SPIS ~ Cole and Vankoughnett

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Poor Municipal Sewer System, Water Collection Disclosure

This case involves representations and remedies available for improper completion of the Seller Property Information Statement (SPIS).

The purchasers brought an action in Small Claims Court for misrepresentation, and non-disclosure of patent defects and latent defects in respect to a semi-detached residence sold by the vendors in 2003. The specific items of concern were the sewer system, the roofs, and water penetration into the basement.

The plaintiffs are a young couple purchasing their first home and the defendant is an elderly widow. The parties entered into an agreement of purchase and sale in August 2003 and the transaction closed September 3, 2003.

The vendor had at one time owned both sides of the semi-detached residence and throughout her ownership of the property there were several issues concerning the sewer system and the underground drainage.

The Court found a municipal system with a very low capacity constitutes a defect.

The severe rationing of use as described by the plaintiffs (restricted showers and restricted laundry) amounts to a serious adverse effect on the habitability of the residence.

The Court also found the defendant was aware of the defect or would have been aware if she had confronted the question in the context of normal demand by a busy family of 3 rather than a very low demand by two elderly women sharing a joint line for many years. The plaintiffs were entitled to compensation for the amount which will be required to correct the defect.

In early 2003, a leak occurred in the roof above the kitchen. The vendor made arrangements to have it repaired. It did not leak again until the Spring of 2004, at which time it required far more extensive repairs. The Court dismissed this part of the purchasers’ claim.

There was also a claim water damage in the basement. When the defendant listed the house early in 2003 she completed for the benefit of prospective purchasers a Seller Property Information Statement . In answer to the question “Are you aware of any moisture and/or water problems in the basement or crawl space?” she answered in the affirmative and commented “In spring.”

The Court made the following findings of fact:

· the understatement on the SPIS was a description of the traditional water problem water problem which had existed until 2002.

· About the time the defendant was completing the SPIS in February of 2003 she was beginning to experience an accumulation of water for the first time.

· The SPIS was not amended to show the new reality.

· By May of 2003 the basement floor was looking “crummy” according to the defendant.

· It is probable it was by then stained by the water which accumulated rather than was being carried away.

· About May of 2003 and approximately 3 months after the property was listed the defendant’s son painted the basement floor because it now looked “crummy.”

· Ankle deep water in a basement is a defect.

· Painting that floor was in this case a concealment of that defect.

· It adversely affects the habitability of the residence and in particular the basement.

· The defendant had recently become aware of the newly acquired defect and had a duty to disclose it but did not.


The purchasers were awarded a Judgment for damages reflecting the cost of replacement of the sewer drain system and the cost of repairing the leak in the basement.

COMMENT:

The reasons for Judgment do not specify whether the SPIS document had been made part of the agreement, or whether it was merely a representation that accompanied the listing.

However, when answering the questions, the vendor has to consider normal usage of the building. The answers have to be reasonably objective and be considered in light of the normal usage of the premises by a purchaser. The drainage system needs to be sufficient to draw waste water away every day of the week, not just on some days and at intervals. This was in fact a system that was connected to the municipal system.

The original SPIS was completed when the property was listed for sale, however, things changed. Water leaked into the basement and the SPIS needed to be updated. It was not, and therefore this constituted a misrepresentation.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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