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Mass fraud, arson threats, murder, organized crime, kidnapping: What are the limits of 'buyer beware'?

In an episode of The Simpsons in the late '90s, Marge Simpson takes a job as a real estate agent to make some extra cash. She made her first sale by selling a big, reasonably priced home to the Flanders family.  

In her haste to close the deal and despite her better judgment, she failed to disclose one small detail: a number of high-profile homicides happened at the property and it was dubbed the “murder house” as a result.  

We did not learn much about the killings other than they were known as the “Jealous Jockey Murders.” One intended victim survived by hiding in the butler’s pantry and there was some sort of “torso heap” in the living room.

Eventually, Marge’s conscience got the better of her and she disclosed the information after the Flanders had moved into the home. She offered to unwind the deal, but the Flanders were surprisingly okay with it and were happy to be “a part of Springfield history.”

That story may sound far-fetched, but what if something like that happened in real life? What would be the repercussions for the buyers, sellers and agents?  

Well, scenarios like that have actually played out in the real world and the results have been mixed.

Murder outside Vancouver home

For instance, in the 2019 decision Wang v. Shao, a woman named Mei Zhen Wang (the “Seller”) lived in a luxurious Vancouver home with her daughter, Gui Ying Yuan, with Yuan’s husband and their children.

In November 2007, Yuan's husband was murdered outside the home. Investigations confirmed his connections to organized crime and deemed the murder a targeted hit. The crime, however, remained unsolved, casting a shadow over the property's history.

Following the shooting, Yuan's daughter needed to transfer schools due to safety concerns, prompting Yuan to buy a new house closer to the school. The Seller then listed the original house for sale.

Two years later, Feng Yun Shao (the “Buyer”) expressed interest in purchasing the home. When inquiring about the reason for sale, the Buyer was informed by the selling agent the sale was due to Yuan's daughter changing schools. There was no mention of the shooting incident.

The Buyer and Seller then finalized a purchase agreement for $6,138,000, with the Buyer paying a $300,000 deposit.

However, weeks before the closing date, the Buyer found out about the shooting from a friend and confirmed it with the Seller’s agent. The buyer then refused to complete the transaction, alleging she was misled by the omission. The property was then sold to another buyer for a reduced price.

The Seller then sued the Buyer for breach of contract, seeking damages and the deposit.

The Buyer counterclaimed for the return of the deposit and accused the selling agents and brokerage of misrepresenting the reason for the sale. The Buyer claimed the Seller fraudulently misrepresented the property by not disclosing the murder. 

At trial, the Seller testified the reason for selling the home was because it was not occupied, initially denying the murder influenced her decision to sell. But, she later admitted to having safety concerns and a desire to relocate her family as a result.

The decision, and the appeal

The judge determined the murder influenced the Seller's decision to sell and the Seller's response to the Buyer's inquiries was designed to hide this fact, constituting a misrepresentation by omission. The contract was invalidated, and the buyer was given the deposit back.

The trial decision was reversed on appeal on the basis the Seller's omission did not constitute a misrepresentation.

The court emphasized sellers are not obliged to reveal every personal reason for selling, especially when irrelevant to the property's intrinsic value or function. Requiring such disclosures, the court noted, could lead to numerous unfounded claims by dissatisfied buyers alleging concealed information or misrepresentation by omission

In that case, the Seller's response was deemed to be “an honest answer as far as it went” without needing further details unless specifically asked about the school change or the murder. The court noted no obligation for the Seller to disclose concerns irrelevant to the property's quality.

Consequently, the trial judge's decision was overturned, and the Buyer was found liable for not completing the transaction.

Therefore, despite the grisly circumstances, “buyer beware” won the day in the end.

The "Crypto King's" former home

Now fast-forward a few years to the even more bizarre case of 1000425140 Ontario Inc. v. 1000176653 Ontario Inc., which had a much different result.  

Earlier this year, Canadian NBA star Shai Gilgeous-Alexander and his partner Hailey Summers were looking to buy an Ontario home to settle down and start a family. Given the couple’s celebrity status, they were looking for a home that was both private and safe.  

Their real estate agent located a property in Burlington, Ont., which was listed for over $8 million. The property was marketed as being “private” and the seller’s agent guaranteed that it was “secure.”

The couple closed on the property for $8.45 million and moved in last May. Just a few days after moving in, they received an unwelcome visit from a stranger who demanded to know where someone named Pleterski was.  

The new owners did not know this person and sent the stranger away. The stranger refused to leave until being told numerous times.

Summers then did some Googling and learned their new home was formerly inhabited by Aiden Pleterski, the self-proclaimed “Crypto King” and alleged fraudster. Pleterski was alleged of masterminding a scheme that defrauded people out of up to $40 million, and has been involved in highly acrimonious bankruptcy proceedings.  

Summers called the police to report the incident and was informed they had received many reports of people trying to break into the home. After doing some more digging, she learned that Pleterski was alleged of defrauding some “very bad people”, many of whom wanted their pound of flesh. One of them had even threatened to burn the house down.

But it got worse.  

The home was sold to the young couple through a numbered company whose principal, Ray Gupta, agreed to sell it to Pleterski on a rent-to-own basis in March 2021.

Fears for tenant's safety

A year later, after the allegations became known, people were showing up at the property on, literally, a daily basis. Fearing for his safety, Gupta moved Pleterski into another home where he could live rent-free.

One of Gupta’s employees then moved into the Burlington home to keep an eye on it. During that time, the employee was being harassed by people coming up to the house every single day. He needed to hire security and his wife refused to stay at the property due to safety concerns.

In December 2022, Pleterski was kidnapped, held for ransom and beaten. The kidnappers let him go eventually and dropped him off in the vicinity of Gupta’s home.

After that happened, Gupta had concerns with his family’s safety and cut all ties with Pleterski. Then in March 2023, during Pleterski’s bankruptcy proceedings, it was revealed that over $1 million in allegedly defrauded funds were diverted into the Burlington property.

It turned out that Gupta was aware of this when he listed the home for sale for over $8 million and represented that it was “private and secure.”

And learning about the disturbing history of the property they had purchased, the young couple moved out of the home after a mere eight days and never returned. They then sued the seller Gupta, the agent and everyone else involved in the sale on the basis that the property was fraudulently misrepresented to them.

The judge's decision

The judge looked at the evidence regarding the connection between the seller and Pleterski, as well as their awareness of the safety hazards associated with the property.  

It was found the seller was aware of threats being made against Pleterski and the presence of uninvited guests. The seller nonetheless argued they didn’t see any connection between the circumstances Pleterski created and threats or danger to the property.

The court rejected these arguments and held that this was not a simple case of “buyer beware.” The judge determined the seller had made a fraudulent misrepresentation by deliberately concealing the truth regarding the property.

A failure to speak can be considered a fraudulent misrepresentation when silence is part of deceitful behaviour. This occurs when a party aims to mislead by not sharing pertinent information, and this omission is equivalent in deceitfulness to making a knowingly false statement.

Additionally, the judge also found there was a “latent defect” with the property the seller concealed when it was sold. A latent defect is a defect with a property that a potential buyer would not be able to uncover during a routine inspection.  

The judge cited numerous examples of latent defects in other cases, such as radioactive waste near a property or a nearby landfill that posed a health hazard. If the seller knows such defects can affect a property, it is incumbent on the seller to disclose them.

In this case, Pleterski’s actions created a real danger to the property, which was held to amount to a latent defect. The defect also created an ongoing safety risk that was real and immediate. As a result, the property was deemed unfit for habitation.  

This constituted a defect the seller should have disclosed when the property was sold. 

In the end, the buyer won the lawsuit, the purchase agreement was rescinded and the buyer was put back in the position it was in before the transaction. It was therefore awarded monetary damages in the form of the return of the deposit, as well as mortgage and insurance payments made on the property.

As this case demonstrates, “buyer beware” definitely has its limits, especially when it comes to issues of health and safety.

In conclusion . . .

These cases show that if something terrible (like a murder) happens on a property, it will not necessarily amount to a latent defect, nor does failing to disclose it constitute a misrepresentation.  

However, if there is a real and present danger as a result of prior occurrences, sellers cannot knowingly withhold that information and then try to hide behind “buyer beware.”

Given these rulings, it begs the question as to whether Marge Simpson made a fraudulent misrepresentation to the Flanders and whether the Jealous Jockey Murders constituted a latent defect to their new home. Well, it seems like this is information that should have been disclosed, but there was no evidence of an ongoing threat, so she likely would have gotten away with it in real life.  

Again, “buyer beware” is not to be taken lightly.

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