Friday, November 13, 2015

Court decision expands risks of disclosure with seller property information statement

The Ontario Superior Court has once again underscored how completing a seller property information statement (SPIS) can be a risky move for vendors.
When it comes to the purchase and sale of real estate the starting point for any analysis is “buyer beware”. For those looking to impress at cocktail parties, the specific expression is “caveat emptor, quit ignorare non debuit quod jus alienum emit,” which translates into “let the purchaser, who is not to be ignorant of the amount and nature of the interest, exercise proper caution.”
This general rule of buyer beware applies to defects that a purchaser could have discovered by means of a routine inspection (known as a “patent defect”) and also “latent defects” (those not discoverable by routine inspection, which are unknown to the vendor).
Notwithstanding the purchaser’s obligation to do their own due diligence, the rule of buyer beware goes out the window once the vendor has made a misrepresentation.
A SPIS is a standard form document that was drafted by the Ontario Real Estate Association. It will contain information relating to defects, renovations and other pertinent property information based on the seller’s knowledge and experience.
A vendor is not obligated to complete a SPIS and if the vendor elects to do so they open themselves up to significant legal risks.
The law in Ontario is that once a vendor completes a SPIS it creates the relationship necessary in law to hold a vendor legally responsible if the information contained in the SPIS is wrong or misleading. Although the buyer has a duty to investigate, the buyer is not required to challenge the honesty of the vendor and is entitled to rely on the representations made by the vendor as though they were true.

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