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A little info, a lot of trouble TheStar.com - living - A little info, a lot of trouble
Vendors often create problems for themselves by signing SPIS forms
March 29, 2008
Bob Aaron
A Superior Court decision released last fall emphasizes once again how dangerous it is for Ontario vendors to sign Seller Property Information Statements, and how the use of the forms serves to promote needless litigation.
John and Suzanne Kaufmann are both retired medical doctors in their 80s, living in London, Ont.
In early 2004, they discovered signs of water penetration and damage in two large bay windows in their living room, in the floor of the master bedroom, and in the closet of an adjacent bedroom.
More damage was evident in a crawl space and small basement room below the master bedroom.
The home insurers were notified and a restoration company came to do drying, cleanup and repair work to the tune of about $12,500.
An insurance estimator attributed the cause to ice damming, resulting from heavy winter conditions in London in the winter of 2003-04.
Ice damming is caused when snow and ice buildups occur on roofs, followed by melting.
After the melt, water finds its way into the house under the eaves, and causes serious internal damage.
The estimator recommended installation of additional baffles on the roof and ventilation holes beside the bay windows, and this was done by the Kauffmans at their own expense.
Later that year, the Kaufmanns decided to sell the house and listed it with a local real estate agent for $495,000.
As part of the listing arrangement, the owners signed a Seller Property Information Statement (SPIS).
These documents are apparently routinely provided by London Real Estate Board agents, although they are not mandatory.
Three questions on the form asked: “Are you aware of …” any moisture or water problems, water damage or roof leakage? Although John was inclined to disclose the water damage from earlier that year, his real estate agent persuaded him to answer “no” on the basis that the questions were in the present tense, and there was no water problem at the time of signing the statement.
It turns out that the advice was wrong.
Within a few days, the Kaufmanns had accepted an offer to purchase the house for $485,000 from Michael Gibson and Nancy Pettigrew.
The SPIS was attached to the agreement.
At the top of the form is a caution that the questions were answered for information purposes only and that the SPIS is not a warranty. Buyers are encouraged by the form to make their own inquiries.
Prior to closing, the purchasers discovered that water damage had occurred earlier in 2004, and were “flabbergasted” by the extent of the repairs done.
The purchasers were told by the restoration company that there was no guarantee that the water penetration would not recur.
In light of the new information, the purchasers terminated the transaction.
The Kaufmanns eventually re-sold the property to other buyers for $380,000 – a reduction of $105,000 from the earlier price.
It wasn’t long before the Kaufmanns sued Gibson and Pettigrew for their losses, and the would-be buyers counterclaimed for return of their $5,000 deposit.
The matter was heard in a three-day trial in London last February before Justice Gordon Killeen.
In his ruling released in July, the judge dismissed the Kaufmanns’ action, and declared that the purchase agreement had been rescinded.
“Since the SPIS form was incorporated in the agreement,” Killeen wrote, “the non-disclosure was tantamount to false representations as to the condition of the home and justifies rescission.”
On the plain wording of the questions, the judge said that the answers could not be restricted to the present-tense basis, but full disclosure of the past repairs was required.
Gibson and Pettigrew were awarded costs of $48,000 plus GST to be applied against their total legal bill of $75,010.
The plaintiffs, in turn, received a very expensive lesson in English grammar.
I have repeatedly stated in this column that although the SPIS form appears to be designed to avoid problems, it clearly leads to more and more expensive litigation.
If you’re listing your property for sale, and your agent insists on getting an SPIS completed and signed, my advice is either to get another agent, or hire a good litigation lawyer.
If you sign the form, you could end up in court.
*Bob Aaron is a Toronto real estate lawyer whose Title Page column appears Saturdays. He can be reached at *
bob@aaron.ca. Visit his website at aaron.ca.
