In Oliva v. Dickson (2025 ONSC 6666), the Ontario Superior Court of Justice delivered a decision that should capture the attention of developers, vendor-builders and anyone selling improved property in Ontario. The case is a pointed reminder that Building Code compliance is not merely regulatory housekeeping. It can become both an implied contractual obligation and the foundation for tort liability years after closing.
The Facts (and Why This Wasn't a Typical Transaction)
The defendant vendors purchased a property in Hamilton Township and undertook significant renovations before selling it to the plaintiffs. The work included raising the house by four to six feet (a major structural alteration designed to enlarge the basement), installing a new septic system and constructing a garage. A building permit was obtained for the garage. No permit was obtained for raising the house or for the installation of the new septic system and the garage permit did not cover the structural work on the home.
Complicating matters further, the plaintiffs were not passive, arms-length purchasers. One of them worked on site as a paid "site supervisor", monitored construction and later moved into the home before closing.
Years after closing, following flooding issues, the plaintiffs made inquiries with the municipality and discovered that no building permits had ever been issued for the structural work or septic installation. The municipality advised that bringing the property into compliance would require permit applications and supporting documentation.
The plaintiffs made a claim under their title insurance and recovered over C$400,000, which they used to undertake additional construction and structural reinforcement. They then sued the vendors.
Was There a Breach of the Agreement of Purchase and Sale?
The Court first considered whether the defendants had breached any express terms of the Agreement of Purchase and Sale (APS). It concluded that they had not. The APS contained no explicit representation that building permits had been obtained, and the entire agreement clause limited the contractual representations to those set out in the document itself.
However, the analysis did not end there. The Court turned to whether an implied term existed. Applying the "officious bystander" test, the Court asked whether, at the time of contracting, the parties would have responded "of course" if asked whether the renovations would comply with Ontario law, including the Building Code. Given the extensive structural alterations—particularly raising the house several feet—the Court concluded that compliance with the Building Code was an implied term of the APS. This is a critical contractual takeaway. Even where an APS contains an entire agreement clause and no explicit permit representation, a court may still imply a term requiring legal compliance where the nature of the transaction demands it. Vendor-builders cannot assume that silence equals protection.
Duty of Care and the Standard of Care
The plaintiffs also advanced a negligence claim. Relying on the Supreme Court of Canada's reasoning in Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., the Court confirmed that contractors—and by extension vendor-builders—may owe a duty of care in tort where negligent construction creates a real and substantial danger. Here, the defendants were not passive sellers. They had undertaken the structural construction themselves. As a result, they owed a duty of care to the purchasers.
The more nuanced question was whether the standard of care had been breached. Notably, there was no evidence of structural collapse or visible failure. There were no significant cracks suggesting settlement, no observable movement, and no expert opinion concluding that the house was unsafe or uninhabitable. The plaintiffs’ expert testified that standard footings were not observed in limited excavation but could not definitively confirm their absence without full exposure of the foundation.
Despite this, the Court found a breach of the standard of care. A reasonably competent contractor undertaking structural alterations of this magnitude would have obtained the required permits, secured appropriate drawings and engaged in inspections. Failing to comply with the Ontario Building Code and permit regime fell below the standard expected of a reasonably competent builder.
The message is clear: negligence does not require catastrophic failure. The failure to follow the Building Code regime itself can constitute a breach of the standard of care.
The Damages Analysis
Although the plaintiffs established both breach of contract (via the implied term) and breach of the standard of care, the damages analysis significantly limited their recovery.
With respect to the septic system, the evidence was persuasive. It was installed too close to the house and water well and did not comply with regulatory requirements. Contamination issues were proven. On this issue, the plaintiffs established actual loss and damages were awarded.
The claim relating to the raising of the house was far less successful. The plaintiffs sought substantial damages, including underpinning and structural remediation. However, the Court found the evidence insufficient to establish that the house was unsafe or that such extensive remediation was required. There was no conclusive proof that proper footings were absent, nor was there evidence of actual structural distress.
Ultimately, judgment was granted in the amount of C$57,701.87, largely attributable to the septic deficiencies rather than the structural raising of the home.
Key Takeaways for Commercial Real Estate Clients
Although this case arose in a residential context, the implications for commercial vendor-builders and developers are significant.
First, Building Code compliance can become an implied contractual obligation. If you act as a builder and sell the improved property, a court may imply legal compliance into your APS even in the absence of express representations.
Second, the standard of care in negligence incorporates the Building Code regime. A reasonably competent builder in Ontario obtains required permits and inspections. Skipping that process creates litigation risk, even where no structural failure is apparent.
Third, active purchaser involvement does not eliminate risk. In this case, the purchaser supervised construction, took photographs of the work, and moved in before closing. That did not shield the vendor from liability.
Fourth, title insurance is not a complete shield. The plaintiffs recovered significant funds under their title insurance policy and still sued the vendors. Insurance may respond to certain defects, but it does not extinguish downstream liability exposure.
For commercial real estate owners, vendor-builders and developers, the practical message is straightforward: permits are cheaper than litigation. The Building Code regime is not merely administrative—it defines contractual expectations and the legal standard of care. Ignoring it may save time on the front end, but it can be very expensive years later.
Building Permit Issues: Further Reading
This blog is the latest in a series of blogs and articles written by Bennett Jones on the issue of building permits. Please also see:
- Requisitioning the Closure of Open Building Permits
- Must a Buyer Accept an Open Building Permit on Closing?
- Do Building Permits Affect Title to Real Estate?
Bennett Jones