The recent decision by the Ontario Superior Court in the case involving NBA star Shai Gilgeous-Alexander and ‘Crypto King’ Aiden Pleterski has made waves in the real estate industry. Gilgeous-Alexander, the Canadian-born point guard for the Oklahoma City Thunder, purchased a property in Burlington, Ontario for a staggering $8.45 million intending to use it as a peaceful home to start a family. However, it soon became the center of a legal dispute that shed light on the perils of fraudulent misrepresentation and latent defects in property transactions.
The Burlington property seemed perfect to serve as a private and secure haven, and was marketed as such. The first words of the listing described the house as “Private Waterfront Estate Property”. However, the property had a notorious past, having been previously occupied by Pleterski, an infamous cryptocurrency investor known for defrauding investors of millions of dollars. Pleterski’s controversial history had turned the property into a magnet for unwanted attention and potential danger.
The property’s alarming reality surfaced when strangers appeared, searching for Pleterski, thereby breaching the expected privacy and seclusion that was promised in the listing. Shortly after moving in, Gilgeous-Alexander and his partner were met with unexpected threats to their doorstep as strangers seeking Pleterski visited their house.
The Heart of the Matter: Fraudulent Misrepresentation
The court focused on the seller’s failure to disclose the property’s contentious past and misleading listing. This omission constituted fraudulent misrepresentation, as the seller knowingly marketed the property as secure and private, despite being aware of the risks associated with Pleterski’s previous ownership.
The Latent Defect: More Than Meets the Eye
Beyond the misrepresentation, the case brought to light a significant latent defect – the ongoing safety risk. Unlike patent defects (i.e., obvious structural or functional flaws), latent defects are insidious, hidden problems that can severely impact a property’s safety and habitability.
What is unique in this case is that the latent defect was not a physical flaw in the property itself but arose from its notorious history and subsequent security risks. The court found that this latent defect was not just a minor inconvenience; it posed a real threat to the occupants’ safety, rendering the property practically uninhabitable.
The Court’s Decision
In response to these findings, the court ordered the rescission of the purchase agreement, which aims to put both parties back into the position they would have been had the contract not been entered.
As a result, Gilgeous-Alexander will re-list the property and is entitled to recoup the difference between the purchase price he paid and the price he receives on the sale of the Burlington property, as well as his ancillary costs to purchasing the property, including Land Transfer Tax, all mortgage payments, insurance payments, and property taxes paid by the plaintiff from the date it purchased the Burlington property to the date of its sale.
Implications for Sellers
This case potentially redefines real estate disclosure norms. The court recognized a non-physical aspect – the infamous history of the previous owner – as a latent defect that compromised the property’s safety, thereby necessitating disclosure. Traditionally, the principle of caveat emptor (buyer beware) has limited the seller’s obligation to disclose only latent defects that are physical in nature and directly affect the property’s safety or habitability. However, this case broadens that scope.
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