A Judicial View of the Use of the Seller Property Information Statement

Sometimes it’s difficult to determine what Judges think about ordinary and customary practices in the real estate industry.

Judge Cozens offered a comment upon the use of the disclosure statement, at times in various jurisdictions referred to as:

1) Seller Property Information Statement (SPIS),

2) Property Disclosure Statement (PDS), and

3) Property Condition Statement (PCS).

This is a document that is in common usuage throughout Canada and in many States in the United States. It was intially designed to limit liability, by protecting agents and obligating sellers to tell what they knew about the property. In some jurisdictions the document is mandatory and in others it is optional.

The difficulty is that the document is oftentimes difficult to interpret. What do the questions really mean, and is the answer a sufficient response? Although intending to protect agents, now sellers are suing their own agents for improper advice, improper direction and negligent advice concerning the completion of the Form. So, while it was intended to reduce litigation, in fact, it seems to be a source of litigation.

Have a look at the comments made by Judge Cozens:

“Recommendations

[1] I would recommend that a comprehensive review be undertaken by real estate agencies and lawyers with respect to the use of the PDS….

Such a review should work towards ensuring that both sellers and buyers are made fully aware of the potential legal implications that may flow from the preparation and disclosure of the PDS.

For example, to the degree that there is any apparent or potential ambiguity in the questions in the PDS, some consideration could perhaps be given to simple wording changes that make it clear that “past” and “present” problems are to de disclosed in the PDS.

[2] I say this keeping in mind that real estate agents are not lawyers and should not be expected to provide legal advice.

The practical reality, however, is that many individuals in real estate transactions likely rely on their real estate agent for legal advice more than they should and real estate agents should be aware of this fact.

[3] While there may be a concern among real estate agents that a PDS with numerous warnings and cautions may have the effect of delaying or possibly even preventing the completion of a purchase and sale, thus potentially becoming a “deal-breaker”, any such concern is far outweighed by the potential legal issues that could arise in cases such as the one before me.”

So, all in all, this particular Judge would be quite cautious.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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