A recent decision of a discipline panel of the Real
Estate Council of Ontario (RECO) could spell the end of the Seller Property
Information Statement in Ontario.
The SPIS is a disclosure form published by the
Ontario Real Estate Association (OREA). Some real estate agents swear by the
form, while others are strongly opposed to it.
I have been very critical of the SPIS because, in my
opinion, the questions are ambiguous, technical or complicated, and they require
expertise in property law, building code, accounting, zoning and other issues —
which most homeowners do not have.
Some agents feel the form exists to protect them
from allegations of failure to disclose property defects. But it now seems that
the form will only create problems for agents who fail to verify its contents.
Across Canada, the SPIS and similar forms have
resulted in about 200 reported court cases since 1997.
A disclaimer on the forms attempts to shield real
estate agents from responsibility for the accuracy of the seller’s answers. But
that disclaimer may not be effective in light of RECO’s recent discipline
Dale Godfrey is a real estate broker in Sault Ste.
Marie. Back in 2010, she represented both buyer and sellers in a purchase
agreement for a $105,000 home.
Before the agreement was signed, Godfrey provided an
SPIS to the buyer. It stated that there were no known problems with moisture or
water infiltration. The buyer relied on that representation in deciding to buy
A subsequent home inspection revealed that the
foundation had significant cracks and was very vulnerable to basement water
The inspection company estimated the cost of repair
at $12,000. The buyer’s bank would not advance funds in the face of the home
inspection and the buyer was unable to complete the transaction as a result.
Godfrey was charged with breach of several sections
of the RECO code of ethics. In an agreed statement of facts submitted to the
discipline panel, she admitted acting unprofessionally by failing to verify
that the SPIS was accurate, and failing to promote and protect the best
interests of the buyer.
Godfrey also admitted that her conduct was
unprofessional or dishonourable, or both.
The panel ruled that Godfrey failed to treat her
clients fairly, honestly and with integrity, and that she failed to promote
their best interests. As well, it found that she failed to exercise reasonable
knowledge, skill, judgment and competence in providing services to her clients.
In admitting that she had an obligation to verify
the contents of the SPIS, Godfrey allowed the discipline panel to find her in
breach of several sections of the RECO Code of Ethics.
Its reasoning seems to be based on an agent’s
obligation to discover and disclose material facts relating to a property
despite the disclaimer on the SPIS form that the agent is not responsible for
Godfrey was fined $6,000.
The discipline panel’s decision may well send a
chill through the ranks of Ontario’s real estate agents because it ruled that
Godfrey failed in her obligation to ensure the SPIS was accurate.
I interpret this case to mean that agents in the
future will now be required to verify all the contents of an SPIS or face the
consequences in a regulatory hearing. If that is now RECO’s position, it is not
difficult to imagine that no agent will ever use the form again.
In the past, OREA has said that it takes pride in
the SPIS form because it acts as “an excellent tool” to inform buyers and protect
sellers over many years of use.
Last week, when asked to comment on the Godfrey
decision, an OREA spokesperson emailed me to say that “the SPIS is another tool
in a registrant’s tool kit which can be helpful in determining information
about a property.”
In 2009 the SPIS was “excellent.” Now, it’s just
“another” tool. As I read it, OREA’s enthusiasm for the SPIS is waning.
RECO DISCIPLINE DECISION
If OREA wants to keeps its own agents out of
trouble, it should kill the form now.
Real Estate Council of Ontario
IN THE MATTER OF A DISCIPLINE HEARING HELD PURSUANT TO THE
REAL ESTATE AND BUSINESS BROKERS ACT, 2002, S.O. 2002, c. 30, Sch. C
REGISTRAR UNDER THE REAL ESTATE AND BUSINESS BROKERS ACT, 2002
- AND -
Subject to Rule 4.02 of the Discipline and Appeals Committee Rules of Practice
(REBBA 2002), I, the Chair of the Discipline Committee (REBBA 2002) have reviewed
and considered the Agreed Statement of Facts and Recommended Penalty together
with the Waiver of Hearing submitted by the Parties to this proceeding and provide the
following Order: FINDINGS: In violation of Sections 3, 4, 5 and 21(1) of the REBBA
2002 Code of Ethics.
ORDER: Fine of $6,000.00 payable to RECO on or before
December 5, 2014.
WRITTEN REASONS: REASONS FOR DECISION
INTRODUCTION This matter proceeded on the basis of an Agreed Statement of Facts and Penalty and
Waiver of Hearing, pursuant to Rule 4.02 of the Rules of Practice (REBBA 2002).
The Agreed Statement of Facts and Penalty read: AGREED
STATEMENT OF FACTS AND PENALTY 1. Dale
Godfrey (“Godfrey”) is registered as a broker under the Act.
At all relevant times,
Godfrey was a broker and broker of record with the Brokerage.
2. The Brokerage, through Godfrey, listed 1-A Street, City A (the “Property”) for the Sellers.
3. By agreement of purchase and sale (the “APS”) dated April 20, 2010, the Numbered
Company agreed to purchase the Property from the Sellers. The APS contained the
a) a purchase price of $105,000.00;
b) a deposit of $500.00;
c) a date of June 25, 2010;
d) the brokerage was the brokerage for both the Sellers and the Numbered
e) the completion of the APS was conditional upon the Numbered Company
arranging suitable financing;
f) the completion of the APS was conditional upon inspection of the property
by a third party and the obtaining of a report satisfactory to the Numbered
Company at its own expense; and
g) the Numbered Company had the rights to inspect the property one
additional time prior to closing.
4. In addition to the APS, both the Sellers and the Numbered Company consented to
multiple representation (dual agency) by signing a Confirmation of Co-operation and
Representation. The document stated, among other things, that the listing brokerage
has a duty of full disclosure to both the Numbered Company and the Sellers, including a
duty to disclose all factual information regarding the Property. Godfrey, on behalf of the
Brokerage, signed the Confirmation of Co-operation and Representation.
5. On or about April 20, 2010, Godfrey provided a Seller Property Information Statement
(“SPIS”) to the principals of the Numbered Company that indicated there were no known
problems with moisture or water infiltration. This SPIS was provided to the Numbered
Company before it entered into the APS and was relied upon by the Numbered
Company in its decision to enter into the APS.
6. The Numbered Company needed financing to purchase the Property. The Bank
contemplated financing the Numbered Company’s purchase by providing a first
mortgage. However, in order to approve the financing, the Bank wanted a report
completed on the condition of the Property. In accordance with finalizing, the Numbered
Company retained the Inspection Company prior to closing to meet the Bank`s
requirement. As a result of the Inspection Company’s report, the Bank refused to
advance funds for closing and, therefore, the Numbered Company was unable to
complete the transaction.
7. The Inspection Company report concluded, among other things, that:
a) That the foundation was “very
vulnerable” to water leakage into the interior basement;b) There were several significant foundation cracks that were visible at the
exterior that extended below grade;
c) That the Sellers confirmed that there were no footing or weeping tile
system around the exterior foundation;
d) That a portion of the Property had been actively leaking the previous year;
e) That chronic leakage occurring at the foundation cracks;
f) Chronic leakage at several areas where the concrete had spalled; and
g) That water collects under the basement floor and is forced up under
pressure through cracks and joints into the basement, and the water
cannot be drained away properly due to either a dysfunctional or nonexistent
8. The Inspection Company’s report estimated the remedial work to cost in excess of
SUMMARY OF AGREEMENTS
It is agreed that Godfrey acted unprofessionally when she:
A. By not ensuring that the version of the SPIS that was provided to the principals of the
Numbered Company was accurate, the Brokerage and Godfrey failed to act fairly,
honestly and with integrity.
B. By not ensuring that the version of the SPIS that was provided to the principals of the
Numbered Company was accurate, the Brokerage and Godfrey failed to promote and
protect the best interests of the Numbered Company.
C. By not ensuring that the version of the SPIS that was provided to the principals of the
Numbered Company was accurate, the Brokerage and Godfrey did not provide
conscientious service to its client, the Numbered Company.
D. By not ensuring that the version of the SPIS that was provided to the principals of the
Numbered Company was accurate, the Brokerage and Godfrey, in the course of a trade
in real estate, engaged in an act or omission that, having regard to the circumstances
that the property was subject to leaking, was unprofessional or dishonourable, or both.
It is agreed that Godfrey breached the following sections of the Code of Ethics:
FAIRNESS, HONESTY, ETC.
3. A registrant shall treat every person the registrant deals with in the course of a trade in
real estate fairly, honestly and with integrity.
4. A registrant shall promote and protect the best interests of the registrant`s clients.
CONSCIENTIOUS AND COMPETENT, ETC.
5. A registrant shall provide conscientious service to the registrant`s clients and customers
and shall demonstrate reasonable knowledge, skill, judgment and competence in
providing those services.
21(1) A broker or salesperson who has a client in respect of the acquisition or disposition of
a particular interest in real estate shall take reasonable steps to determine the material
facts relating to the acquisition or disposition and, at the earliest practicable opportunity,
shall disclose the material facts to the client. AGREED PENALTY DALE GODFREY, the Respondent, be ordered to pay a penalty of $6,000.00 on or before
December 5, 2014.
By initials below, I, DALE GODFREY, acknowledge that I have read and understand the
penalty outlined herein and agree to the said terms and/or conditions.
By initials below, I, DALE GODFREY, agree, understand, acknowledge and consent to
waive the requirement for a hearing and to request an Order from the Chair of the Discipline
Committee that includes this Agreed Statement of Facts and Penalty as a final settlement of
this matter. [Respondent’s Initials]
By initials below, I, DALE GODFREY, acknowledge that I exercised my right to be
represented by Counsel or agent in this matter.
By signature below the Parties agree, acknowledge, understand and consent to the final
settlement of this matter by way of this Agreed Statement of Facts and Penalty.
[The Agreed Statement was duly signed by the Parties.] DECISION OF THE CHAIR
Having reviewed and considered the Agreed Statement of Facts, the Chair of the
Discipline Committee (REBBA 2002) concluded that the Respondent breached Sections
3, 4, 5 and 21(1) of the REBBA 2002 Code of Ethics.
The Chair of the Discipline
Committee (REBBA 2002) is also in agreement with the joint submission of the Parties
as to penalty and accordingly makes the following order:
1. Dale Godfrey is Ordered a Fine of $6,000.00 payable to RECO on or before
December 5, 2014.
[Released: June 23, 2014]
Bob Aaron is a Toronto real estate lawyer
and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at
email@example.com, phone 416-364-9366 or fax 416-364-3818.
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