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September 19, 2011

Full disclosure of home's history protects both buyer and seller

One Ontario political party has announced its intention of creating a public registry of houses used for grow-ops and meth labs, an idea endorsed by the Ontario Real Estate Association (OREA). Buildings that were once used to create illegal drugs do pose health and safety risks. But buildings of this type make up only a small percentage of homes sold in the province. OREA strongly recommends that to protect homebuyers from many other potential property issues, all home sales include a full disclosure of known problems with a property.

Barbara Sukkau, president of OREA, advises that one of the best ways homebuyers can protect themselves is to ask for a Seller Property Information Statement (SPIS) from the homeowners. “An information statement like the SPIS will tell potential buyers what the known issues are in the house—both those you can easily see and those that are hidden behind walls or only appear after something like a heavy rain or snowstorm,” says Sukkau.

While providing a SPIS for a house is not legally required by a seller, it is considered a best practice by OREA, and Realtors will encourage sellers to include one with the house’s listing. OREA also instructs Realtors that disclosure is imperative as prescribed in their Codes of Ethics. “We recommend listing everything that a buyer might be concerned about in the home because, as Realtors, we are trained to work within the rules of real estate law and are familiar with recent court judgements against sellers who failed to inform a buyer about the home’s history,” says Sukkau.

An information document like the SPIS is not a warranty, but it can help protect the buyer or the seller if the buyer discovers an issue with the house after the sale and wants money to fix the problem or takes the previous owner to court. The SPIS shows the seller acted in good faith and told the buyer about all the known issues.

In Ontario, caveat emptor or “buyer beware” applies to real estate law. A homeowner selling his or her property may believe that it prevents litigation if the buyer later discovers a problem with the property; however, this is not actually what caveat emptor means. “Buyer beware” means that the buyer cannot after the sale is closed ask the seller to pay for repairing something on the property if the problem was visible at the time of purchase or could be discovered through a home inspection. For example, if the buyer sees that a window is broken in the home, he or she cannot later ask for money to repair it, but the buyer could ask their Realtor to include a clause in the agreement of purchase and sale to fix the window before the sale is finalized.

On the other hand, the seller is legally obligated to inform the buyer of any problems that would not be discovered during a home inspection (e.g. a basement that floods after a heavy rainfall) as this is a latent, or hidden, defect. If the seller did not tell the buyer about the problem before the sale is finalized, the buyer could take the previous owner to court for failure to disclose the dangers if it can be proven that the sellers knew about the issue when the home was sold.

“Some homeowners may be reluctant to tell a potential buyer that the basement leaks or if there is old wiring, but providing this information can make your house more attractive to buyers than sellers who do not provide a list. People interested in your home will know what to expect and will not have to worry about having unhappy surprises after they move in,” says Sukkau.

To learn more about how a Realtor can help with disclosure when you sell a home, visit www.howrealtorshelp.ca.


About the Ontario Real Estate Association

The Ontario Real Estate Association represents 50,000 brokers and salespeople who are members of the 42 real estate boards throughout the province. OREA serves its REALTOR® members through a wide variety of professional publications, educational programs, advocacy, and other services. OREA.com


To book an interview with Barbara Sukkau, president of the Ontario Real Estate Association spokesperson, or to learn more on how disclosure can protect homeowners when selling their home, contact:

Jennifer Fox
Thornley Fallis Communications
Office: (416) 515-7517, ext. 350
Mobile: (416) 473-9565

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