SPIS ~ Reasonableness is the Test not Honesty

So, what is more important: reasonableness or honesty?

Recently, the Ontario Court of Appeal determined that in completing a Seller Property Information Statement, that reasonableness was important. Honesty was expected, but simply being honest was insufficient to avoid liability.

Here are some observations made by the Court in Krawchuk v. Scherbak:

•·        completion of an SPIS is not mandatory

•·        once a seller decides to fill one out, he or she must do so honestly and accurately

•·        the purchaser is entitled to rely on the representations contained in the SPIS

•·        once a vendor breaks his silence’ by signing the SPIS, the doctrine of caveat emptor falls away as a defence mechanism and the vendor must speak truthfully and completely about the matters….

•·        honest intentions, by themselves, are [NOT] sufficient to avoid liability for inaccurate representations

•·        The obligation is to provide, to the extent possible, accurate and complete information

•·        The key to the basis of the Scherbaks’ liability is ….. that a reasonable person in similar circumstances would have disclosed more. 

Comment

Just trying to be honest is not enough. The Court requires sufficient disclosure. Offer all the information. Holding back something won’t work. Telling just enough to get by is risky.

To summarize, the seller should either keep quiet and exercise their right to remain silent, or complete the document the way it should be completed. The document generally is offered as an inducement to encourage a buyer to be satisfied with the response, or even to alert the buyer to further inquiry by professionals.

Make sure that the seller follows the basics and is:

•·        honest

•·        accurate

•·        complete

The Court believed that a reasonable person in the same position as the sellers would have disclosed more information. The honesty factor is really not enough. If the seller is to offer the truth, make sure it’s the whole truth.

Actually, just the swearing in of a witness in court is much the same, “do you swear…” to tell:

•·        The truth (accuracy)

•·        The whole truth (completeness)

•·        And, nothing but the truth (honesty)

All in all, the case is relatively straightforward in terms of the fundamental legal principles adopted.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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