BUYING a PROPERTY in a DEREGULATED MILIEU FACTORS to CONSIDER

The deregulated construction industry in Québec

The extent to which the concept of deregulation has taken hold is quite remarkable. Recent articles in Montréal’s La Presse newspaper, sums up rather well just how far the industry has become deregulated. The first article published on June 3, 2021 “Une licence de la RBQ n’est pas gage de qualité” warned consumers that the RBQ, the licensing body for tradesmen/contractors, hardly ever gets to verify the quality of their work [by visiting job sites] once the license is issued. The second article, equally damning, appeared on September 18, 2021 “Surveiller les travaux (chantiers de construction) pour mieux protéger les Québécois” written by the president of the Order of Engineers of Québec, is about the fact that impartial supervision isn’t being done and contractors are self-policing. That doesn’t bode well for the consumers who are buying a property.

Prepurchase building inspections was one of the first construction matters that got deregulated back in 1994. The new Québec Civil Code at the time said that a prepurchase inspection could be done by the buyer [that could mean anyone] without the need of expert assistance, as long as whoever does it is prudent and diligent. That change was made in disregard/disrespect to the expert architects and engineers who were doing it prior to that date. Deregulation typically provides a lot of lower paying jobs to individuals peripherally involved with the construction industry while the experts get priced out of the market. This lack of respect for expertise has continued up to the present time – so that even scientists are currently being challenged when it comes to serious crises like fighting the coronavirus pandemic or global warming/climate change.

The real estate industry has also embraced deregulation. Real estate agents or brokers in most jurisdictions [including Québec] are able to recommend prepurchase building inspectors even though that should be an obvious conflict of interest. A clause such as “the choice of building inspector has to be agreed to by the vendor” negates the essence of consumer protection. It is still against the law in Massachusetts [including the city of Boston] and other jurisdictions where consumer protection is taken more seriously. The mandate of a prepurchase inspection is to reveal the apparent defects in a property so real estate agents who work on commission, be it for the buyer or the seller, should have nothing to do with that process.

With low interest rates the demand for housing is overwhelming and prices have become exceptionally high. Some residential properties are being sold based on a bidding process. Often, that implies there will be no prepurchase building inspection because the agents give preference to those who are willing to proceed without an inspection. Most properties are being sold without legal warranty [no recourse to latent defects] which is a detriment to the buyer. Most don’t realize that it is a right accorded to them by virtue of the Québec Civil Code.

Considering all of the above, the purchase of a property is a crapshoot at best. There are very few safeguards available to protect the consumer/the purchaser. Deregulation means it is very difficult if not impossible for them to be able to determine the quality of the product being purchased.

Here are seven recommendations to buyers

1] Affordability – Houses are expensive and in short supply. My first recommendation is to eliminate the services of a real estate agent. The commission paid to them, one representing the buyer and the other representing the vendor, costs about 6% of the home’s sale price. Sometimes there is only one broker representing both parties – buyer and seller. That is a lot of money. That cost [the commissions] is deducted from the purchase price when you’re at the notary’s office signing the deed of sale. Don’t sweat the legalities. A good notary will take care of that.

2] Negotiate directly – Real estate agents act as intermediaries between the buyer and the seller. They do the negotiations whereas most purchasers would be much better off negotiating on their own directly with the vendor. They could be much more convincing. Most vendors are reasonable people and not as greedy as some brokers and the real estate agents who work for them. Many are conscientious and worry about burdening a future buyer with a possible latent defect. I have gotten many calls from vendors asking my advice because they are loath to sell their properties in their present condition. Canadians are known to be excessively polite. Real estate agents, on the other hand, believe in preparing a property for sale which they call staging. Often that amounts to borderline misrepresentation or perhaps seduction. They have the mentality and ethics of salespeople working on commission. I’ve never noticed much of a difference between a real estate agent representing a vendor and one representing a buyer. I’ve have had the experience of doing prepurchase building inspections for some very powerful individuals including prime ministers and business magnates. The one thing they had in common was they were good negotiators. They always insisted on negotiating directly with the vendor. They would threaten to “walk” if they could not do so. The average buyer believes that the real estate agent is acting in their best interests. They are excessively polite to them and to the vendor in good Canadian fashion. They don’t realize they have been manipulated.

3] Choose the best expert to do the building inspection – It should be an architect or an engineer who has been in professional practice doing renovations or new construction of the type of building being considered for purchase. Real estate agents will be recommending “certified inspectors”. That title is meaningless, made up by the real estate industry. The inspector should be a member of a government recognized Professional Order. These “Orders” exist to protect the public, which requires professional insurance for errors and omissions and a code of ethics for its members. It is simple for architects and engineers– tell the truth, protect the public. Not all architects and engineers are capable of doing prepurchase building inspections because it is considered to be a very libelous activity and insurance premiums are especially high as a result. Many of my prepurchase inspection clients are in fact architects and engineers or referrals from them, because they are loath to do a building inspection themselves. Real estate agents who recommend inspectors inevitably promote incompetence because they tend to choose compliant individuals who never find serious enough defects which could impede a sale. A serious buyer has to be prepared to “walk” if the real estate agent does not allow them to choose the building inspector.

4] Choose an experienced and reputable notary – They can help with the legalities and financing of the purchase. Many are very conscientious in their work. They should be involved in the preparation of the offer to purchase. They appreciate the importance of obtaining an up-to-date certificate of location. With the current laissez-faire attitude, most real estate agents delay the production of an up-to-date certificate [which is a requirement of an offer to purchase] to the very end, when the purchaser goes to the notary’s office for the signing of the deed of sale. A good prepurchase building inspection should include a close examination of the up-to-date certificate while at the site, because notaries do not leave their office during the signing. Presenting them with an up-to-date certificate only at that time of signing, prevents them from advising the purchaser of possible consequential matters on a timely basis, before the signing takes place. Similarly, the offer to purchase should be verified by the notary as well as the building inspector before the inspection is done. Preparation should also involve reading all documents including the seller’s declaration before visiting the property. The declaration is often filled out by the real estate agent when the vendor is out of town or is unavailable. It is often not filled out too accurately and can be misleading. Most offer to purchase forms will have a clause [typically right after the one entitled “inspection by a person chosen by the buyer”] which is titled “review of documents by the buyer”. It is remarkable how both of those clauses get to be manipulated by real estate agents. By recommending an inspector, the first clause is, practically speaking, nullified. As for the second one, it  is frequently left blank or a bare minimum number of documents are listed. What happens instead, at the day of the inspection, the real estate agent will turn up with a hodgepodge of receipts from various tradesmen spanning a number of years — on their cell phone. It is reminiscent of a stack of receipts handed to accountants by procrastinating clients just before the yearly tax deadline. A proper prepurchase inspection should include a lot of preparation time, studying all of the available documents, before making the visit to the property.

5] Do not buy a property without legal warranty – It should be illegal to sell a property in that manner unless an estate sale is involved [not so if the inheritors have gone ahead and renovated the property before the sale is to take place] or when it is known that the vendor will be leaving town. It is a total waste of time to pursue a vendor for latent defects who has moved to an out-of-town jurisdiction. It is too expensive, the delays are too long, and the outcome is a gamble because judges are known to be unpredictable.

6] Do not buy a property in or near a flood zone – The flooding will only get worse in the near future because of global warming/climate change. The evidence is already there, the science is clear. If you are presently living in a flood zone, write off the basement if there is one. Don’t try to repair it next time you get flooded even if the insurance offers to pay for the repairs.

7] Do not buy a property which has large trees close to the foundation, located in a clay soil – One third of the island of Montréal has clay soil with large trees around. As a rule of thumb, the height of the tree equals the diameter of the roots. It includes all of Hampstead, lower Westmount, parts of NDG, a good portion of the following municipalities – Mont Royal, Cote St. Luc, Montreal West, Lakeshore municipalities from Dorval to Senneville, Pierrefonds, Ahuntsic, and Pointe aux Trembles. With global warming and climate change, those trees are a hazard because they can fall over, or a heavy branch can break off during intense windswept storms, and those are on the increase. It is especially dangerous when there are high tension wires passing through or close to the tree branches. Homeowners can get electrocuted if they inadvertently come in contact with such fallen wires. Municipalities should be bearing those wires underground which a lesson that should have been learned from the ice storm of 1998. Large trees such as Carolina poplars, silver maple and weeping willows grow very quickly, require a lot of water and that can destabilize the clay soil in which the foundations of the house are “floating”. Clay, by definition, is a fine particle solution which loses its bearing capacity when the soil becomes too dry or too wet. The soil will shrink in summer when there is a heat wave and the roots of the tree draws out the moisture in the ground. In spring and fall, when the soil is too wet because of excessive rain or melting snow, the soil loses its bearing capacity. In winter, wet clay soil freezes, frost heave will occur. Clay soil also transmits vibrations so that if a bus or heavy truck passes on the street in front of the house, it can cause cracks to occur in the foundations or the walls above. The only way to prevent cracks from occurring is to install piles supporting the foundations down to bedrock. One solution used to be the cutting of trees close to the foundation and to better manage surface and subsurface drainage. But that solution is no longer viable since everyone now embraces trees because they are a natural carbon sink. It used to be that municipalities only had jurisdiction over trees on their property. There are now regulations regarding the preservation of trees including those on private property.

#construction industry #deregulation #consumer protection #building inspection #real estate industry #architects #engineers #notaries #clay soil #hazardous trees