Municipality Liable for Faulty Building Inspection

In 1999, a couple purchased a 6-bedroom cottage in the Township of Bays. It had been built by the prior owner in 1991 in accordance with an issued building permit, and was duly inspected by the Township at that time.

When the couple started renovations on the cottage in 2012, they discovered it had several structural issues and defects, which rendered it unsafe and in violation of Building Code requirements.

The couple sued the Township for about $580,000 in damages, alleging it had fallen short of its duty of care. Specifically, they claimed the Township had been negligent during the 1991 inspection and had breached its legal duty to enforce the provisions of the then-prevailing Building Code and regulations.

The couple succeeded in establishing the Township's liability. The court noted that the purpose of the building inspection scheme was to protect public health and safety by enforcing safety standards for all construction projects. That regime also afforded the Township the power to grant or reject a building permit application where it saw fit. This left the Township with a duty of care towards those who, on a reasonable conclusion, might be injured by the negligent exercise of its inspection powers. Nothing in the legislation expressly limited the scope of that duty. The applicable standard was measured by what would be expected of an ordinary, reasonable and prudent municipal inspector in the same circumstances.

Here, the Township conceded that it owed a duty of care to the prior owners at the time of the 1991 inspection. There was no public policy reason not to extend that duty to subsequent owners – including the couple. This was reasonable, since they might be injured today by the Township's negligent exercise of its authority three decades earlier, respecting the building permit and construction.

The Township clearly breached its duty to them, and was responsible in damages for failing to meet the standard of care around identifying and having Code violations rectified. As for the amount: the court granted the couple the costs needed to remedy structural Code violations the Township overlooked, but declined to award them amounts for longer-term water penetration damage purportedly flowing from the prior owner's poor construction.

In the end, the court awarded the couple damages of $360,000, together with related costs and expert opinion fees. See Breen v. The Corporation of the Township of Lake of Bays, 2021 ONSC 533.