Vendor not Obligated to Warrant Property: No Commission
This is another interesting case involving the use of the Seller Property Information Statement (SPIS), not for the purpose for which it was intended, but for other purposes.
This particular matter came on by way of appeal from a lower court, to the Divisional Court of the Superior Court of Justice of Ontario in December 2005.
Briefly, the plaintiff in this case is a realtor and sought payment of a commission for a transaction which was never completed. At issue, was the offer itself and
1) whether it was ever properly presented, and
2) whether it met the terms of the listing agreement.
In respect to the latter, a discussion took place concerning the SPIS on the appeal.
The defendant, Ireland owned a property with her spouse with whom she was involved in a matrimonial dispute. It was agreed by Mr. and Mrs. Ireland that Mrs. Ireland would occupy the residence and list it for sale. Accordingly, Mrs. Ireland signed a listing agreement with the plaintiff realtor and as part of that process signed a Seller Property Information Statement.
Actually, there were two offers. The first was rejected because it was not full price. The second was a full price offer but contained two important conditions:
(i) that the vendor warrant that the water on the property was potable and available in sufficient quantity for normal household purposes, and
(ii) that the vendor warrant that the septic system was free from problems.
The realtor claims that the vendor indicated in the Seller Property Information Statement that she was “unaware of any problems with either the quality or quantity of the water on the property.” And, for this reason, states that the vendor was under an obligation to accept the offer with those two conditions.
In fact, Bird stated that the two standard warranties that are included in offers are:
1) the pump and related equipment to perform adequately for safe and significant household use.
2) the other warranty is on the septic system, that it is in good working order.
The appeal Judge commented:
· It is clear that the realtor simply assumed that, because the vendor indicated in the Seller Property Information Statement that she was not aware of certain problems, she was prepared to warrant that such problems did not exist.
· This he was not entitled to do.
· There is no evidence that the appellant ever agreed to such conditions.
· It is one thing to state that one is not aware of any problem with the water and quite another thing to warrant as a positive fact that there is no problem.
· The former case presupposes merely a state of ignorance on the part of the vendor, from which a potential purchaser may, perhaps, take some limited comfort.
· Absent fraud or willful blindness, however, no liability attaches to stating the simple fact that one is not aware of any problem.
· In the latter case, however, one is stating positively the existence of a particular state of affairs and, by so doing, exposing oneself to liability if it should prove otherwise.
· Therefore, the mere fact that the vendor had indicated that she was unaware of any problems with the water or sewage systems is not to say that she was content to warrant that there were no such problems.
On this particular point the Court concluded:
“There is no term, or other reference whatsoever, concerning the water or the septic system “particularly set out” in the Listing Agreement. The two conditions were “other…terms” within the meaning of the agreement. That being said, according to the wording of the Listing Agreement, for the offer to be binding upon the appellant it was necessary that the other terms be “acceptable to [her]”. Thus, on a plain reading of the two documents, in my view, it cannot fairly be said that the offer was the same as the Listing Agreement. As stated above, there was no evidence that these other terms were ever accepted by the vendor.”
The Court dismissed the realtor’s claim for commission for two reasons. The first was that the Offer was not the same as the listing. There was no confirmation contained in the SPIS that the vendor would include any specific warranties in the agreement. Further, on the facts it was also determined that the second offer was not truly “presented” to the vendor.
It is noteworthy that the realtor took the position that anything contained in the SPIS must then be included in an offer. That’s quite a peculiar position!
Nevertheless, the realtor was successful at trial, but overturned on appeal.
This is a rather unanticipated use of the SPIS document. I’m sure that the vendor never thought that her own agent would be using it against her in a lawsuit.
Brian Madigan LL.B., Broker