By Martin Rumack
The Ontario Real Estate Association’s Seller Property Information Sheet (or SPIS form), was designed with the best of intentions. But it has become a good example of the old adage, “the cure is worse than the disease”. Now the confusion and uncertainty surrounding this form has been magnified by OREA’s introduction of a so-called “clarifying” form – one that seems designed to actually warn sellers against signing the SPIS at all.
But let’s back up a moment: Why is the SPIS form often so confusing, ineffective and controversial?
The SPIS form – known as OREA Form 220 – contains a series of questions about the property that the seller is supposed to fill out. Ostensibly, this is in order to comply with the existing legal requirement imposed on all sellers to disclose hidden material defects in the property.
In theory, its main purpose is two-fold: on the one hand, it is designed to protect buyers by “establishing that correct information concerning the property is being provided” to them. On the other hand, the form is also designed to protect sellers, by confirming that buyers are still obliged to make their own inquiries about the property. This shields sellers – and hopefully, their real estate agents – from disputes that arise over misinformation.
Why the controversy? Whatever the intention may be, in reality the SPIS form itself has prompted more confusion and dispute – not to mention a significant amount of litigation – than existed before it was introduced in 1997. In short, it has further complicated the already-uncertain area of real estate law relating to seller disclosure obligations.
The reasons for this are many.
For one thing, it is a complex, technical and sometimes repetitive document. Too convoluted to be understood by the average seller, it also presupposes (often inaccurately) that he has a certain detailed level of information and knowledge about the property. The form also asks technical legal questions that are well beyond the expertise of virtually all sellers.
Secondly, the SPIS form has been inconsistently adopted. Some real estate boards make its use mandatory, while others have left it as optional. Certain boards that initially required the use of the SPIS form have now reconsidered. And in regions where it is discretionary, some individual agents push for its use, while others do not.
Thirdly, courts have been “all over the map” when ruling on how the form should be interpreted, how the information provided on the form should be applied, whether they should be upheld and what their legal effect really is.
Essentially, with its inherent flaws and its (sometimes) optional add-on role in the disclosure process, the SPIS form seems to bring uncertainty rather than clarity to the minds of those it is designed to protect.
What is this new “warning” form? The latest “information statement” that OREA published, titled the Seller Property Information Statement –Important Information for Sellers (Form 225), is essentially an “informed consent” form that purports to “clarify the purpose and use of the Seller Property Information Statement”. However, the real purpose, one can assume, is to advise sellers and their agents about the potential dangers inherent in its use.
Form 225 begins helpfully enough: It advises that “The Seller Property Information Statement, when properly completed, can be of benefit to both the sellers and the buyers. However, care must be taken when the form is completed. Sellers should answer the questions on the form as fully and accurately as possible.” It also recommends that it is better to err on the side of caution.
But the new form does little to clarify matters beyond that; it fails to elaborate on the scope of a seller’s disclosure duty, and avoids firmly identifying the role or legal impact of the original SPIS form. It does advise against attaching the original SPIS form as a schedule to the Agreement of Purchase and Sale. However, it then merely goes on to restate the existing law, by pointing out that:
1) whether or not the seller completes an SPIS, the law requires him to disclose known hidden material defects of a property; and
2) by filling out the SPIS form in the first place, the seller is not giving the potential buyer any sort of warranty.
While Form 225 provides a space for the seller to sign, as a means of acknowledging that this so-called “clarifying” additional information has been received, one has to wonder whether the average seller will have gained very much clear and helpful information at all, by reading and signing it.
What’s the bottom line? We already know that the SPIS form has a troubled history and has sparked confusion, not to mention litigation. The Informed Consent Form for SPIS, though ostensibly designed to provide information, can be read as an implicit warning against using the SPIS form at all. That’s probably great advice.
Toronto lawyer Martin Rumack’s practice areas include real estate law, corporate and commercial law, wills, estates, powers of attorney, family law and civil litigation. He is co-author of Legal Responsibilities of Real Estate Agents, 3rd Edition, available at www.lexisnexis.ca/bookstore. Visit Martin Rumack’s website at www.martinrumack.com.
