By Stan Albert

As many of REM’s readers know, I’ve thundered on about using Seller Property Information Statements (SPISs, as they are known in Ontario) from time to time. Toronto lawyer and columnist Bob Aaron has dubbed me the “unofficial ombudsman” for Ontario Realtors. Be that as it may, I asked Lou Radomsky, Ontario Real Estate Association Standard Forms Committee legal counsel, to answer some of the slanted views of Mr. Aaron. It’s my fervent hope that some of you will weigh in on this article.

Lou was called to the Bar in 1977. He is an OREA Real Property Law instructor and he also instructs the Real Estate Council of Ontario Update Course. Lou has written and presented a variety of other courses.

Stan Albert: What gave rise to the SPIS?

Lou Radomsky: The SPIS was originally developed in Ontario by one of the boards. It was created to perform a number of tasks. It was and is meant to afford the real estate salesperson an opportunity to gather information about and become familiar with the property. It also gave and continues to give the seller the chance to be forthright about issues on the property that would be of interest to a buyer. OREA saw the benefits and value of the information provided by the form and created its own.

Albert: How many jurisdictions use a form similar to the SPIS?

Radomsky: Virtually every provincial and territorial association has some version of this form available.

Albert: Why does the form have a number of questions that may not apply to a property?

Radomsky: The form is a written format of questions a Realtor is supposed to ask when taking a listing. The Realtor would go through a series of questions to become knowledgeable and informed about the property. In any conversation of that nature there will be questions that the Realtor asks that have no application to a property. However, by having these questions addressed in the form, in the event that the question is appropriate, then it has been asked.

Albert: Do you believe that the completion of the form should be mandatory?

Radomsky: There are instances where the form would not be appropriate; as in a power of sale, an estate sale, a tenanted property to be sold or where the seller does not exhibit a working knowledge of the property. However, the benefit to having a written format is that the answers have been documented. The effect is to ensure that a buyer would become aware of issues that might affect their decision to buy.

Further, the use of the form is meant to provide the disclosure necessary to avoid litigation. A buyer who has been told of a deficiency in advance of making an offer on a property will have great difficulty pursuing successful litigation on that issue. The benefit of the written format is to avoid any dispute that might arise with a verbal disclosure vs. written disclosure.

Albert: What do you think about the court cases that are out regarding the SPIS?

Radomsky: There are many cases where the use of the form was a deciding factor in protecting the seller and the sales representative or broker.

Albert:  How is the form meant to be completed?

Radomsky: It is not appropriate for the Realtor to leave the form behind and ask the seller to complete it in the Realtor’s absence. The Realtor’s job is to meet with the seller while the SPIS is completed. The Realtor is to explain what the question is asking and not to provide an answer.

Albert: What cautions would you suggest to anyone completing the form?

Radomsky: Primarily, be honest. Most of the litigation where the sellers were found liable came from circumstances where the court did not believe that the sellers were telling the truth.

It needs to be emphasized that the use of the form is like any other tool; it must be used and completed correctly. The difficulties arise when that does not happen. Some of the cases have illustrated this. It is expected that the seller diligently reviews the questions before answering them. A cavalier approach might result in a determination that the seller was negligent in completing the questions.

It should also be noted that there are questions that the seller may not be able to answer. If this inability results from lack of knowledge, then the form provides a place for responding that way – “Unknown”. If the inability is because the question does not apply, then it is appropriate to answer “n/a”. If the seller does not understand the question then it is important that an explanation be provided so that the seller can correctly respond.

Err on the side of caution. Better to disclose a repair that was completed a while before the sale of the property, than to have the buyer discover the issue after closing when it has become a bigger issue.

What used to be afforded the protection of the principle of caveat emptor has eroded over time. The courts expect sellers to be forthright about what it is they are selling.

This is, in most cases, the most expensive undertaking that buyer and seller will undertake in the lifetime. We should hold sellers accountable for trying to “slide one by”.

Today, we instruct Realtors that disclosure is imperative. This is also prescribed by Section 21 of the Code of Ethics.

Sellers are under an obligation to disclose defects on the property, in particular, defects that a court might consider a latent defect. A latent defect is typically in regards to a structural matter of which the seller has knowledge and the defect is not readily apparent. The ones that most often find their way to a court are leaks.

Latent defects can be pursued in a court in the absence of a SPIS. The SPIS affords the seller the opportunity to tell the buyer. Upon disclosure a successful court action would be extremely problematic.

In a current circumstance consider the Krawchuk v. Scherback case where ultimately both the sellers and the salesperson were held liable. The trial judge came to the conclusion that the sellers were not forthright but rather were dishonest in not disclosing defects on the property and held the sellers liable. On appeal the court found the sellers liable and the sales representative liable as well. The sales representative in a multiple representation situation had advised the buyers to remove a home inspection condition.

The Appeal Court said: “To avoid liability in negligence, a real estate agent must exercise the standard of care that would be expected of a reasonable and prudent agent in the same circumstances.”

The Court of Appeal determined that the salesperson was obligated to engage in further investigations where a visual inspection revealed issues. These included a “sloping floor” and the statement by the sellers that there had been a repair done 17 years previously and there had been no further issues.

On the other hand, take the Cotton v. Monahan case in 2006 where the buyers purchased a home and discovered a large number of latent defects. The buyers pursued the sellers and the real estate salesperson, claiming damages. After a review the court determined that the buyers had been advised that there had been construction done to the premises without a permit and that the buyers should consider a home inspection. The buyers chose not to have one done. Upon discovery of the defects, they sued the sellers because they felt that the sellers had concealed these defects. There was a SPIS completed and provided to the buyers.

The court determined that the sellers and the salesperson were forthright in all their dealings with the buyers and had not concealed anything. The action was dismissed.

Albert: So do you think it is a good idea to complete the SPIS?

Radomsky: Emphatically yes! If completed appropriately, it gives the buyers valuable information. It affords the sellers the chance to be forthright in their knowledge of the property. Problems arise with or without the form, when the sellers attempt to mislead or conceals issues. These can lead to litigation whether there is a SPIS or not.

Consequently, by offering the SPIS to a seller to complete it allows the seller to tell the buyer of anything that might be of value to the buyer in deciding whether to purchase a property.

Stan Albert, broker/manager, ABR, ASA at Re/Max Premier in Vaughan, Ont. can be reached for consultation at stanalb@rogers.com. Stan is now celebrating 41 years as an active real estate professional.