SPIS ~ Royt and Goldenberg

Find Out Before They Sign: Encroachments, Easements, and Licenses - True  Title

What about the stairs and retaining wall on City property


This is a case which involves the discussion of the Seller Property Information Statement (SPIS) and its effect on the outcome of a proposed real estate transaction. A review of the case will be limited to the SPIS issue.

Briefly, Mr, and Mrs Royt submitted an Offer on 114 Vesta Drive a fashionable area of Toronto known as Forest Hill. The deal was struck at $1,470,000. Mr. Royt was in the building business and planned to demolish the residence and construct a new one. The offer was submitted on 8 March 2006 and the transaction was set to close on 15 August 2006.

You may very well appreciate that a million and a half just for the lot was rather expensive (that is in 2006).

The 2006 real estate market didn’t turn out well for the Royts. They were unable to sell their own home and consequently wanted to terminate this transaction in any way they could, legally.

The result was that they brought an application to Court pursuant to the provisions of the Vendors and Purchasers Act to permit them to rescind the transaction and secure the return of their deposit. They raised a number of objections, but the ones that are relevant to our consideration involve the SPIS.

Facts

Here are the basic facts:

· The vendor’s listing with MLS included a Seller Property Information Statement (SPIS) completed by the vendor which stated that there were no encroachments.

· Attached to the agreement of purchase and sale and referenced in the agreement entered into between the parties was a survey conducted in 1940 which did not show any encroachments on adjoining lands.

· The purchasers were given a tour of the house in June 2006 and there was no mention by the vendor’s husband of any encroachments.

· The purchaser Alexander Royt is in the business of designing and building houses.

· In June 2006, he obtained a survey that noted concrete steps, a concrete landing and stone retaining walls which encroached on the municipal road allowance by up to almost eight feet.

· The Royts continued to prepare site plans for the property. They say that after discussing the matter with their solicitor, they became concerned about the impact of the encroachments.


The Application Arguments by the Purchaser

Here are the arguments put forward by the purchasers:

· The applicants take the position that they relied upon the accuracy of the SPIS when they entered the agreement of purchase and sale.

· The form completed by the vendor said that there were no encroachments.

· The applicants say that, had the encroachments been disclosed in the SPIS or on the old survey of 1940, they would not have entered into the agreement or incurred the costs for a new survey.

· They argue that various proposals by the vendor including an encroachment agreement from the City, title insurance and/or an abatement of $14,000 in the purchase price are inadequate responses to their objection.

· The existence of the encroachments would affect the marketability of the property. Title insurance provides no compensation for reduced marketability of the property. An abatement in price is also only a short-term solution.

· The applicants also argue that they are entitled to rescind the agreement because of the misrepresentations made by the vendor.

· The vendor knew about the encroachments at the time that the SPIS was completed as they had constructed the structures in question.


The Application Arguments by the Vendors

This is the response to the purchasers’ case by the vendors:

· The vendor takes the position that the requisition was invalid as the requisition date had passed; alternatively, they argue that if there is a deficiency, it is not an issue of title.

· The encroachments are not on the property.

· The vendor could still convey the entire property.

· The vendor also says that they had completed the SPIS noting no encroachments because they had permission from the City of Toronto given years earlier as a “boulevard permit” that allowed them to build.

· Technically, the structures are not encroachments.

· However, the vendor is not able to provide a copy of any documents showing that a permit was issued and the City does not have the records because of changes made to its computer system.

· The vendor also argues that the objection about encroachments is academic as the applicants had always had plans to demolish the dwelling and rebuild. Only recently, did they talk about maintaining the existing structure and renovating.

· The vendor argues that the applicants are not acting in good faith and that what is underlying the application is that they have not been able to sell their own house at the price they had hoped to obtain and simply want to find a way out of the agreement.


The Decision

The trial Judge concluded that the purchasers were not entitled to rescind the agreement.

Considering the SPIS Form the trial Judge stated the following:

“16] I now turn to the issue of whether the purchasers were entitled to rescind the agreement on the basis that the vendor made misrepresentations by checking off “no encroachments” on the Seller Property Information Statement. In Rampersad v. Rose, [1997] O.J. No. 2012, Deputy Judge Searle of the Small Claims Court discussed the use of the SPIS in real estate transactions:

It is a form adopted by the local real estate board about 1993 and is a form of disclosure ostensibly used to provide potential purchasers with information about the property…. The form contains a number of explanatory and qualifying statements.

[17] The term encroachment refers to an “unauthorized” or “illegal” or “unlawful” intrusion onto another’s land: see Black’s Law Dictionary, Eighth Edition, (West Publishing Co.: St. Paul, 2000); Concise Oxford Dictionary, Eleventh Edition (Oxford University Press: New York, 2004).

In this case, the stairs, landing and retaining walls extend over the front lot line onto City owned property but were constructed with permission of the City and, certainly, without objection.

The survey report obtained by the purchaser did not characterize the structures as encroachments.

The Seller Property Information Statement (SPIS) had notations on it that the information is provided for information purposes only and is not a warranty even if attached to an agreement of purchase and sale. The form also stated “Buyers must still make their own enquiries”.

While the vendor’s husband agrees that if he was now asked about encroachments (after seeing the recent survey), he would answer the question differently, he has provided an explanation for completing the SPIS the way he did. I do not consider the statements made on the form to be misrepresentations.”

The Judge stated that “rescission based upon alleged misrepresentations in the SPIS form was not available.” Accordingly, the application was dismissed.

COMMENT:


This is another good result for vendors. However, in this case, the sympathy was with the vendor. The purchasers simply wanted out of the deal any way they could. The market had dropped, that meant for this property and the sale of their own house. The question, of course, is still whether another Judge would be so kind if the sympathy in that case was with the purchaser.

Looking at the qualifications: the statement is not a warranty. The Buyer should make his own inquiry. In fact, the vendor agrees that he did not understand the document. Had he known what he now knows his answer would have been different.


It is clear that there was no knowing attempt to deceive the purchasers. The stairs and the retaining wall were very evident when approaching the property.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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