October 30 2004
Readers weigh in on disclosure statements
Hot topic in the Toronto real estate market
There are strong views both ways on SPIS forms
Judging from the response I received to my column on property condition
statements two weeks ago (http://www.aaron.ca/columns/2004-10-16.htm)
, the issue is a hot and sensitive topic in the Toronto-area real estate
I told the story about the sale of an upscale Winnipeg home in which the
sellers had filled out a property condition form known in the Toronto area
as a seller property information statement or SPIS.
The sellers failed to note on the disclosure form that some of the windows
had been leaking even though there were black stains on the windowsills.
The buyers sued and were awarded damages in small claims court. Their
victory was later upheld by the Manitoba Court of Appeal.
The basis of the appeal court's decision was that when the sellers failed to
answer the question about water leakage fully and honestly, they were guilty
of active concealment and "fraud by silence," even though the stains on the
window sills were quite apparent for any potential purchaser to see.
Justice Guy Kroft of the Manitoba Court of Appeal warned the real estate
industry against the use of property condition forms.
He noted that use of the form would be likely to increase the amount of
litigation in similar circumstances.
He added, "This judgment should, in my view, be taken as a warning about the
routine use of the PCS."
And Chief Justice Richard Scott wrote that the form creates "a ripe ground
I received many emails on both sides of the issue.
Richard Faye, of Coldwell Banker Case Realty in Pickering, wrote to say that
the forms are commonly used, and "if they are filled out honestly and
correctly they will lead to fewer lawsuits."
The form, he says, is under active consideration by the Toronto Real Estate
Board, and may become mandatory.
Faye told me about a transaction he is involved in where there is a dispute
about whether the SPIS was filled in accurately. "I just hope it can be
worked out without going to court," he added.
Brampton realtor Elizabeth Doell believes that the questions on the SPIS
often place sellers at risk for innocent misrepresentations as the questions
asked require the seller to comment on areas in which they have no
She wrote, "We have had discussions within our office regarding the use of
the SPIS. I have not been the only representative to have misgivings about
the `for information purposes only' statement on the SPIS."
Robert Findlay wanted to know why I was "so down" on the form. He suggested
that it could be tweaked so that little litigation would result from its
Realtor Sam Soukas wrote that it is the policy of Re/Max Hallmark Realty in
Toronto that all sellers complete an SPIS when listing a property.
"In my experience," he wrote, "I have had very few people ask to see it when
I have had listings."
The last word goes to Dennis Irwin, of Re/Max All-Stars Realty in
Irwin wrote that the issue of the SPIS form is becoming a critical one for
the protection of sellers.
"I am glad to hear that I am not the only lone wolf out here in the woods
who thinks the ... SPIS is one deadly piece of paper for a seller to sign,"
His opinion is that if the forms become mandatory, it will only be to
protect the realtor and not the client.
"So I continue to scratch my head, and any other part I can find, wondering
where the real estate industry is coming from when advising us to get them
"Because of this (fraud by silence) case, we in the industry can no longer
hide behind the curtain of `well it has never been a problem before,'" Irwin
"Now we must advise the client that there is liability attached to the
form," he added. "My opinion is to scrap the darn thing."
I couldn't have said it better myself. If you're selling a house, get legal
advice before you sign a seller disclosure form.
Unless, of course, you enjoy litigation.