Buying a home is the biggest financial investment most Canadians will ever make. When we see a beautifully updated property, we naturally expect that the work was done safely and to modern standards. However, a recent decision from the Ontario Superior Court of Justice, Slatkovsky v Machado et al, serves as a cautionary tale for homeowners, sellers, and real estate agents alike. The two-week trial in Kitchener centered on a beautifully renovated century farm home in Puslinch, Ontario, that turned out to have serious unpermitted structural defects and undisclosed utility issues. The court ultimately ordered the defendants to pay a total of $150,318 to the buyers, establishing important legal precedents regarding property disclosures and the responsibilities of real estate agents.
The Story Behind the Dispute
In 2013, the plaintiffs, Karen Slatkovsky and Adrian Levytsky, fell in love with a century home listed for $799,000. The marketing materials highly praised its extensive, “to the walls” renovations, promising the buyers true “peace-of-mind”. Reassured by a pre-listing home inspection arranged by the listing agent, Gerry Lall, the plaintiffs agreed to buy the home for $800,000. Because they did not have their own realtor, they agreed to a multiple representation arrangement, allowing Mr. Lall to act as a dual agent representing both sides of the deal.
Unfortunately, the promised peace of mind quickly vanished after closing:
No Building Permits: The buyers discovered that the massive structural renovations done a decade prior were completed entirely without the required building permit, meaning the municipality had never inspected or approved the work.
Dangerous Structural Flaws: An invasive inspection by an engineer revealed serious structural violations of the Ontario Building Code related to those renovations. Notably, a vertical, load-bearing post was not plumb and at risk of failure.
Hidden Well Deficiencies: During their first winter in the house, the well froze, cutting off their water. They later found a servicing record hidden in a folder left at the house. While the sellers had provided a report showing the water was clean and flowed well, they withheld a second report from the exact same day warning that the 20-year-old pressure system was failing and needed to be replaced.
Faced with an unsafe home and a sudden, serious medical diagnosis, the buyers chose to minimize their stress. They moved out, put the house back on the market with full disclosure of the defects, and sold it at a loss for $730,000, representing a $70,000 drop from what they paid. They then took the sellers and the agent to court to recover their financial losses.
The Court’s Verdict: Sellers Cannot Simply Blame the Contractor
The sellers, Yuri and Kara Machado, defended themselves by arguing that they shouldn’t be held responsible because they had hired a professional contractor and assumed he had taken care of the necessary municipal permits. The court soundly rejected this defense. Justice Spurgeon clarified that under Ontario’s Building Code Act, the ultimate responsibility to ensure building permits are secured lies with the property owner. Homeowners cannot simply pass the buck to a contractor. Furthermore, there was no evidence that the Machados took any steps to verify that the contractor obtained permits where required or ensured that the requisite inspections had been conducted. The judge concluded that if a building permit had been properly obtained, a qualified municipal inspector would have caught and fixed the structural flaws before the home was sold. Additionally, the court found the sellers liable for negligent misrepresentation regarding the well. The judge ruled that selectively sharing the positive water test while hiding the negative report about the failing pressure system was an unfair omission that misled the buyers.
Holding the Real Estate Agent Accountable
A major focal point of the trial was the role of the real estate agent, Gerry Lall. Mr. Lall argued that he did his job by suggesting the buyers have a real estate lawyer look over the initial offer. He claimed that once the buyers and their lawyer decided to remove a standard municipal inspection condition from the final contract, he was no longer responsible for verifying the permit history. The court disagreed completely, calling out the unique dangers of dual agency. Under the Real Estate Council of Ontario (RECO) Code of Ethics, realtors must take reasonable steps to discover and share “material facts” about a property. The judge called Mr. Lall’s admission that he didn’t even know that the structural renovations required a building permit “shocking” for a professional.
Crucially, the court ruled that telling a buyer to go to a lawyer does not let an agent off the hook. Because standard real estate lawyers rely heavily on title insurance rather than digging through City Hall files, and because title insurance often won’t cover unpermitted work unless the town has already issued an official violation notice, the agent’s failure to check on the permits left the buyers completely unprotected. The court found Mr. Lall liable for both professional negligence and a breach of his fiduciary duties.
Legal Takeaways: The Cost of Overlooking Accountability
The decision in Slatkovsky v Machado serves as a stark reminder of how property disputes can pivot on the strict enforcement of statutory and professional duties.
For property owners, the ruling makes it clear that municipal permit compliance is a non-delegable statutory obligation under Ontario law. Simply relying on a third-party contractor does not shield a vendor from long-term liability if unpermitted structural work leaves a home dangerous or deficient. Furthermore, the court reinforced that half-truths in property disclosures, such as revealing positive inspection results while omitting concurrent negative maintenance reports, will be treated as actionable misrepresentation. For the real estate industry, the judgment highlights the significant professional risks inherent in dual agency and places a heavy emphasis on an agent’s fundamental duty to discover and disclose material facts. When an agent chooses to represent both sides of a transaction, they remain fully bound by a fiduciary duty to proactively investigate the property’s history rather than acting as a passive conduit for information. The court firmly rejected the defense that a realtor can offload their obligation to uncover material facts, such as the permit history of a major structural overhaul, onto a real estate lawyer or an assumed title insurance policy. When an agent heavily markets a property’s renovations, they bear an independent professional responsibility to verify those claims, including whether the renovations were properly permitted and inspected.
