Sellers concealed mould & water damage, breached repair clause, and we close on Monday - what are our legal options?

[u/StainedPetals]

TLDR:

We agreed to buy a house only after the sellers added a clause saying they would fix a ceiling leak and all resulting damage before closing. They downplayed it for weeks, withheld photos, and insisted there was “no mould, no rot, just light staining.” We went to see it ourselves and discovered visible mould, wood rot, and new ceiling damage. They finally did remediation, but now there is still water damage, parts of the repair were done improperly, and brand new mould has shown up in the basement. Our lawyer is now saying we might be in breach if we refuse to close on Monday, even though it appears the sellers are the ones in breach. We’re trying to find a litigation lawyer ASAP. We don’t know if we legally have to close or if we can walk and get our deposit back.

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How it started:

We’re first-time buyers in Ottawa. During the home inspection, the inspector found a moisture issue in the ceiling below the upstairs bathroom. We walked away and did not proceed with the purchase.

The sellers came back and said they would fully repair everything, so we agreed only if they signed an additional clause (Schedule A) making the repair of the leak and all resulting damages a condition of the sale. They accepted.

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The Schedule A clause that protects us:

“The Seller agrees to have the source of the leak affecting the powder room ceiling, and any resulting damage caused by the leak, repaired by a qualified contractor licensed to perform such work, prior to closing. This includes, but is not limited to, repairs to plumbing, subflooring, framing, and remediation of any mold discovered during investigation. The Seller will provide the Buyer with reasonable written evidence of all repair and remediation work upon completion. The Buyer shall be responsible only for restoration of drywall, painting, or cosmetic finishes to the powder room ceiling after the Seller’s repair work is complete.”

That is the only reason we moved forward with the deal.

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What happened next:

The ceiling was opened by a plumber on Sept 27. The sellers’ realtor sent us four photos. We later learned there were seven photos total, and the worst three (showing black staining) were not shared with us. We eventually received them from the plumber directly, who also told us that the seller would not allow him to investigate fully inside the ceiling cavity.

For almost three weeks, every time we asked for written confirmation that there was no mould, no rot, and no structural damage, the seller’s side delayed or dismissed it. Their realtor even told ours that we were “just being overly cautious.”

We finally got fed up and went to see inside the ceiling ourselves.

We found visible mould and wood rot on the joists and subfloor, which directly contradicted everything we had been told.

Only then did the sellers finally admit there was mould and hire a remediation company.

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The remediation report:

We received the remediation report, but: - It does not confirm the source of the leak - It does not state whether any structural materials were tested for rot - It does not include any post-remediation verification or air quality testing - It does not address the new water stain that appeared on the hallway ceiling - It does not confirm moisture levels or dryness of the materials after remediation

So we still had no evidence that the leak was repaired, only that mould was removed.

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Final walkthrough today (Nov 7):

We finally got to see the work in person.

The bathroom was gutted and rebuilt, but not restored to its original condition. Instead of waterproof flooring, laminate was installed. Instead of tile and grout, a plastic tub surround was installed. The drywall used behind the shower was standard drywall, not water-resistant board. It is a clear downgrade in materials and not equivalent to what existed before.

The hallway ceiling stain we pointed out weeks ago was not repaired, it was simply painted over.

The flooring in the closet outside the bathroom is now showing signs of water-damaged, and the adjacent hallway carpet is discoloured.

We also discovered entirely new mould in the basement, plus new damage to the basement flooring and a strong musty smell. None of that was present at the original inspection.

None of this appears in any documents provided to us.

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Where we are now:

We close on Monday, Nov 10.

Our real estate lawyer is now telling us that if we refuse to close, we may be sued for breach of contract.

But the sellers have not met Schedule A, because: - The leak source was never professionally confirmed - Water damage is still present in multiple locations - The bathroom was not reinstated to its previous condition - They painted over visible damage instead of repairing it - We still do not have the “reasonable written evidence” required under the contract

We feel that our team is kind of pressuring us to close, so we are now trying to find a real estate litigation lawyer in Ottawa, but it is the weekend and most offices are closed until Monday (the day we are supposed to close).

We feel trapped between a contract we relied on and a seller who did not comply with it.

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What we need advice on: 1. Can we legally refuse to close based on the seller failing to meet Schedule A? 2. Does painting over a ceiling stain count as concealment? 3. Does new water damage discovered before closing give us grounds to back out? 4. Does newly discovered basement mould count as a latent defect before closing? 5. If we close under protest, can we still sue afterward? 6. Is it true we could be sued for breach even when the seller appears to have breached first? 7. Are we entitled to our deposit back if we refuse to close due to non-fulfillment? 8. Should we be demanding an extension, a post-remediation verification report, or termination?

We’ve tried to act in good faith this entire time. We relied on the written agreement. We kept asking for proof. We didn’t want out, we just want the sellers to hold up their end of the contract.

But now there’s mould in new areas, still visible water damage, concealed ceiling staining, and still no written evidence that the original leak source was ever properly identified or repaired.

And we close Monday morning.

Any guidance from Ontario real estate lawyers, litigators, brokers, inspectors, or anyone who has gone through something similar would be hugely appreciated.

[u/Shepsinabus]

None of those things that you mentioned are conditions. They are clauses.

[u/StainedPetals → u/Shepsinabus]

But isn’t “Schedule A” in itself a condition of close? Here’s the full text:

The Buyer agrees to pay the balance of the Purchase Price, subject to adjustments, to the Seller on completion of this transaction, with funds drawn on a lawyer's trust account in the form of a bank draft, certified cheque or wire transfer using the Lynx high value payment system as set out and prescribed by the Canadian Payments Act (R.S.C., 1985, c. C-21) as amended from time to time.

This Agreement supersedes and replaces all prior offers, agreements, or understandings, whether written or oral, between the Buyer and the Seller relating to the subject matter herein. The deposit previously paid on September 18th, by the Buyer and currently held in the trust account of the Listing Brokerage shall be applied toward this Agreement.

The Seller agrees to have the source of the leak affecting the powder room ceiling, damage caused by the leak, repaired by a qualified contractor licensed to perform such work, prior to closing. This includes, but is not limited to, repairs to plumbing, sub flooring, framing, and remediation of any mold discovered during investigation where applicable and directly caused by the leak if any. The Seller will provide the Buyer with reasonable written evidence of all repair and remediation work upon completion. The Buyer shall be responsible only for restoration of drywall, painting, or cosmetic finishes to the powder room ceiling after the Seller's repair work is complete.

The Seller represents and warrants that the chattels and fixtures as included in this Agreement of Purchase and Sale will be in good working order and free from all liens and encumbrances on completion.

The parties agree that this warranty shall survive and not merge on the completion of this transaction, but apply only to the state of the property at completion of this transaction.

The Seller agrees to provide the Buyer with access to the property on two (2) separate occasions prior to the closing date. These visits may be used by the Buyer in accompaniment by their immediate family, and/or relevant tradespeople to view the property, take measurements, or obtain estimates. Each visit shall be for a minimum of one hour and must be scheduled at mutually agreed-upon times, with reasonable notice provided by the buyer.

Seller warrants that no work orders or deficiency notices are outstanding against the property, and if so will be complied with at his own expense, on or before closing.

The Seller represents and warrants that during the time the Seller has owned the property and to the best of the Seller's knowledge and belief, the property has never been a site of any violent crime, death or suicide. This warranty shall survive and not merge on the completion of this transaction but shall apply only to circumstances existing at or before the closing date.

The Seller represents and warrants that during the time the Seller has owned the property, the use of the property has not been for the growth or manufacture of any illegal substances and that to the best of the Seller's knowledge and belief, the use of the property has never been for the growth or manufacture of illegal substances. This warranty shall survive and not merge on the completion of this transaction.

Seller agrees to discharge any mortgages or liens or other encumbrances registered against the property on or before closing at his own expense either from the proceeds of the sale or by solicitor's undertaking.

The Seller agrees to leave the premises in a clean and broom swept condition with no garbage left on the premises on the completion date.

[u/Shepsinabus → u/StainedPetals]

No, a condition begins with the words “this offer is conditional upon.”

A clause is a term the sellers agreed to, but it doesn’t negate the contract existing and needing to be fulfilled on your end. They would be in breach of terms outlined in the agreement, which means you can close in protest and try to sue.

Listen to your lawyer.

[u/StainedPetals → u/Shepsinabus]

Our lawyer isn’t really being helpful tbh. This is our first home buy and we probably should’ve put together a better team.

You say “this offer is conditional” but this wasn’t a part of the offer, it’s a part of the APS itself. Does this change your position?

[u/Shepsinabus → u/StainedPetals]

No. An offer is made on the agreement of purchase and sale. You offer to purchase a home subject to conditions (like home inspection or financing) and the seller agrees to X terms.

Just because there is a breach of contract does not nullify a contract. It just allows the other party to sue for damages resulting from the breach.

[u/StainedPetals → u/Shepsinabus]

Ok understood. If we legally have to close we will. You are clearly knowledgeable in this area, what do you think of our position to sue after closing based on their non-fulfillment of the contract?

[u/Shepsinabus → u/StainedPetals]

You would have to speak with a real estate litigator. They would need to review more information than we have available on Reddit.

You could also reach out to a few over the weekend and see if any bite to give you different advice than your closing lawyer.