Disclosure document is an invitation to litigation

Bob Aaron
Bob Aaron bob@aaron.ca

Posted On: Saturday, September 12, 2009
The vast majority of residential real estate transactions close as scheduled, without problems or disputes. The chances of any given real estate deal resulting in litigation involving the buyers, sellers and real estate agents increase dramatically when the agents insist that the sellers complete a disclosure document called the Sellers Property Information Statement (SPIS).

The form is published by the Ontario Real Estate Association (OREA).

An increasing tide of court cases from across the country is evidence that the forms provide an endless source of income for litigation lawyers, and a bottomless pit of grief and expense to the parties involved in the transaction.

An Ontario Superior Court decision released earlier this year is yet another example of how dangerous these forms are and why OREA and some of its member boards should bear the blame for promoting them.

Back in 2002, Maria Lunney purchased a 90-year old Ottawa duplex for $180,000 from Jana Kuntova. The listing agent was Masoud Badre, an employee of Re/Max Metro City. The house was described in the sale listing as having a "stone, stucco" exterior with a "stone" foundation.

This type of foundation, with parging on the interior sides, was in common use until about 70 years ago, and is also known as a rubble foundation.

At the time of the listing, Kuntova with the assistance of her agent, Badre completed a Sellers Property Information Statement on the OREA form.

In it she stated that she was not aware of any structural problems in the basement.

Prior to the sale to Lunney, however, Kuntova had accepted an offer to purchase the property from Marque Laflamme. That purchaser had obtained a home inspection report, which indicated advanced crumbling of the rubble foundation under the rear extension of the house. Laflamme backed out of the transaction, although the seller was not told the reason for the cancellation.

At the time of her purchase in 2002, Lunney also commissioned a home inspection, but it did not reveal any defects in the foundation as the interior basement walls had been covered with drywall since the previous inspection.

A subsequent inspection undertaken for Lunney in 2005 revealed that there were serious foundation deficiencies behind the drywall, and that the property would either have to be demolished or raised to permit the construction of a new foundation under it.

The following year, Lunney sued Kuntova, Badre and Re/Max Metro-City for $300,000 in damages for misrepresentation. The co-defendants also sued each other.

The trial took place late last year over the course of five days. As a general guideline, the three lawyers involved probably spent at least another five days each in pre-trial discoveries and in preparation for trial. That comes to a total of a minimum of 30 lawyer-days, and points to a combined legal bill for everyone of something north of $100,000.

In the end, the judge found no evidence that the defendants were aware that the foundation was useless. The judge dismissed the case. Following the trial, Lunney paid court costs to the defendants, but the amounts have not been made public. As well, the losing plaintiff was responsible for her own legal bills and the foundation is still at the end of its useful life.

But for the existence of the SPIS this case may never have gone to court. The form is an invitation to litigation, and in my view agents who promote it are doing themselves and their clients a huge disservice by exposing everyone to needless litigation.

Bob McLean, director of communications at OREA, the publisher and promoter of the SPIS disclosure form, emailed me last week to say that the association had declined my request to interview a spokesperson but would shortly be providing me with a written statement about its position on the SPIS.



Lunney v. Kuntova, 2009 CanLII 7173 (ON S.C.)

Print: PDF Format
Date: 2009-02-24
Docket: 06-CV-034131
URL: http://www.canlii.org/en/on/onsc/doc/2009/2009canlii7173/2009canlii7173.html
Noteup: Search for decisions citing this decision

COURT FILE NO.:  06-CV-034131

DATE:  2009/02/24








B E T W E E N:










Robert J. De Toni, for the Plaintiff










- and -












Mark W. Smith, for the Defendant, Jana Kuntova and


Adam Stephens, for the Defendants, Masoud Badre and Re/Max Metro-City Ltd.














HEARD:  October 7, 8, 9, 10, and 17, 2008




Power J.



[1]          In her Amended Statement of Claim the plaintiff seeks damages in the amount of $300,000 against all defendants for fraudulent and/or negligent misrepresentation in connection with her 2002 purchase of a duplex known as 558 Melbourne Avenue, Ottawa, from the defendant Kuntova.  In addition, she seeks punitive damages in the amount of $25,000.

[2]          The defendant Badre acted as the vendor s real estate agent.  Mr. Badre was employed at all relevant times by the third defendant, Re/Max Metro-City Ltd., a real estate broker.  Ms. Kuntova has delivered a cross-claim against her co-defendants seeking contribution and indemnity should the plaintiff be successful in her claim against Ms. Kuntova.  In addition, Mr. Badre and Re/Max have cross-claimed against Ms. Kuntova.

[3]          The plaintiff s claim, in its essence, is that the defendants, at the time of the sale and purchase, were aware that the foundation of the house had deteriorated to such an extent that it was virtually useless.  The main building and its foundation appear to have been constructed more than 90 years prior to the property being listed for sale in 2001.  The plaintiff alleges that the defendants deliberately concealed the condition of the foundation from her with intent to induce her into purchasing the property.

[4]          The foundation had, in fact, reached the end of its useful lifespan by 2001 and, indeed, some time before 2001.

[5]          The defendants deny that they were aware of the extent of the deterioration of the foundation and, in particular, deny any attempts to conceal its condition from the plaintiff.

Findings of Fact and Discussion

[6]          Ms. Kuntova purchased the Melbourne property in 1993 or 1994.  She lived in it until the time of the sale to the plaintiff.  Mr. Badre acted as her agent at the time she purchased the property and again at the time it was listed for sale in 2001 and sold in 2002.  Mr. Badre is an experienced real estate agent.

[7]          Notwithstanding that there are circumstances that give rise to a suspicion of misrepresentations by the defendants, I have concluded that the plaintiff has failed to meet the burden on her to prove misrepresentation and/or concealment.  In my opinion, the inferences from the facts which the plaintiff wants me to make are not warranted by the evidence.  I have not been persuaded on a balance of probabilities that any or all defendants knew that the foundation had become useless or that they were guilty of concealment or reckless disregard for the truth or falsity of any representations.  Neither Ms. Kuntova nor Mr. Badre was shaken in the giving of their testimony.  I accept as credible Ms. Kuntova s testimony that she listed and sold the property for financial reasons and that she was not aware of nor did she misrepresent the condition of the foundation.  Similarly, I find that Mr. Badre was not aware of the condition of the foundation and that he too did nothing to misrepresent its condition nor did he in any way attempt to conceal it from the plaintiff.

[8]          In other words, I have not been satisfied beyond a reasonable doubt that the plaintiff has made out a case of misrepresentation against Ms. Kuntova or Mr. Badre.  In the light of this conclusion, it goes without saying that the plaintiff has not met the higher burden on her to prove misrepresentation by fraud.  There is no reason to suggest any liability on behalf of Re/Max because the validity of the claim against it depends on the validity of the claim against Mr. Badre. 

[9]          The Melbourne property was listed by Ms. Kuntova through Mr. Badre in 2001.  The information supplied through the Ottawa Real Estate Board to prospective purchasers described the property as having a stone, stucco exterior with a stone foundation.  The house is a 2-storey home of wood framed construction with a brick veneer covering the stucco.  The foundation was, and still is, known as a rubble foundation with some parging on its interior sides.  The evidence establishes that a rubble foundation is also known as a stone foundation.  This type of foundation is commonly found in homes of more than 70 years of age.  The lifespan of such foundations is lengthy and depends on several factors.  I find that by 2001 this rubble or stone foundation would, most likely, have required some attention but that the need for such attention would not necessarily be obvious to the average homeowner unless there was some sort of structural failure that was obvious.  I find that none of the defendants were aware of any structural failure attributable to the foundation.  There is no negligent or deliberate misrepresentation in the above-mentioned Ottawa Real Estate Board information. 

[10]      The experts do not seriously disagree that, as a result of evidence that became available approximately three years after the completion of the real estate transaction, the foundation had come to the end of its useful life.  In particular, I accept the evidence of Mr. Bottriell P. Eng. RHI that this foundation has reached the end of its lifespan and has actually failed in a few locations and that this failure has caused the parging and brick to come off the wall which is unsupported and starting to collapse.   I also accept Mr. Bottriell s conclusion that this house needs immediate structural repair.  

[11]      It is important to note that there is an old addition at the back of the main building.  This addition was constructed by partially enclosing a wooden porch at the rear of the main building.  This addition has no foundation as such i.e. other than the original porch supporting posts.  When the property was listed there was a crawl space under this addition which was accessible through a small access door on the side of the skirt wall that surrounded the addition.

[12]      I accept as truthful Ms. Kuntova s testimony wherein she said that, just prior to listing her property, she personally inspected the outside of the house and observed some cracks on the outside walls and that she repaired them herself.  I accept her testimony that this was not an attempt to cover up any foundation problems.  As aforesaid, she was not aware of the foundation problems even though she was aware that the foundation was very old.  Age alone does not justify a conclusion that the foundation had failed completely.

[13]      At the time Ms. Kuntova listed the property for sale through the defendants she, with Mr. Badre s assistance, completed a Seller Property Information Statement.  I will hereinafter refer to this document as an Information Statement.   This Information Statement is a form prepared by the Ontario Real Estate Association for use throughout Ontario.  It was a relevantly new device in 2001.  While Mr. Badre could not specifically recall doing so on this particular occasion, I accept his testimony that his usual practice was to tell the vendor that, when the Information Statement was completed, it was necessary for the vendor to be honest and that a copy would be supplied to prospective purchasers. 

[14]      The Information Statement form contains the following noteworthy provisions beginning with the following which appears at the top of the first page:

                        ANSWERS MUST BE COMPLETE AND ACCURATE.  This Statement is designed in part to protect Sellers by establishing that correct information concerning the property is being provided to buyers.  All of the information contained herein is provided by the Sellers to the broker/sales representative.  Any person who is in receipt of and utilizes this Statement acknowledges and agrees that the information is being provided for information purposes only and is not a warranty as to the matters recited hereinafter.  The broker/sales representative shall not be held responsible for the accuracy of any information contained herein.


                        BUYERS MUST STILL MAKE THEIR OWN ENQUIRIES.  Buyers must still make their own enquiries notwithstanding the information contained on this statement.  Each question and answer must be considered and where necessary, keeping in mind the Sellers knowledge of the property may be incomplete, additional information can be requested from the Sellers or from an independent source such as the municipality.  Buyers can hire an independent inspector to examine the property to determine whether defects exist and to provide an estimate of the cost of repairing problems that have been identified.


[15]      Below the two above quoted paragraphs there is a series of questions.  The following are quotes of some of the relevant questions:






UNK (unknown)







15. Do you know the approximate age of the building(s)?  Age Any additions: Age




WATER SUPPLY AND WASTE DISPOSAL: (there is nothing of relevance under this heading





ENVIRONMENTAL:  (again, there is nothing of relevance here)















1.  Are you aware of any structural problems?




2. (a) Have you made any renovations, additions or improvements to the property?




   (b) Was a building permit obtained?




 (c) Has the final building inspection been approved or has a final occupancy permit           been obtained?




7.  Are you aware of any moisture and/or water problems in the basement or crawl space?




16.  Is there a home inspection report available?  Date of Report .




CONDOMINIUM:  (not applicable)





RENTAL INFORMATION:  (not applicable)






[16]      Following the questions and answers portion the form provides a space for ADDITIONAL COMMENTS .  The following appears:





[17]      Ms. Kuntova signed this document.

[18]      I pause to note that Information Statements are not mandated by law.

[19]      In October 2001 Ms. Kuntova accepted an offer to purchase the property from Mr. Marque Laflamme.  The agreement was conditional on an inspection.  The inspector retained by Mr. Laflamme, David Glennie, noted in his report and advised Mr. Laflamme that the basement walls (in the main building, not the addition), were all covered on the interior (meaning that they could not be seen).  He made the following relevant comments at pp. 9, 12, and 22 of his report and advised Mr. Laflamme of these during the inspection: (Note: the underlining is substituted for circling that was done on the report format employed by Mr. Glennie)

                        Age: the main building was constructed about 1920 s, with one/two/no old   additions/renovations rear

                        Class:  Substandard      Economy         Average           Custom            Luxury



                        √         basement walls are all / mostly / partly covered on the interior


                        √         interior finish has been recently painted: basement / first floor / second    floor / third floor




                        IV)      This SUMMARY CHART OF DEFICIENCIES is to be used as a guide only and should not be considered as fully inclusive of all repair items.  Description of the systems and detailed notes are on the following report sheets.


                        SYSTEM         Col.      *1      * 2     * 3    


1.0 General Exterior (not relevant)










 2.0  Structural





main foundation




 advanced crumbling of rubble-stone material noted under rear extension (above grade)





 - walls are completely covered in the basement





 removal of drywall required for better determination

 rear extension




bowing of skirt wall and no structural piers found


                        *Column 1:  Major Deficiency

                        *Column 2:  More Info Req d

                        *Column 3:  Monitor


                        STRUCTURAL SYSTEM








 2.1 Foundation

√ Foundation walls visually checked where visible (closed space)

 √ Major

 √ MR

 √ Monitor


 √ Stone/rubble     (F) main

significant crumbling and weakness of foundation wall at rear crumbling, scaling, bowing, old



√ exterior parging

exterior parging loose, cracks (other than the handwritten comment about significant crumbling, the other comments relate to the

addition at the rear)


 2.2 Basement  Moisture Considerations

√ Visually Inspected, Limitations as per  2.1



√ Moisture Readings taken on finish materials

 √ MR

√ Monitor

√ Interior wall finish 100%

√ Not accessible



seepage  -  occurring near window (sides)




[20]      Mr. Glennie advised Mr. Laflamme that to be thorough he would have to perform a much more detailed inspection than the type contracted for in order to give a detailed report on the foundation.  He also pointed out other deficiencies which he ranked as major.  However, the main deficiency was the foundation.

[21]      Mr. Glennie did not have any personal recollection of the inspection.  His testimony was based on his written report.  He testified that, notwithstanding that in the interior the walls were covered with drywall, they were able to see part of the foundation walls from a crawlspace area.  Mr. Glennie also recalls seeing some evidence of leakage near the basement windows where there was evidence of water penetrating from the exterior.  He concluded that the house was at least 80 years old and that rubble/stone foundations, such as the one here, have a lifespan of 55 to 100 years.  He said it would be reasonable to assume that the foundation was nearing the end of its useful life.  Mr. Laflamme backed out of the transaction.

[22]      It is not clear from the evidence just what information was passed on by Mr. Laflamme to his agent or by his agent to the vendor.  Notwithstanding this uncertainty, I find that neither Ms. Kuntova nor Mr. Badre was told that the reason for Mr. Laflamme s backing out of the transaction was the state of the old rubble foundation.

[23]      It is important to note that the Melbourne property was the only real estate ever owned by Ms. Kuntova.  During her plus or minus 7 years occupancy of the premises she was married for a short period of time.  Her husband was knowledgeable about construction and made a number of repairs; however, she was/is not sophisticated in real property or construction issues.  Her husband constructed the drywall in the basement during 1996 or 1997.  The purpose of putting up the drywall, according to Ms. Kuntova, was to improve the look of the basement and to keep down the dirt.  Ms. Kuntova described the basement as dark and dusty.  I accept Ms. Kuntova s testimony that she never saw any water on the basement floor at any time during her habitation of the premises.  Indeed, she painted the floors and ceilings in the basement around the time of the drywall installation.  As I found earlier, Ms. Kuntova did not intend to hide the defective foundation behind the drywall.

[24]      Ms. Kuntova testified, and I accept her testimony as truthful, that, during her habitation, there were no smells in the basement emanating from water or dampness.  She found an old sump pump in the basement; however, she threw it out because it was not working and it was not needed.  She said that no water had accumulated in the sump pump hole and that she was never advised by anyone of any problems with her foundation prior to completing the transaction of purchase and sale with Ms. Lunney.

[25]      Ms. Kuntova also testified that she had no specific recollection of completing the Information Statement; however, she acknowledged completing it.  She also said that she did not know that she had an option with respect to completing the document but that she understood it was the usual practice to complete such a statement.  She could not recall Mr. Badre telling her what he intended to do with the questionnaire.  However, she insisted that she would have answered the questions honestly.  It will be observed that none of the questions in the Information Statement relates specifically to a foundation .

[26]      Mr. Laflamme, whose testimony I accept as credible, testified that he was present during the inspection and was advised by Mr. Glennie that the foundation was in very bad shape and would cost a lot of money to fix.  As a result, Mr. Laflamme decided forthwith not to complete the purchase of the property.  Neither Ms. Kuntova nor Mr. Badre was present at the inspection.  I should add, as well, that the foundation walls were not visible, or were just barely visible, from the exterior of the building.  At no time did Mr. Laflamme, his wife, or Mr. Glennie speak with Ms. Kuntova or Mr. Badre about what they had seen and discussed between themselves.  However, they, or one of them, did discuss what they saw with their real estate agent who was with them during the inspection.  That real estate agent did not give evidence at trial.  This is significant.  Mr. Laflamme testified that he personally saw some crumbling in the walls in the basement.  However, he could not recall which wall it was.  He did, however, recall Mr. Glennie pulling stones or earth from the foundation walls while in the basement.

[27]      Following the notification to Mr. Badre by Mr. Laflamme s agent that the transaction would not be completed, Mr. Badre advised Ms. Kuntova that there was a problem in the exterior back wall near the kitchen and pointed out to her some areas where stucco was peeling.  He advised her to fix it which she did.  All of the work done by her flowing from this conversation was done to the addition, not the main building.  I pause to observe that, because of the passage of time, all witnesses at trial suffered from memory loss.

[28]      Notwithstanding that I do have some concerns with the reasonableness of the testimony of both Ms. Kuntova and Mr. Badre, the evidence at trial, taken as a whole, is such that I cannot and do not reject the testimony of either of them as being untruthful.  Notwithstanding the efforts of Mr. De Toni, counsel for the plaintiff, he was not able to shake or seriously question their veracity.

[29]      It was Ms. Kuntova s testimony that Mr. Badre told her that Mr. Laflamme had backed out of the transaction because of the peeling stucco at the rear of the premises.  While Mr. Badre could not recall this, I accept, as aforesaid, Ms. Kuntova s evidence as credible.

[30]      Mr. De Toni, in his cross-examination and during argument, raised a number of questions about the veracity of the testimony of the defendants.  I am left with a request by the plaintiff to draw inferences in the face of evidence to the contrary that appears to be credible.  Ms. Kuntova s evidence about the work she did following the collapse of the Laflamme agreement is corroborated by the contractor which she hired to effect some repairs to the addition, Mr. Heafy.

[31]      During his repair work, which was prior to Ms. Lunney agreeing to purchase the property, Mr. Heafy closed off the earlier mentioned hatch at the side of the addition.  His testimony was that it was his idea to do so and that he was not instructed to do so by Ms. Kuntova.  I observe that if Ms. Kuntova s intent was to have Mr. Heafy cover-up the foundation, it would have been unwise to continue to show the property to prospective purchasers, which she did, while Mr. Heafy carried out his work.  Therefore, this is strong evidence in favour of the defendants in contradiction of the allegation that, by closing the hatch, their intent was to make it impossible to view the interior of the foundation from the rear of the property.  Mr. Heafy testified that, when working at the site, he did not see the main foundation wall and saw nothing abnormal.

[32]            While I did not agree with the substance of all of Mr. Heafy s testimony, there is no justification for rejecting his testimony as incredible.  In my opinion, the nature of the information received by the defendants following the Laflamme/Glennie inspection, was not such as to convey that the foundation was useless.  Therefore, I conclude that there was no reason compelling the defendants to complete a revised, or new, Information Statement.  Indeed, when Ms. Kuntova became aware of what she understood to be some concerns about the addition, she undertook to remedy those concerns, not hide them.  After the Laflamme deal fell through, according to Ms. Kuntova, Mr. Badre spoke with her and told her there was a problem in the back of the house i.e., in the kitchen area.  He took her outside and showed her places on the back wall where stucco was peeling off and told her that it should be fixed.  Ms. Kuntova acknowledged that she did indeed see stucco crumbling or peeling off.  There was one large spot in particular.  She testified that she assumed that this was the reason Mr. Laflamme had backed out of the transaction and, indeed, her recollection was that Mr. Badre told her that that was the reason.  Mr. Badre does not recall these events.

[33]      Ms. Lunney, a 45 year old teacher, began her search for a house in the Westboro area of Ottawa, the area in question, in 2001.  She had never before owned a home.  She was looking for an older home.  In early January of 2002 she came across the listing for the subject property whereupon she contacted her uncle, Pat Smith, a real estate agent.  She asked him to accompany her on a site visit which he did.  After the first visit she returned again with Mr. Smith and her parents for a second visit.  After those two visits she had no real concerns with what she observed.  Indeed, her few concerns about which she testified at trial were related to minor items of d cor. 

[34]      With the assistance of Mr. Smith an offer to purchase was prepared with a house inspection clause.  Ms. Lunney knew that, because she was buying an old house, there would be wear and tear issues.  The inspection clause reads as follows:

                        This Offer is conditional upon the inspection of the subject property by a home inspector at the Buyer s own expense, and the obtaining of a report satisfactory to the Buyer in the Buyer s sole and absolute discretion.  Unless the Buyer gives notice in writing delivered to the Seller not later than 11:59 p.m. on the 18th day of January, 2002, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction.  The Seller agrees to co-operate in providing access to the property for the purpose of this inspection.  This condition is included for the benefit of the Buyer and may be waived at the Buyer s sole option by notice in writing to the Seller within the time period stated herein.



[35]      The agreed upon purchase price was $180,000.  Neither Ms. Lunney nor Mr. Smith had any contact with Messrs Laflamme and Glennie nor did they see Mr. Glennie s report.  There was no evidence given at trial regarding whether Ms. Lunney even knew about Mr. Laflamme s offer and his withdrawal from the transaction.

[36]      Prior to the expiration of the time limit for compliance with conditions in the agreement, Ms. Lunney was, through Mr. Smith, provided with a copy of the aforementioned Information Statement.  A new statement was not prepared notwithstanding the above-described repairs.  Mr. Badre could not recall why a new statement was not prepared.

[37]      I pause here to note that I have no concerns with the credibility of either Ms. Lunney or Mr. Smith.  Indeed, Ms. Lunney did not at any time overstate her case in any significant respect.  On a couple of occasions Ms. Lunney did contradict the answers she gave on her examination for discovery; however, in my opinion, these contradictions were not significant.  In the end, I am satisfied that she received a copy of the Information Statement prior to the expiry of the conditions and that she read it and relied on it.  I observe, however, that the contents of the Information Statement quoted earlier in these reasons contain a warning that it should not be relied on as a warranty.

[38]      Mr. Chalmers, the inspector retained by Ms. Lunney, provided her with a copy of his inspection on the spot.  Under the heading History of Home Improvements Mr. Chalmers made the following observation:  Foundation parging loose, missing behind the surface in some areas.   He then checked the blocks or boxes opposite the following pre-ty

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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 bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.

Visit the Toronto Star column archives at http://aaron.ca/toronto-star-columns.cfm for articles on this and other topics.