Issa v. Wilson, 2020 ONCA 756
Issue: Misrepresentation of a property’s size, purchaser’s inspection, and rescission of the Agreement of Purchase and Sale.
Facts
Hassan Issa was a 26-year-old first-time home buyer looking for a home for himself and his family. He was represented by real estate agent Wasim J., who was also involved in the listing for the seller.
The property was represented as being approximately 2,000–2,500 sq. ft. on MLS. Jarrah also told Issa that it was approximately 2,100 sq. ft. The seller independently told Issa that the home was approximately 2,000 sq. ft.
Importantly, Jarrah had not measured or independently verified the property’s size. He admitted that he was negligent in doing so.
Issa inspected the property twice and saw all of the rooms. He subsequently made an offer and paid a $50,000 deposit.
Before closing, an appraisal obtained for his mortgage revealed that the home was actually only 1,450 sq. ft. Issa immediately refused to complete the purchase and sought rescission of the agreement and return of his deposit.
The Superior Court granted rescission and ordered the return of the $50,000 deposit. The agents appealed.
Decision of the Court of Appeal
The Court of Appeal dismissed the appeal and upheld the rescission.
The important issue was whether Issa’s physical inspection of the property meant that he could no longer rely upon the representations concerning its size.
The Court rejected the proposition that
- a purchaser’s inspection automatically defeats reliance on a representation about the property.
The Court stated that there is no absolute rule that inspection of a property displaces reliance on representations about its characteristics. The circumstances of each case must be considered.
Why the misrepresentation was material
The Court identified several factors:
- Specific representations were made
Wassim J. represented the property as approximately 2,100 sq. ft., and the MLS stated 2,000–2,500 sq. ft. The seller also represented it as approximately 2,000 sq. ft. - The discrepancy was substantial
The actual size was only 1,450 sq. ft., representing a discrepancy of approximately 27% to 42%, depending on which representation was used. - Issa acted consistently with reliance on the representation
He remained prepared to close until the appraisal disclosed the actual size. Once he learned the truth, he immediately advised that he would not complete the purchase. - His age and inexperience were relevant
The Court accepted that Issa’s status as a young, inexperienced, first-time purchaser could properly be considered in determining whether his reliance was reasonable.
Important legal principle
The central lesson from Issa v. Wilson is that:
- A purchaser’s inspection of a property does not automatically eliminate reliance on a seller’s or real estate agent’s representation about the property.
Rescission may be available where there is:
- a material misrepresentation that induced the purchaser to enter into the contract.
The Court relied on the established principle that rescission for misrepresentation requires a false statement that is material and that induced the plaintiff to enter into the contract.
Significance for real estate agents
This is an important case for Ontario real estate professionals because it demonstrates the potential consequences of putting unverified property information on MLS.
Jarrah did not personally measure the property. Instead, he relied on information supplied by the seller and an old listing from 12 years earlier. He ultimately admitted negligence.
The case also demonstrates that an agent cannot necessarily defend a misrepresentation claim by arguing:
- “The buyer inspected the property, so the buyer should have discovered the problem.”
That argument will depend on the circumstances. Where the representation concerns something that is not readily apparent from an ordinary inspection, and the representation is substantial and material, the purchaser may still be entitled to rely upon it.
COMMENT
Issa v. Wilson is a strong warning about inaccurate MLS information. A purchaser’s opportunity to inspect a property does not automatically cure an agent’s or seller’s inaccurate representation.
Here, the combination of the specific representations, the enormous discrepancy in square footage, the buyer’s reliance, his immediate reaction upon discovering the truth, and his lack of experience justified rescission and the return of the $50,000 deposit.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com