A century of Canadian legal precedents dealing with listings describing homes for sale were reversed late last year by an Ontario Court of Appeal decision that is being seen as one of the year’s most significant real estate law rulings.
The case involved first-time homebuyer Hassan Issa, 26, who was interested in a residence where he could live with his parents and three sisters. Early in 2017, he retained Keller Williams Realty Centres agent Wasim Jarrah, who introduced Issa to a house on Winlane Dr., in Stouffville, Ont.
Issa was told by Jarrah that the house was approximately 2,100 square feet. Copies of the MLS listing left in the kitchen indicated the approximate size was 2,000 to 2,500 sq. ft.
During his second visit to the house, Issa was allowed to inspect the entire home. He was told by the owner, John Wilson, that the house was about 2,000 sq. ft.
Issa submitted a $730,000 offer which was accepted by Wilson. A subsequent appraisal of the property for financing purposes revealed the house was only 1,450 sq. ft., coinciding with Municipal Property Assessment Corporation records showing the size to be 1,444 sq. ft.
Jarrah was acting as agent for both the seller and the buyer. In preparing the listing, he did not measure to confirm the size of the house, but instead took the footage from a previous but incorrect listing 12 years earlier.
After receiving the appraisal report, which confirmed the value at $730,000 but showed the smaller size, Issa decided not to close the deal. He then sued the seller, the agent and the brokerage to void the agreement and get a refund of his $50,000 deposit.
Following a trial last year, Justice Jane Ferguson ruled in favour of Issa, terminating the agreement and ordering the return of the deposit. Her decision was based on negligence being admitted in the representations about the size of the house by the agent and the seller.
The decision was surprising because it ran contrary to many similar cases which relied on the measurement details in sale agreements and not the published listings. A standard provision of agreements of purchase and sale, known as the “entire agreement” clause, says that any representations or statements outside of the contract do not affect its validity or enforceability.
An appeal by the real estate agent and broker was heard in November by a three-judge panel of the Court of Appeal. The court dismissed the appeal and awarded $10,000 in costs to Issa.
In its ruling, the appeal court said the trial judge was correct in concluding that the misrepresentation by the seller and the agent concerning the size of the home was material to the buyer’s decision to purchase.
In this case, the Ontario Court of Appeal has effectively changed the law on the “entire agreement” clause, and misrepresentations in published listings. In future, where there is a discrepancy between the MLS listing and the purchase agreement, or where the agreement is silent on some of the details in the published listing, purchasers may be able to rely on the listing if they meet the tests in the Issa case.
Issa v. Wilson, 2020 ONCA 756 (CanLII), <http://canlii.ca/t/jbvmh> Court of Appeal
Issa v. Jarrah, 2019 ONSC 6744 (CanLII), <http://canlii.ca/t/j3mcg>, Superior Court