Question:
Under TRESA if a property had a significant insurance claim but everything was fully repaired and there have been no issues since, this does not need to be disclosed unless a buyer’s agent specifically asks. Is this correct? At that point, the seller can direct their agent to respond with the details or say that they have been instructed not to answer. So, the common advice of “when in doubt, always disclose” could unnecessarily affect the property value when there are no defects and is not good advice. I think the argument is that the Buyer’s insurance company may uncover the past claim before closing and notify the buyer possibly causing issues.
Answer:
You have raised several questions here.
TRESA
There is a very poorly written provision in TRESA obligating agents to make some additional disclosures, obviously motivated by those that like to say: “when in doubt, disclose, disclose, disclose”.
But, when you think about it, that statement doesn’t make any sense. The premise is that you don’t know the answer. Wouldn’t the better approach be to find out the correct answer? This section would encourage agents to breach their fiduciary duties. That has implications itself. Next there are very easy “workarounds”. The TRESA legislation doesn’t apply to Sellers, or their lawyers. Of course, this is not covered in the Information Guide.
Rectification
The repairs were undertaken and if the issue was resolved, then no disclosure is required.
The critical issue is whether it is presently a material latent defect. So, if a home inspection will reveal it, no disclosure is required. If not, it must still be material. That means a latent defect which will 1) affect to structural integrity of the building, or 2) render the premises uninhabitable. That material test is a difficult hurdle to achieve.
Inquiries
The mere fact that someone asked the question, doesn’t mean you have to respond. You are not permitted to lie, but you can say that your client has not authorized you to respond. They will know, then, that it’s up to them to pursue this matter further if they wish.
Insurance
There certainly can be issues with insurance and they are likely to occur at the last minute. If it’s not a problem, then you could even let them know at the outset
COMMENT
It’s always best to be very careful when it comes to disclosure issues, particular under TRESA. Disclosure can backfire, so always get the Seller’s permission.
Brian Madigan LL.B., Broker