Ontario Court of Appeal and the Seller Property Information Statement

So, what does the Ontario Court of Appeal think about the Seller Property Information Statement drafted by OREA and commonly used in  many transactions?

Let’s have a look at the specific comments directed by the Court to the Seller Property Information  Statement (SPIS) in Krawchuk v. Scherbak May (2011). This is what the Honourable Madame Justice Gloria Epstein said in her reasons for Judgment:

“The focus in this case on the SPIS leads me to endorse the concern expressed in a number of cases about the risks associated with the use of the SPIS and similar documents used in other provinces. 

In Kaufmann, Killeen J. commented …. that use of the forms has “almost inevitably … gives rise to litigation over their meaning and reach.” 

In Alevizos, Scott C.J.M commented ….. that the use of SPIS forms:

seems to present a ripe ground for litigation.  Doubtless this is due in no small measure to the problems inherent in an informal “fill in the blank” form which can have such serious legal consequences when problems subsequently develop in a real estate transaction.  The wisdom of maintaining in use a form fraught with such inherent difficulties, exacerbated by the conflicting statements within the form concerning its purpose and effect, should be addressed by lawyers and real estate agents alike.

In his concurring reasons, Kroft J.A. took this warning even further, commenting:

This judgment should, in my view, be taken as a warning about the routine use of the PCS.  The purchase and sale of a home is for many people the most significant business transaction they will ever enter into.  Representations as to the condition of the property are inevitably going to be requested and given.  I do not believe that these concerns are ever going to be safely dealt with by filling in the blanks on a short form carried in the real estate agent’s briefcase with his or her other supplies.”

Comment

In short, the SPIS document is troublesome:

·        It gives rise to litigation

·        The meaning and the extent of the questions are unclear

·        Conflicting statements within the Form concerning purpose and effect should be resolved

·        The SPIS Document should not be used routinely

·        Representations as to the condition of a property are not properly addressed by a fill-in-the-blanks form.

The comments of the Judges are based on similar documents in both Manitoba and Ontario. In essence, the SPIS document should be improved.

The Real Estate and Business Brokers Act, 2002 enables the use of a Seller Property Information Statement and regulates its use. The Act does not contain a prescribed form. Consequently, any registrant is free to develop and use their own. The document is a valuable disclosure tool if used effectively. It can limit the liability of the seller and the listing agent. However, used incorrectly, or using a Form fraught with ambiguity can lead to litigation.

Parties would be well-served by drafting their own specific, custom-made document suited to the particular property. Make proper disclosure. Reduce it to writing and be clear about what is intended. Disclose facts, not opinions!

Do not have the seller offering comment unless they have actual knowledge. Place warnings and restrictions similar to the OREA document in the SPIS disclosure. Review the document carefully to ensure that there is no ambiguity. Then the document works as it is intended to under the Act.

Used carefully, the SPIS document can be a valuable tool to reduce liability for the sellers and their agents.

While many courts have used the document to establish the basis of liability, they are often cases where there is a substantial oversight or where there is an evident deceptive practice.

In such cases, liability may very well have been imposed without the document.

The difficult cases are those where the seller intends to be honest and forthright and looks to the registrant for guidance in completing the form.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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