Real estate boards and agents across the country continue to promote the use of the Seller Property Information Statement (SPIS), despite the fact that the disclosure form has resulted in an avalanche of litigation resulting from its widespread use and misuse.
Proof of the litigation explosion comes in the form of a detailed analysis of every Canadian case on the SPIS, which I have just completed for a presentation to real estate lawyers at a gathering of the Ontario Bar Association next month.
Since the forms were first introduced around 1993, there have been 49 reported court decisions resulting from the use of the SPIS in Ontario, and a further 153 from the other provinces and territories, for a total of 202 cases. I cannot think of any other single document which has accounted for so much litigation in the same time period.
Typical of the cases taking up considerable court time lately is the 2010 decision of Small Claims Court Deputy Judge Jay State in the case of Smith v. Campanella.
David and Brenda Smith sued Salvatore and Maria Campanella for damages in the amount of $9,256.25 arising from their purchase of the Campanella house on Queenslea Dr. in Hamilton.
The Campanellas signed an SPIS form which was given to the purchasers before the agreement of purchase and sale was finalized.
Beside the question for the type of wiring in the house, the seller had the option to check off one of four options: copper, aluminum, knob-and-tube or other. There is a space beside the word “other” where the sellers could have filled in “unknown,” but instead they checked off “copper” and left a blank in the space beside “other.”
They completed the form in this way on the advice of their real estate agent.
After the purchase transaction had closed, the Smiths discovered that the house had both aluminum and copper wiring. They sued for damages representing the cost to remove the aluminum wiring and replace it with copper.
The judge accepted that the Campanellas actually believed that the wiring was all copper and that they did not deliberately or fraudulently mislead the buyers.
Nonetheless, he determined that their answer was based upon “a thin premise, an assumption, a guess, really, based upon the age of the building . . . made without doing any checking to ascertain if the answer was accurate, and this assertion amounted to a negligent misrepresentation.”
In this case, the SPIS was not just “attached” to the Agreement of Purchase and Sale, but it was specifically incorporated into the Agreement of Purchase and Sale by a clause to that effect. As a result, it became a contractual commitment of the sellers.
Not only was the statement about copper wiring made a part of the agreement, but the sellers confirmed it orally on two occasions.
The written decision of State is unusually lengthy for a Small Claims court case. In 264 paragraphs and more than 28,500 words, the judge conducts a detailed analysis of the many court decisions in this area of law.
In the end, the judge was not happy with the actions of either the buyers or the sellers. Even though he found the sellers responsible for misrepresentation, he said the buyers were partly the cause of their own misfortune since they should have conducted a more thorough investigation of the wiring issue which concerned them so much.
This seems to be the first case in which a judge found the sellers and buyers equally at fault. As a result he reduced the damages by 50 per cent, awarding them only $3,556.88 and costs.
Based on the more than 200 SPIS cases taking up the time of lawyers, judges and homeowners in recent years, it’s clear to me that anyone who uses an SPIS in a real estate transaction is playing with a ticking time bomb.
Why real estate associations across the country continue to foist these dangerous disclosure forms on their clients continues to amaze me. Bob Aaron is a Toronto real estate lawyer and board member of the Tarion Warranty Corp. He can be reached at email@example.com. Visit his website at www.aaron.ca.
Applying the logic of a few folks who like to visit our message board…it would only make sense that, in order to better protect the public from sloppy disclosure statements, all home sellers should be licensed by the government before being allowed to sell a house. Apparently there are many more of them being sued than home inspectors.
(" Apparently there are many more of them being sued than home inspectors. ")
Thanks James that is exactly what I thought when I read this last night .
In Canada we have a group of self-appointed experts who are pushing big time to gain control of our industry.
They give no facts but are trying hard to convince our Government how they have the answers.
They double talk and tend to attack those who disagree with them. http://www.nachi.org/forum/f48/bbb-complaints-list-2008-a-57843/
This report shows how few actual complaints there are against our industry,.
We need to stand up to this loud Mouth Minority .
With conservative #'s of an average of 400,000 house sales per year X 15 years (since 1995)= 6,000,000 sales/202 = the rate of court cases resulting from the SPIS documents is probably as high as 1 per 20,000 sales (0.00005%) to a low of 1 per 29,000 sales(0.000034%).
I’d be surprised if the home inspection rate is as low as 1 in 20 or 30 thousand!!!
I hate to say it…but if it was that low, Mike Holmes would not have enough homes for his HI series!!
Please present some facts .
Most of Mikes Homes are about contractors who have done a very poor job.
I wonder why you and others are not complaing about them.
Many on W5 programs are about shoddy repairs on the home .
I wonder why you are do not have some thing to say about that .
Many programs on W5 are abour auto repairs .
I wonder why you have nothing to say about that.
BBB puts many compaints well above home Inspectors .
From Grocery,Snow plowing, Gardeners, Electronic, cell phones ,Electrictians, and hundreds more and you seem to ignore all these
Why do you just single out Home Inspectors.
You are not satisfied with BBB but do not seem to be able to find facts to back up your reasoning .
BBB Complaints list 2008
[size=2][FONT=Arial][size=2][FONT=Arial][FONT=Arial][size=2]Actual Complaints… 27[/FONT][/size][/size][/FONT]
[size=2][FONT=Arial][FONT=Arial][size=2]Complaints Settled …14[/size][/size][/FONT][/FONT]
[size=2][FONT=Arial][FONT=Arial][size=2]Complaints Not Settled… 13[/FONT][/size][/size][/FONT]
[size=2][FONT=Arial][FONT=Arial][size=2]These are Canadian Figures[/FONT][/size][/size][/FONT]
[size=2][FONT=Arial][FONT=Arial][size=2]BBB list of Complaints Home Inspection Ranked #108[/FONT][/size][/size]
Canada BBB 2008 Statistics Sorted by Complain[FONT=Arial][size=1][FONT=Arial][size=1]t [/size][/size][/FONT] Industry Description Inquiries Report Rank Complaints Complaint Rank Complaints Settled % Complaints Not Settled % Complaints Unable to Pursue %[/FONT][/FONT][/FONT][/size]
I think the proponents of legislative control over their competitors have finally run out of legitimate argument when all that is left to support their claim for “need” is the subject of some guy’s television show.
I single out HI’s because I have been in the field part or full time for many years…26.
My inspection today is a referral from a recently retired municipal inspector. The young lady had a friend that worked in the inspection office and referred my client to him and then he to me! (BTW, I have never personally met him.)
Even though she had a strong referral source, she gave me a “third degree” questioning before hiring me!! A good friend of hers had a poor inspection that cost them quite a few thousands…The friend’s lawyer said not to sue as it would cost more than it was worth. (Note: My longest litigation here was 3-4 weeks short of 6 YEARS!)
BTW…My wife overheard the conversation leading to myself being hired for today…she said “By the sounds of that, you should’ve refused the work!”.
HOW MANY HOME INSPECTORS ARE THERE IN CANADA? HOW MANY INSPECTIONS ARE COMPLETED / YEAR? HOW MANY OF THOSE INSPECTIONS LEAD TO MINOR / MAJOR CLIENT COMPLAINT?
In order to properly assess the condition of the Canadian Home Inspection Industry we need to establish the actual failure rate of Canadian Home Inspectors. We don’t need guesses, estimates, suppositions or Ouija board or tarot card readings. Our industry, and every practicing inspector in it have been defamed for too long.
Your questions are only relevant to yourself and a few of your “hangers-on”. CALL BC…maybe they have the answers but won’t tell you!!
Ask the public a simple question: “Should HI’s be licensed or regulated?”…the answers will be well over 90-95%…
They are our customers, they way outnumber us and they should have some say in how a service that can affect their largest buying decision will be carried on so that they can have some assurance of having well trained and experienced HI’s delivering that service.
I find it strange how the loud mouth minority are great experts
( they keep telling us how smart they are) .
Here is just few Law suits against the Regulated Agents .
The agents make home Inspectors look great .
Read and weep .
Presently, our clients have a “weasel clause” (that apparently Massachussets frowns on or has banned -according to Joe F on these boards), walk away from trying get redress, or go to the courts at potentially big expense (that’s why lawyers are telling clients-"It’ll cost more than it’s worth)…to you guys…it’s “Poor Them”…Great respect for your future clients!!
So… why do we license electricians, mechanics, plumbers, etc? That’s just more government costs for what?
In an unlicensed environment, no one would claim they were an electrician unless they were, right? No one would ever claim they were an engineer…right?
It’s time to reveal The Great SPIS Myth the prevailing fiction about the Seller Property Information Statement (SPIS), a disclosure form published by the Ontario Real Estate Association (OREA).
Although its use is endorsed and encouraged by many OREA member boards, real estate agents remain sharply divided on whether the form is too dangerous to use, and whether it protects the public or the agents who try to get sellers to sign it.
I have been very critical of the form because it results in a great deal of litigation among sellers, unhappy buyers and the agents who are caught in the middle.
The official position of OREA and industry commentators who support it is that the problem with the SPIS is not the form itself, but that some sellers do not tell the truth.
The key to the successful use of the SPIS, OREA says, is honesty. In every one of the court cases I have written about in this column, OREA’s view (set out in a letter to me last month) is that “it was not the SPIS form itself that caused legal difficulty for the sellers: rather it was the failure of the sellers to be forthright in their disclosures about the property.”
This, in my view, is the fatal flaw in the OREA logic.
I call it The Great SPIS Myth the fiction that if sellers are honest they won’t wind up in litigation over the SPIS form.
A careful analysis of the reported court decisions shows that this position is simply not accurate, and that is probably why OREA’s president declined my request for an interview.
Consider some of the questions on the form:
“Does the survey show the current location of all buildings, improvements, easements, encroachments and rights-of-way?” My response: only a licensed land surveyor can answer this question. Even the most honest seller doesn’t have the skills to answer it properly.
“What is the zoning on the subject property? Does the subject property comply with the zoning? If not, is it legal non-conforming?” Unless a seller is intimately familiar with the municipal zoning bylaw, it would be foolhardy to answer these questions.
“Are there any restrictive covenants that run with the land? Are there any drainage restrictions?” Few sellers have a current title search at hand in order to properly understand or answer these two zingers.
“Are there any local levies or unusual taxes?” To me, all taxes are unusual and most sellers have no idea if there are any levies.
“Is the sale of the property subject to GST?” Only someone familiar with the GST legislation would be safe in answering this. “Has the use of the property ever been for the growth or manufacture of illegal substances?” Note the use of the word “ever.” Unless the proverbial “honest seller” knows what happened in the house under previous owners, this question could be an invitation to litigation.
“Is the property under the jurisdiction of any Conservation Authority?” Not something most homeowners would have the slightest clue about.
Other questions ask for the size of the electrical service, the type of wiring, , whether there is any lead or galvanized metal plumbing, and what is under the carpeting.
How the honest but typical homeowner is supposed to know the answers to these questions off the top of her head is beyond me.
Condominium owners are asked to itemize what is included in the common expenses, whether a reserve fund study has been completed, how much money is in the reserve fund, and whether there are any pending rule or by-law amendments.
Again, these are not questions that even the most honest condominium owner could readily answer without extensive investigation.
The SPIS form is so impossibly technical, so complicated, so ambiguous and so badly worded that even a college of cardinals, a posse of priests, an institution of imams, a multitude of monks or a regiment of rabbis could not honestly fill it out.
**Disclosure form is a danger to buyers and sellers **
November 12, 2010
Over the years, I have repeatedly criticized the Seller Property Information Statement (SPIS), a form published by the Ontario Real Estate Association.
Use of the form is a controversial issue in the real estate community. Some listing agents encourage sellers to complete the form and provide it to buyers to disclose various issues about a house being offered for sale.
In numerous columns, I have been critical of the form because it is complex, ambiguous, misleading and technical. Many court cases have resulted from the use and misuse of the document.
Not only does the SPIS present a risk of litigation to buyers and sellers, but it now appears that its use has repeatedly resulted in real estate agents getting disciplined by their regulatory body, the Real Estate Council of Ontario (RECO).
Recently, RECO added a search function to its website (www.reco.on.ca), allowing the public to search 10 years of discipline decisions by the subject matter of the rules which an agent may have breached.
In no time at all, I was able to confirm that there are a dozen reported discipline decisions in which the agent involved was censured over the use of the SPIS, among other issues.
The most recent was in September, 2010. The agent involved published a listing for a property indicating that an SPIS form was available, when in fact it wasn’t until after it was too late. The penalty imposed for this and other transgressions was $7,000.
In September of 2007, an agent was brought before a discipline panel regarding the sale of a property which contained urea formaldehyde foam insulation (UFFI). She failed to get the buyers to acknowledge receipt of the SPIS form which disclosed the existence of UFFI. Penalty: $7,500.
Another agent faced a discipline hearing in June, 2007. The SPIS indicated that the water supply was a well with a backup cistern. A question about year-round water supply was left blank. In fact the well was dry and the cistern had to be refilled by truck every two weeks. The agent was fined $10,000 for failing to review and correct the incomplete SPIS form.
Earlier, the brokerage had been fined $5,000 for failing to adequately supervise the activities of its salespersons to prevent harm to consumers.
Three agents and their employer came before a discipline hearing in late 2003. They were involved with the sale of a property in Caledon which was zoned rural and hazard land. The listing only showed the property as rural, but the SPIS disclosed it was hazard land which could not be used for any further construction. The selling agent failed to show the SPIS to the buyers before they signed the offer.
For their lack of disclosure, the three agents were fined $5,500 each and their employer got hit with a penalty of $2,000.
Earlier in 2003, an agent was fined $3,000 for failing to disclose on the MLS listing or the SPIS that the “private” driveway to the house was actually on land owned by the province of Ontario.
Two agents back in 2001 listed a home on one acre of land in Caledon which was about to be designated as being within a High Potential Mineral Aggregate Resource Area. The listing noted that an SPIS was available but this turned out to be false. For their lack of disclosure, one agent was fined $1,000 and the other $3,000.
In another 2001 case, the SPIS stated that there was wood under the carpeting in a listed home. The agent assisted in preparing the form and failed to verify the statement, which was only partially true. Fine: $750.
Based on these reported discipline cases, the SPIS forms present a significant danger to the real estate agents who use them. They also have a tendency to get buyers and sellers involved in nasty litigation.
Since the use of SPIS forms is so clearly risky to all parties in a transaction, it continues to puzzle me why some agents still promote them.
That was a interesting read.
I went further and investigated the news paper column to further inform myself on the subject.
Roy is it possible to email a SPIS from.
I would like to see one first hand.
You are a great wealth of knowledge to the HI industry as a whole.
Bravo Roy,again good work…Robert.