Property Information Statements

http://www.thestar.com/App_Themes/TheStar/images/logo_torontostar.gif
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.

I am surprised at Bob’s advice. The Kaufmanns should have sued their agent. This case just reinforces the need to disclose and be honest about problems that vendors are aware whether past or present tense.

Another “nice” agent taking advantage of an elderly couple.

Happens all the time in all fields of endeavour.

I agree, go after the agent.

ya know, when we sold our house in '05, we signed a disclosure statement. After each item we stated, our agent prompted us with “anything else?”
We gave complete disclosure to everything we knew to be wrong with the house, everything we did to the house and the timelines we did the repairs on the house.
House sold in 6 days - from listing date to offer signing.

The court decision cited by the lawyer should be a warning in particular for newcomers in this business not to carry out pre-listing inspections unless they are absolutely certain that their released inspection results will withstand close scrutiny when challenged. Home inspectors in general should realize that their exposure to risk is at least twofold when performing "pre-listing" inspections. This applies in particular if the third-party information is being employed to fill out *“Seller Property Information Statements” *to substantiate the condition of the subject property for sale.

However - I recently read a proposal by an obviously ludicrous individual - who suggested on a local RE forum that there is a lucrative income opportunity by performing *“one hour” *pre-listing home inspections for $100.00 each. It is amazing how many starving home inspectors are prepared to become patsies of the conniving real estate fraternity - only for the sake of staying in business.

RUDOLF REUSSE - Home Inspector since **1976 **- **TORONTO **

I had to re-read that last part, I thought it said parasites…of course, that could apply as well.

pat·sy (pts)
n. pl. pat·sies Slang
A person easily taken advantage of, cheated, blamed, or ridiculed.

What if a report which is 5 years old, and is provided to the purchaser and is relied on by the purchaser? There is no difference in liability whether its pre-listing or pre-purchase?

cheers,

I think My report before or after sale is just as liable to get me in trouble.
Write Hard talk soft miss nothing .

…Cookie

Well I know for a fact that reports that the sellers had conducted for themselves when they purchased the house are often left out on the table for anyone to see coming through for a showing.

I also know that my reports are likely used in the same manner.

The liability is everywhere, all it takes is one disgruntled person who perceives a wrong and has a few bucks kicking around to start the wheels in motion.

I can painfully say you are 100 % correct, Raymond. Two weeks ago I wrote a cheque for $ 7,000. to the lawyer of someone who bought a house last year. I inspected the house for the sellers four years ago. The new people ‘bought’ my report from the seller, with no notification or consultation with me. About nine months ago I was served with papers as a co-defendant with five others. It seems the toilet leaked and caused the upper bathroom floor to rot. In addition, the swimming pool had major problems.

As legally right as I was, I made the decision to pay the 7,000 rather than go to Superior Court for perhaps a week and pay out at least 20,000 in legal fees.

Had I been the sole defendant I likely would have invited the ‘games to begin.’ However, law suits make cannibals out of people. To save their own asses, three defendants offered to settle and of course their lawyers then threatened to cross-sue the rest of us. It soon became obvious which course would cost the least. Nonetheless, I am very bitter to have to pay a large amount of money to someone who has never paid me a dime for the work I do.

…and yes, I do have all the right clauses and disclaimers in my contract and report.

Bill Mullen

Smooth Move Bill a person has to know when to hold them and when to fold them.
Not knowing the complete story sounds like you did the best thing.
I had a long conversation a short while ago with one of the owners of the largest oldest HI company in Toronto on this same subject and we both agreed on this direction.
Thanks very much for sharing this with us .
We all need to hear this type of information from an experienced well established Home inspector…
…Cookie

Bill

Thats a bummer! Sounds like it was the ole shot gun approach.

Regards

Yep. It put a big dent in our self-protection kitty.

They sued me, one of my employees, a pool company, the previous owner, and a neighbour for $ 50,000 jointly and severally.

It’s one of those cases that you just can’t avoid.

Bill Mullen

Sorry about what happened Bill. I have to tell you my friend, I would have put on a good fight before I caved in, on principle alone!

Bill ,

I am sorry to hear about this, would you like me to get some of my Hamilton North End buddies together and go discuss the issue with these people!:twisted: Cheaper than legal fees and the problem disappears (oops did I say that out loud!)

I usta live for a brief time in Hamilton, right near main and King I think…usta know some “gentlemen” that ride steel horses, mebbe they can help too.:wink:

Mario:

We were in court twice on various motions, etc. I fought hard but it doesn’t take long sometimes to see which way the judicial wind is blowing.

Bill Mullen

Thanks, Jerry. Next time I might just ask for help from your ‘Angels’.

Bill Mullen

Take care Bill and keep the attitude positive.

Would something like this covered with E/O insurance? Starting out as i am in this field, it’s good to know any pitfalls or potential concerns.