The UFFI Warranty
Those new to the profession may well wonder: What is UFFI? Why is there a UFFI warranty in the Agreement of Purchase and Sale? Why does it matter to me
UFFI stands for Urea Formaldehyde Foam Insulation. UFFI was commonly used as a “retrofit” insulation on existing houses. The foam was injected behind walls and in areas where installing other forms of insulation wasn’t practical. UFFI was most commonly used in the 1970s. This was the period of the “Energy Crisis”, which was triggered by the OPEC oil embargo. Between 1975 and 1978, the government implemented a program known as the Canadian Home Insulation Program (CHIP), which offered financial incentives to homeowners to increase the insulation levels for their homes.
As the result of perceived health problems associated with UFFI, the insulation was banned by the Canadian government in 1980. UFFI remains a commonly used building product in Europe.
The UFFI warranty was born out of the concern many home buyers had regarding the potential health risks that UFFI might pose. The UFFI warranty is intended to give buyers comfort.
The UFFI warranty matters to you because it is something you need to explain to both buyer and seller clients. A failure to properly explain the implications of the warranty can result in you being dragged into litigation.
When acting for the sellers, you need to make sure that they understand that the warranty they give survives closing and they could be sued if it turns out that there is UFFI in the house. It is important that clients confine themselves to representations only within their personal knowledge. If the client is providing an SPIS to the buyers, make sure that any representations with respect to UFFI mirror the warranty in the Agreement of Purchase and Sale.
If the SPIS states that UFFI has never been installed where the Agreement says that the warranty is only to the best of the client’s knowledge, that could result in an unintended liability for your client that could get passed on to you.
If you have actual knowledge that the house contains UFFI then you cannot allow your seller client to give an untrue warranty. For example, you may have been involved in previous transactions involving the property or you may have checked prior listings that stated UFFI was present. In such a situation, you may want to delete the warranty from the Agreement of Purchase and Sale. That might scare off some buyers, but it will protect your client (and you) from exposure to a lawsuit later.
You should still be cautious when a seller is aware that their home once contained UFFI, but “knows” that it was removed. They may even have evidence of removal, such as a certification by a previous owner or contractor. Your client should not provide a warranty based on this evidence. A seller should only warranty to the best of their knowledge the UFFI was removed.
When acting for the buyers you want to make sure they understand that a warranty to the best of the seller’s knowledge is not a categorical guarantee that the house doesn’t contain UFFI. Again, make sure that the SPIS is in line with the Agreement of Purchase and Sale. If the seller includes a statement in the SPIS that the house contains UFFI, you need to make the buyers aware of that before closing and inform their lawyer.
You might have read that there is no definitive science to indicate that UFFI is harmful, so you may be wondering why there is any concern with a harmless building material that hasn’t been used in Canada since the 1970s.
The fact is that some people are sensitive to the issue of UFFI and would not knowingly buy a house that contains it, just like some people won’t buy a house with a certain address number. It is really a matter of disclosure. Think of UFFI as being the equivalent of a latent defect.
Sellers need to give warranties that are true and within the scope of their knowledge and buyers need to make an informed decision to buy a property.
For more information about UFFI and the UFFI clause, visit:
Content provided by Alternative Risk Services. Alternative Risk Services is a division of 3303128 Canada Inc.