If you live in Calgary you live with hail storms – it’s just a fact. The most recent hailstorm of the summer highlights the concerns from both a Buyer and a Seller perspective.

The issue really shows itself where a property has been sold, conditions have been waived, closing is some time in the future and there is significant hail damage (likely to the roof and to siding in most cases.)

The competing issues are obvious: the Seller has warranted to have the property in substantially the same condition as when the contract was signed but the Buyer isn’t really entitled to either a new roof of siding. The question is how to resolve these competing interests and what role does home insurance play in this?

The Buyer’s Concerns

If you are the Buyer, you certainly expect that any hail damage will be either repaired or will be in the process of repair prior to the closing. This is rarely the case where hail damage is involved. There are often countless properties and goods like cars involved and it means:
1. Insurance adjusters are swamped; and
2. The time for repairs is at a crawl due to so many situations to resolve.

A couple of principles guide this situation. First, the Seller does warrant that the property is in essentially the same condition as when it was purchased. This does obligate the Seller to give effect to the repairs either through insurance or through private contractors. The vast majority of cases are through insurance, however, insurance claims raise other concerns: the deductible to be paid and the question of depreciation. The deductible is clearly the obligation of the Seller but who covers the issue of depreciation?

Depreciation is a somewhat fictional estimate of the used life of something and the expected remaining life. A “25 year” shingle that has been installed for 20 years has, in the eyes of insurance, 5 years left or 20%. This sometimes has nothing to do with the real life of the roof left but is purely an accounting function.

The problem is that the insurance company may only pay 20% of the costs to replace that roof. Who pays the other 80%? When the house was purchased and an inspection showed an old roof did the Buyer really expect to get a brand new roof when hail happened? But, in the same vein, did the Buyer expect to have an invoice for 80% of a roof when they were stretched to their limits on the purchase? This is the legal dilemma that is faced – who is responsible for the potential depreciated value?

The Concerns for Sellers

The converse to the issue for the Buyer is what exactly are a Seller’s obligations to the Property? Clearly, the standard provisions do apply. It is also imperative that the Seller should immediately file a claim with their insurer to get the ball rolling.

However, from the Seller’s perspective there are some different concerns. In particular, the insurance work can take significantly longer than expected. Where there is major and significant hail damage in multiple areas the work could be 1 or even 2 years away from being completed. If there is a holdback of funds does this end when the insurance claim is filed? When it is formally approved? When will the work be completed?

These are all significant questions that have to be discussed from a legal standpoint. The Buyer wants to buy – the Seller wants to sell but at what cost to each party?

Ultimately, these are issues that should rightfully be negotiated as between the parties and their real estate agents as early as possible in the process. Legal advice plays an important role and there is no real cut and dried solution to this problem. Each case is somewhat unique but requires experience and knowledge to properly resolve it.

Don’t hesitate to contact your real estate lawyer to discuss potential options and solutions.

For more information regarding real estate law, we are Calgary’s leading legal real estate team to help you. Contact us today, at 403 245 – 3500, or email us at info@calgarylaw.com.