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Ontario Court of Appeal: township liable for negligent building inspection

The Ontario Court of Appeal released its decision in The Corporation of the Township of the Lake of Bays v Breen, 2022 ONCA 626.  This is a significant decision for claims against municipalities alleging negligent building inspection.  

The Court of Appeal upheld the trial judge’s finding that once a building permit is granted, a municipality has an obligation to inspect the building whether or not the building permit holder requests an inspection. This finding was made despite the apparent legislative scheme requiring the building permit holder to request an inspection.

Background

  • October 30, 1989 - the original owner of the cottage property submitted his application for a building permit, which was granted by the Corporation for the Township of Lake of Bays (the Township) that same day.
  • Between 1990 and 1991 - the Township completed three inspections at the building site and noted no deficiencies. At trial, there was no evidence that the building site was inspected beyond these dates. 
  • January 28, 1992 - the Township wrote the original owner of the cottage property advising that he had not requested any inspections for the project for over six months. The Township noted that if the owner intended to extend the permit, he should do so in writing. If this were not done by February 14, 1992, the Township would assume that the project was complete and would close all its files related to the project. 
  • June 1993 - the Township again wrote and advised that it assumed that the building project was complete and any further construction activity on the property would require new permits to be filed with the Township. 
  • 1999 - the original owners sold the now-completed cottage property to the plaintiff homeowners. By way of a home inspection during the purchasing process, the plaintiffs became aware of several issues with the property. Prior to closing, the plaintiffs’ real estate lawyer informed the plaintiffs that the Township did not complete a final inspection of the property. However, on the recommendation of their real estate lawyer, the plaintiffs closed on the property without a final building inspection from the Township. 
  • Years later, when beginning the process to build an addition to the cottage property, an engineer identified significant issues with the original building. The plaintiffs subsequently commenced this action against the Township. 

The trial decision

At trial, it was alleged that the Township breached the standard of care when issuing the building permit and with respect to the inspections conducted. The trial judge found the Township had breached the standard of care in both respects.

Regrading the standard of care for inspections, the trial judge rejected the Township’s argument that under the applicable legislation, the Township was only required to inspect when the building permit holder notified them that they were at a stage requiring an inspection. In doing so, the trial judge held:

“I am of the view that once the municipal building department grants a building permit, it has an obligation to take the appropriate steps to confirm that the construction complies with the Act and the Code, which may mean to make site visits even if a request has not been given or exercise its authority under the Act to revoke or suspend the building permit. This obligation is specifically pertinent if the municipality has not received a request for inspection on the construction of a building for an extended period of time.” [emphasis added]

The appeal decision

The Ontario Court of Appeal considered, among other issues, whether the trial judge erred in finding that the Township was required to inspect the property in the absence of a request from the builder.

At trial and on appeal, the Township argued that it could not be faulted for failing to conduct a given inspection without first receiving notice. The Court of Appeal disagreed and found that in implementing by-laws, issuing the building permit and inspecting the cottage property on three occasions, the Township made the policy decision to inspect the construction project, and enforce the provisions of the Ontario Building Code. This created a duty to subsequent purchasers who relied on the Township to act with care, which would be expected of an ordinary, reasonable and prudent municipality in the same circumstances. The Court of Appeal found that the Township “fell short of this standard when it declared the construction of the cottage closed without conducting further inspections.”

Key takeaways

This decision appears to create a positive obligation on municipal building departments to conduct inspections even if an inspection request has not been made by the building permit holder. 

The decision also underscores the importance of maintaining building department records. The decision will undoubtedly have implications for municipalities with historical open and/or incomplete building permits. 

To discuss how to best address these issues, please kindly reach out to any of the key contacts listed below.

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