 QCCA 1462.
[2] Tougas v. Malo, 2018 QCCS 4952; Bélanger v. Girard, 2017 QCCQ 8762; Roy v. Belzile, 2008 QCCS 80.