November 8th - 2008

LEGALBEAT: Honesty, clarity needed for SPIS

The sellers were aware of some water damage and had professionals do some repairs and restoration work.

The sellers were aware of some water damage and had professionals do some repairs and restoration work. Later they decided to sell the house and when being interviewed by the REALTOR® had details of the water damage and corrective work. However, when they completed the SPIS they did not disclose this.
 
There was some dispute as to what the REALTOR® told them the statements meant. Their trial lawyer argued that disclosure did not need to be made since the questions talk in the present tense. For example: "Are you aware of any moisture and/or water problems?" The judge did not agree with that.
 
The REALTOR® for the buyers included the SPIS in the offer and included this clause: "The buyer acknowledges that the buyer has received a completed Seller Property Information Statement from the seller, attached hereto as Schedule B and forming part of this Agreement of Purchase and Sale and has had an opportunity to read the information provided by the seller on the Seller Property Information Statement prior to submitting this offer."
 
When the buyers discovered that there had been water damage they refused to close the transaction. The sellers resold with a fully completed SPIS and sued the buyers for their losses of $113,000. The judge noted the language of the SPIS that says the statements are not warranties. However, he decided that the statements were representations on which the buyers can rely, especially when they are attached to the offer. "…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 raised in the unambiguous questions at issue here. In this case, the called-for truthful answers were an integral part of the contractual terms and the failure to provide truthful answers fully justified the defendants in refusing to close and asking for rescission of the agreement."

Kaufmann v. Gibson, 2007 CanLII 26609

MERV'S COMMENTS
Some lawyers for sellers tell them not to complete an SPIS, but buyers' lawyers may insist on them. The language may be overly broad and sometimes not appropriate for some sellers. However, if sellers decide to answer them, they should do so honestly and completely.

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