One of the most effective ways for a real estate professional to reduce the risk of being sued is to make appropriate written disclosures.
While excellent communication is essential in every transaction, verbal conversations are often forgotten, misunderstood, or remembered differently years later. A carefully drafted written disclosure can become one of the strongest pieces of evidence if a dispute arises.
Many lawsuits against real estate agents do not stem from deliberate wrongdoing. Instead, they often arise because a purchaser later claims that important information was never disclosed or that the significance of certain information was minimized. A written disclosure demonstrates that the issue was identified, communicated, and brought to the client’s attention before the transaction was completed.
When Should You Make a Written Disclosure?
Whenever there is uncertainty, incomplete information, or a material issue that could influence a buyer’s decision, consider whether a written disclosure is appropriate.
Examples include:
- Water penetration or previous flooding.
- Foundation movement or structural concerns.
- Roof leaks or uncertainty about the age of the roof.
- Moisture, mould, or previous remediation.
- Knob-and-tube or aluminum wiring.
- Septic systems, wells, or private road maintenance.
- Boundary uncertainties or encroachments.
- Zoning questions or permitted uses.
- Unpermitted renovations.
- Rental equipment.
- Condominium special assessments or pending litigation.
- Easements or rights-of-way.
- Known environmental issues.
- Any information that has not been independently verified.
Even where the information originates from the Seller, the listing brokerage, municipal records, or a previous MLS® listing, an agent should be cautious about simply repeating it without qualification if it has not been independently verified.
To Whom Should the Disclosure Be Made
To the client for sue, but on occasion the other side in a deal. It is very important to follow the rules.
Never State Assumptions as Facts
One of the most common mistakes made by real estate professionals is presenting assumptions as though they are established facts.
For example, an agent may say:
- “The basement has never leaked.”
- “The addition was built with permits.”
- “The zoning allows a duplex.”
- “The lot is exactly fifty feet wide.”
Unless these matters have actually been verified, those statements can later become allegations of negligent misrepresentation.
A much safer approach is to accurately describe the source of the information.
For example:
- “According to the Seller, the basement has not experienced water penetration during their ownership.”, or
- “The Seller advises that the addition was completed with permits; however, Buyers should satisfy themselves by reviewing municipal records.”
These statements are truthful, identify the source of the information, and avoid representing unverified facts as personal knowledge.
Disclose Limitations in Your Knowledge
Real estate agents are not engineers, surveyors, electricians, environmental consultants, lawyers, or home inspectors.
Trying to answer technical questions outside your expertise creates unnecessary liability.
Instead, be comfortable saying:
- “I don’t know.”
- “That should be verified.”
- “You should consult the municipality.”
- “You should have that inspected by an appropriate professional.”
Some agents worry that admitting uncertainty makes them appear less knowledgeable. In reality, Courts often view this as evidence of professionalism. Recognizing the limits of your expertise and directing clients to qualified professionals is generally far safer than offering opinions outside your competence.
Put Important Advice in Writing
Many disputes begin with the statement:
- “My agent never told me that.”
A brief follow-up email can eliminate much of that uncertainty.
For example:
- “As discussed today, because the property contains an older addition, I recommend that you confirm permits with the municipality and obtain a professional home inspection before waiving conditions.”
Years later, that email may become compelling evidence that appropriate advice was given.
Encourage Independent Investigations
Disclosure is not simply about providing information—it is also about encouraging buyers to conduct their own due diligence.
Where appropriate, recommend that clients obtain:
- Home inspections.
- Survey or boundary verification.
- Legal advice.
- Engineering reports.
- Environmental assessments.
- Municipal zoning confirmation.
- Condominium status certificate reviews.
- Financial advice where appropriate.
Importantly, these recommendations should also be documented in writing whenever practical.
Be Careful When Representing Sellers
Listing agents frequently receive information directly from their Sellers. While Sellers are generally expected to answer questions honestly, agents should avoid becoming the guarantor of those answers.
Rather than stating:
- “The furnace is ten years old.”
A safer statement may be:
- “The Seller advises the furnace was replaced approximately ten years ago.”
If documentation exists, retain a copy in the transaction file.
If no documentation exists, avoid overstating certainty.
Disclosure Does Not Mean Breaching Confidentiality
There is an important balance between disclosure obligations and fiduciary duties owed to a client.
An agent cannot simply disclose confidential information that a Seller has instructed them not to reveal. However, if the information constitutes a material latent defect or another matter requiring disclosure under the law, difficult issues can arise.
Where a Seller refuses to permit disclosure of information that legally should be disclosed, the brokerage should seek legal advice immediately. Continuing to market a property without addressing such issues can expose both the brokerage and the registrant to significant liability. If there is doubt, then “walk away” from the transaction.
Written Disclosures Protect Everyone
Good written disclosures benefit everyone involved in a transaction.
They help Buyers make informed decisions.
They demonstrate professionalism.
They reduce misunderstandings.
Most importantly, they provide valuable evidence if a complaint or lawsuit is filed years later.
The objective is not to create fear or overwhelm clients with paperwork. Rather, it is to communicate material information clearly, accurately, and honestly while documenting that the communication occurred.
In litigation, the issue is often not whether the agent knew everything. The issue is whether the agent acted reasonably, disclosed what was known, identified what was uncertain, and encouraged appropriate investigation.
Those simple practices can make the difference between successfully defending a lawsuit and facing costly liability.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com