When Stefanos Michelis and his wife, Peggy Karagianis, first set eyes on the small north Toronto home they were about to purchase, they didn’t see a 1960s bungalow.

They saw their dream home.

After living with Karagianis’ mother and patiently saving, the couple was ready to buy the house and embark on a major renovation and second-storey addition.

But buyers beware: Their million-dollar dream has turned into a bit of a nightmare.

Three years later, and nearing the end of the home’s stunning transformation, the couple are caught in a legal Catch 22 because of the 1970s addition of a garage that engineering reports say is unsafe and should be torn down.

At issue is who is going to pay for it.

The couple says they can’t move in until problem is resolved and are suing the city, the former owner, the agent and the realty company for $50,000 to cover the costs of tearing down the garage and replacing it.

“It’s my first house with my husband. It’s my dream home. We saved. We worked hard,” says Karagianis. “I think it’s ridiculous.”

The problem is proving who’s at fault.

North York expunges old records, a practice that continues today. Aside from a permit number, there is little else to prove the garage — built by a contractor — was ever properly inspected.

“The permit (to build the garage) is almost 50 years old,” says Ted Tipping, director and deputy chief building official for the city. “And the former North York had a retention bylaw where they destroyed records. You can’t go and look at inspectors’ notes, because all of these documents have been destroyed a long time ago.”

Tipping says the issue is even more complex because the building predates Ontario’s building codes, which didn’t exist until 1975. “What happened in the early ’70s, prior to the building code, I can’t comment on,” said Tipping. “And what the standard or practice was back then, I truly don’t know.”

Currently, a permit for a garage is followed by mandatory inspections of the footings and framing, plus a final inspection.

The couple waived a home inspection when they purchased the property because of a bidding war.

“There are many issues going on here,” Tipping says. “If a garage became unsafe because of a lack of maintenance, then that is nobody’s fault. If you buy a property you need to do an inspection. That’s not a liability issue from our standpoint.”

But Michelis’ lawyer, Robert Moubarak, says an engineer’s report — which Tipping doesn’t have a copy of — found several structural problems with the garage that a home inspector would never have uncovered.

The garage is too close to the lot line, according to current zoning. The engineering report also found that the foundation was sunk 2 feet into the ground instead of 4 feet, and the rafters and framing were improperly built.

“An inspector would not have been able to find latent defects, what we call structural issues,” says Moubarak. “An inspector does not come to the home and dig under the garage to see if they’re underpinned properly.

“This was a bidding war. Everything was happening quick, quick, quick,” he says. “They relied on the representations of the broker and the vendor when the home was on the market.”

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Everyone named in the lawsuit has filed a statement of defence, Moubarak says.

“The problem is my client now has to deal with it because he has knowledge, and now he owes a duty to any future purchaser that he sells the house to,” he says. “Any owner, just like the city, has an obligation to any potential future buyer of the home to make sure it’s built properly and safely and legally.”

Maybe the mayor will figure it all out. Michelis was on a local radio show Thursday morning when Councillor Doug Ford called in to say that the homeowner could expect to hear from his brother.