Better to ask about a SPIS
This was a Small Claims Court decision in Toronto involving the use of the Seller Property Information Statement.
Briefly, the purchaser acquired a real estate property (416 St. Clement’s Ave.) in Toronto from the vendor pursuant to a standard form real estate agreement. The Offer was accepted on 30 May 2006 and the transaction closed on 4 July 2006. By 12 July 2006, the basement was leaking.
The repair was expensive and the purchaser as plaintiff abandoned the claim in excess of $10,000 in order to bring the action within the jurisdiction of the Small Claims Court.
The facts related to the leakage:
· The defendants bought the property in approximately 1994.
· The basement contained a storeroom at the northern (rear) end, a laundry room and a utility room to the south.
· Part of the basement was used as a study.
· The defendants were aware that water could enter the basement at the north wall, at the north east corner and along the east wall.
· Their evidence was that this happened to a greater effect on an intermittent basis and the water drained away into a drain.
· Some months before the house was listed for sale some of the basement wall
· and the floor was painted.
The facts related to the Seller Property Information Statement:
· In May, 2006 in anticipation of listing the house for sale the defendants engaged James Hammond to inspect the property.
· Hammond noted: “Some staining/dampness from water penetration has been noted along foundation wall at north/east corner. Investigate to determine cause and correct as required”.
· In response to the question, “Is the property subject to flooding?” Ms. Brinkman indicated “No.”
· In response to the question, “Are you aware of any moisture/water problems?” Ms. Brinkman indicated, “Yes,” and added “Some moisture in basement.”
Inspection and Offer
· The purchaser viewed the house at an open house on May 27, 2006.
· The purchaser’s real estate agent had 26 years of experience.
· An offer date was set for May 30, 2006 and there were multiple offers.
· For reasons that are completely unexplained, the purchaser’s agent did not provide plaintiffs with a copy of the SPIS.
· The SPIS was not attached as a schedule to the agreement of purchase and sale.
· The purchaser did not ask for it, even though its existence is specifically referred to in the Toronto Real Estate Board listing that had been provided to the purchaser.
The Standard Wording in the Agreement
Clause 13 of the Ontario Real Estate Association standard form listing
agreement the provides:
“INSPECTION: Buyer acknowledges having had the opportunity to inspect the property and understands that upon acceptance of this Offer there shall be a binding agreement of purchase and sale between Buyer and Seller. The Buyer Acknowledges having the opportunity to include a requirement for a property inspection report in this Agreement and agrees that except as may be specifically provided for in this Agreement, the Buyer will not be obtaining a property inspection or property inspection report regarding the property.”
· An unconditional offer without containing an inspection condition was submitted.
· No review of the SPIS was conducted.
· The SPIS might have prompted further inquiry.
· No request was made for production of the Hammond report (which again might have been prompted by the SPIS).
The water leakage
The basement started to leak on 12 July 2006. The purchaser consulted a contractor JAGG Enterprises who reported as follows:
“Based on my visual inspection of your residence here are my findings. There appears to be several leaking areas, efflorescence and staining was evident more towards the back half of the house. This is usually caused by deteriorating damp proofing (tar) that was applied on the exterior of the foundation walls at the time of construction. Based on the age of the house the old clay weeping tile system (if any) may be clogged or damaged. In my opinion this problem appears to have been present for quite some time……”
Analysis by the Court
· The vendor made no effort to conceal any water problems.
· The problem had been disclosed in the SPIS.
· The purchaser failed to review the SPIS.
· The purchaser could have made an offer conditional on an inspection.
· The inspection report of James Hammond makes it plain that water damage was visible, as does the quotation provided by JAGG Enterprizes.
· There were no representations made by the vendor as to the condition of the basement.
· The ignorance of the purchaser about the water leakage can be directly related to the lack of inquiry.
· The problem was a patent defect not a latent defect.
· The entry of water into the basement was detectible on ordinary inspection.
· There was no attempt on the part of the vendor to mislead the purchaser by concealing the damage or by inducing the purchaser to limit inquiries.
· The repairs have never been made.
· The actual cause of the leaks remains open to speculation.
· It is impossible to conclude that the defendants were in any better position to know about the source of the problem than would have been the purchaser.
· The purchaser is entirely incorrect in the assertion that there was any duty whatsoever on the part of the vendor to bring the water problem to the attention of the purchaser.
Consequently, the Trial Judge dismissed the purchaser’s claim for damages.
This is an interesting case because the trial Judge correctly applied the law to the facts. The SPIS document was helpful to the vendor in this particular case. It was part of the disclosure and indicated that the vendor had nothing to hide. It was mentioned in the listing agreement.
There is a small problem on the part of the real estate agent. Under the Code of Ethics that have been passed as a Regulation pursuant to the Real Estate and Business Brokers Act there is a provision that deals specifically with the SPIS document:
“Seller property information statement
20. If a broker or salesperson has a seller as a client and knows that the seller has completed a written statement that is intended to provide information to buyers about the real estate that is available for acquisition, the broker or salesperson shall, unless the seller directs otherwise,
(a) disclose the existence of the statement to every buyer who expresses an interest in the real estate; and
(b) on request, make the statement available to a buyer at the earliest practicable opportunity after the request is made. O. Reg. 580/05, s. 20.”
So, the listing agent fulfilled the obligation to disclose it by noting its existence and availability on the actual listing as published on MLS. However, the buyer and the buyer’s agent failed to ask about it. There is no corresponding obligation on the part of the buyer’s agent to seek a copy of it, but there are other provisions in the Act which would be interpreted as an obligation to do so.
In this case, the buyer was not suing her own agent. Why? Remember that this was a multiple offer situation. This house was in a very desirable part of Toronto. The water leakage issue was a very small problem. If you wanted to buy it, you would simply overlook it and press on with an offer. To speculate that there may have been some negligence on the part of the buyer’s agent would be incorrect. The water leakage issue was never repaired? Why? It was not that big a deal!
So, the purchaser simply decided to outbid everyone else, and consider her options later. Others, who were outbid, or who requested a home inspection or some resolution to the water leakage issue didn’t get the property. So, this result is the correct result.
The completion of the SPIS was helpful to the vendor to prove that full disclosure or at least sufficient disclosure was made in the circumstances.
Brian Madigan LL.B., Broker