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Professional Standards Manual

Trading Services

4. General Information

(a) Contract Clauses - View Entire Section

(XXV) Health and Environmental Concerns - View Subsection
(3) Special Concerns with Rural Land - View Sub-subsection
(ii) Water Supply

In the case of unproven water supply from either an existing or a new source, the buyer will be concerned not only with quality but also with quantity.

When a property is connected to a municipal or community water supply, water is often taken for granted. The rural experience is often quite different — water conservation practices being the rule rather than the exception. When the water supply expected by the buyer disappears, the consequences can be disastrous.

During examinations for discovery in an Alberta case, the plaintiff buyers testified that the water supply was much less than capable of meeting their family’s needs. As a result, a number of extraordinary measures were required. Two members of the family showered in the morning and the other members showered in the evening. They could not do any watering in the yard and they flushed the toilets only when absolutely necessary. That sort of evidence has the potential to generate considerable sympathy at trial.

What should a licensee do when he or she is asked a question with respect to the well? Many buyers do not know the proper questions to ask of the sellers or the buyer’s agent to make an informed decision to purchase a rural property. The water quality and quantity is crucial to a buyer in deciding to purchase a property and a buyer may not be aware of the importance of water quality and quantity.

Licensees have an obligation to avoid error, misrepresentation or concealment of pertinent facts. Therefore, licensees must take reasonable steps to discover the facts pertaining to every property they may list or sell.

When someone says, ‘‘I want the water tested’’, a licensee should be clear what tests the client wants conducted on the water and a condition should be included in the offer to purchase to meet those standards to the buyer’s satisfaction. The test for mortgage approval may be at a lower standard than is satisfactory to the buyer’s personal needs for water quantity and quality. The buyer needs to determine the quality and quantity of water to meet his or her personal needs and then request water tests that will determine if the water meets those standards.

When sellers state that they had enough water quantity for their needs, what does that mean for the buyer? The water needs for each family may be significantly different as a result of the number and age of people living in the house, laundry washed, cattle or horses to water, etc. Does the buyer need the water to be of the quality that babies or individuals with heart conditions can consume?

To minimize potential liability in rural well cases, a listing agent might consider the following practices as a minimum:

  • Secure any representations by the seller concerning the well in writing so as to eliminate any doubt at a later time as to what was said.
  • Does the seller have a well report that verifies his or her information? Have you obtained a copy? Is the well report current? Does it test at the levels necessary to satisfy the buyer’s needs?
  • If a representation based on a well report is to be set out in the listing information, set out the fact that the information comes from a well report and the date of that report. Has the seller experienced any problems with the water supply, on a seasonal or other basis?
  • Are there any restrictions on the use of water by the seller’s household? When acting as agent for a prospective buyer, your duty is to assist the buyer in determining his or her water quality and quantity needs having a regard for all of the inquiries above and also considering the following:
    • If there is no well report or no current well report, recommend as a condition of the sale that the well be tested and approved by the buyer.
    • Determine whether your buyer had any prior experience with wells. If not, ensure that your client understands that the water supply cannot be guaranteed, that a good well can go dry with little or no warning and that even a good well may be subject to seasonal fluctuations.
    • Do not make representations to your client about the sufficiency of the water supply. One family of four people may be able to get by on a two gallon per minute well while another family may need two or three times that amount of water.

Because of the obvious importance of water supply and quality to any rural transaction, prudent licensees will be careful in documenting their files to reflect all of the discussions between them and their client about the water supply and quality.

If necessary, a clause such as the following should be included in the Contract of Purchase and Sale.

Water Quality and Supply Clause

Subject to the Buyer, at the Buyer’s expense, receiving and being satisfied with a report from (name of source of report) concerning the quantity and quality of the water supply on or before (date) .

This condition is for the sole benefit of the Buyer.

Ω If not using the standard form Contract of Purchase and Sale, refer to ‘‘Contracts under Seal

Water Potability Clause

Subject to the Buyer receiving and approving a water potability test report done by (name of service) on or before (date) .

This condition is for the sole benefit of the Buyer.

Ω If not using the standard form Contract of Purchase and Sale, refer to ‘‘Contracts under Seal

In situations where the existing services were not approved or the site cannot be approved for new services, the prudent licensee should protect the parties to the transaction by noting the same in the contract.

Approval Uncertain Clause

The Buyer acknowledges and accepts that the property may not receive approval for an onsite sewage system and that no representations to the contrary have been made by either the Seller or his or her agent.

In some circumstances, where the property is not serviced by municipal water and sewer services, mortgage lenders may require appropriate certificates regarding water potability and the septic system. Also, a well driller’s certificate confirming adequate water flow may be required.

To meet the Canada Mortgage and Housing Corporation’s (CMHC) requirements, water potability must meet the provincial standard, or in the absence of such standard, Health Canada’s Guide on Canadian Drinking Water.

CMHC advises that it will not delay approval of any insured mortgage application pending lender receipt of a potability certificate. The approved lender is responsible for obtaining the required certificates prior to advancing funds. Copies of all certificates must be retained in the approved lender’s file. For further information, contact CMHC at 1-888-463-6454 or visit www.cmhc-schl.gc.ca.