Beware of signing disclosure forms
Difficult queries beyond scope of most homeowners
Statement dredges up increase in problems, disputes
Excerpt from an article by Bob Aaron
One of the most controversial forms used in the real estate field today is the Seller Property Information Statement (SPIS) distributed to its members by the Ontario Real Estate Association (OREA). Similar forms are in use in other jurisdictions across the continent.
The OREA form lists 47 questions to be answered in writing by the sellers of each home. At present, the forms are not mandatory in Ontario, and in my experience they have been a gold mine for litigation lawyers — creating more problems and disputes than they were intended to avoid.
Sellers who are presented with these forms by listing agents are invited to answer — and be responsible for — questions which are well beyond the knowledge of the average homeowner.
Sellers are also asked whether they are aware of any structural problems, non-compliance with the Ontario Fire Code, insect damage, and problems with the air conditioning, plumbing or heating systems. They are also asked whether the wiring is copper, aluminum or knob and tube.The 2003 New Brunswick decision in the case of Hansen and King versus Seely is a prime example of a seller being sued, not because the house was defective, but because she signed a property disclosure statement.
A year after closing, water and silt entered the basement. At that point, the seller advised the buyers that there was a sump pump buried outside the house to divert surface water away from the basement walls.
That fact was never mentioned in the disclosure statement, and there was no question in the SPIS form about the existence of a sump pump. The agent (who was aware of the existence of the pump) never told the buyers about it either.
The buyers had to spend more than $11,000 to repair the water problems and sued the former owner. At trial in the local small claims court, the buyers were awarded the maximum $6,000 damages that the court had jurisdiction to award.
Despite the fact that the buyers had a home inspection, the court said that the previous owner had misrepresented the condition of the property, even though her basement had been dry for more than 13 years.
The judge in the case said, “In my opinion, a purchaser of real estate should not have to go behind and second guess the answers to the questions contained in a Property Disclosure Statement.
A leaky basement was also the subject of a representation in the disclosure statement of the 2002 Ontario decision in Swayze versus Robertson. The sellers correctly stated they were not experiencing water problems, but also indicated, incorrectly, that there was no history of cracks or water in the basement.
Despite a home inspection revealing repairs would be required to the basement walls, the purchasers closed and later sued for $12,572 plus costs. The new owners were successful both at trial and on appeal, based on false statements made orally and in the SPIS.
The new owners sued the seller, who explained the misrepresentation by saying that the tank had been “upgraded” 10 years earlier. The trial judge found that “the Plaintiffs have established fraud by the Defendant,” and awarded them $8,000, plus interest and full legal costs.
In general, the rule is caveat emptor — buyer beware. That’s why purchasers use home inspectors.
Bob Aaron is a Toronto real estate lawyer. Email: bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818. Column archives: http://www.aaron.ca.
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