The real estate associations throughout North American were concerned about the issue of consumer protection. If the seller failed to disclose a defect or actively misled a buyer, real estate agents were worried about their own liability.
A documented disclosure statement became popular. It was thought that if the seller completed it, then, the agent would be “off the hook”. That didn’t turn out to be the case. Not only were both sellers and agents sued, sellers began to assert that they had received poor advice from their own agents about:
1) the risks of signing the document,
2) about the proper completion of the document, and
3) about what matters required disclosure.
So, the lawsuits didn’t go away. In fact, many buyers used them as evidence in their cases.
Consequently, with all the litigation, many sellers refused to sign. Most lawyers in Ontario caution against the use of the seller Property Information Statement.
However, it’s a good document if used properly.
Now, OREA has drafted up Form 225. It provides basic advice and guidance about the use of the Form in the first place. The intention here, is to ensure that the seller, should he choose to sign it, can’t come back later and claim that he really never knew what it was about, or that he had been cautioned not to sign it.
Here’s the new Form 225:
Seller Property Information Statement
Important Information for Sellers
Form 225
for use in the Province of Ontario
TO SELLER(S): ……………………………………………………………………………………………………
…………………………………………………………………………………………………………………
BROKERAGE: ………………………………………………………………………………………………
…………………………………………………………………………………………………………………
Form 220 – The Seller Property Information Statement “SPIS” is intended to provide information to a prospective buyer, based on the fact that the owner of the property will likely have information that a typical buyer would consider to be
important.
As stated on the form, the seller is providing information as known to the seller but is not warranting the information provided. For this reason, OREA recommends that the SPIS not be attached as a Schedule to the Agreement of Purchase and Sale. There is a clause included in the standard OREA Agreement of Purchase and Sale that states “there is no representation, warranty, collateral agreement or condition which affects this Agreement other than expressed in the
Agreement in writing.”.
The Seller Property Information Statement, when properly completed, can be of benefit to both the sellers and the buyers. However, care must be taken when the form is completed. Sellers should answer the questions on the form as fully and accurately as possible. There is space on the form to add “Additional Comments” and this feature should be used to explain items on the form that could be claimed to be incomplete or misleading by a buyer. If there is some question as to whether a particular item should be mentioned on the form, it is better to err on the side of caution and provide the information along with an explanation, e.g. a defect that has been repaired. Also, if the information on the form becomes outdated or incorrect before the property sells or before a sale is completed, the information should be updated and given to the buyer.
With the high volume of property transactions that take place, there will inevitably be disputes between seller and buyers, whether or not an SPIS has been completed. The SPIS, when completed, may become an issue in such a dispute. There have been cases where a court has determined the sellers completed the SPIS accurately, honestly and to the best of their ability and the evidence provided by the SPIS is favourable to the sellers. There have been other cases where a court has determined that a seller has not been forthcoming with important information on the SPIS or has provided misleading information to the buyers.
Whether or not the seller completes an SPIS, the law requires a seller to disclose known hidden material defects to a property. In addition, the Real Estate and Business Brokers Act, 2002 requires registrants to determine and disclose “material facts” when a buyer is purchasing a property. The Seller Property Information Statement can be useful in fulfilling these obligations.
This information statement is provided to clarify the purpose and use of the Seller Property Information Statement.
I/We acknowledge receipt of this information:
Property……………………………………………………………………………………
Seller…………………………………………………………Date……………………….
Seller…………………………………………………………Date……………………….
© 2013, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction of its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter when printing or reproducing the standard pre-set portion.
Form 225 New 2013 Page 1of 1
COMMENT
There are several important points made in the document:
· It should not be attached to the agreement of purchase and sale
· It is not intended to be a warranty
· The SPIS is of benefit to both sellers and buyers
· Answers should be complete and accurate
· Err on the side of disclosure
· Update the information on the Form, as required
The above points are all good and they should generally be followed in large measure.
But, why not attach the document? If it’s right, and it’s properly completed, then why for greater certainty, just attach it.
Several cases have imposed liability upon the seller where the document was not attached and was therefore considered to be a “representation” rather than a warranty. This “trick” associated with showing it, but not attaching it, will just not work if there is clear deception. And, of course, that’s the only time when there is liability anyways.
I don’t think that simply having it on the table, shown, read, and copied, will make any difference. If it’s wrong, then don’t sign it. If you’re not sure, then don’t sign it.
I doubt that there is any magic associated with failing to attach it by referring to it as a schedule or affixing it with a staple or paper clip.
The other points make good sense.
There is a short summary of the law of disclosure in the document. In my view, the summary is close but not entirely correct. We’ll have a look at that statement later.
Brian Madigan LL.B.