Written by: Irvin Schein.
In the world of residential real estate transactions in Ontario, it has become customary for buyers to request a Seller Property Information Statement (“SPIS”) in their Offers to Purchase. Sellers sometimes agree to provide them.
An SPIS is a three-page pre-printed standard form document prepared by the Ontario Real Estate Association. The purpose of the document is to protect buyers by requiring sellers to provide complete information about their experience with the property. The form includes, in its instructions, a requirement on sellers to provide answers that are complete and accurate. It also warns buyers that they must still make their own inquiries notwithstanding the information in the SPIS.
Good intentions alone do not protect the seller completing a SPIS.
At the end of the form, there is a statement indicating that sellers “are responsible for the accuracy for all answers”, but also that their information is “true based on their current actual knowledge as of the date below”.
The recent case of Nylander v. Martin involved the purchase by a Mrs. Nylander from a couple named Martin of a house in Ste. Sault Marie in 2008, contains some interesting comments on SPIS forms by the court.
Before entering into the transaction, the Martins signed a SPIS indicating, among other things, that the property was not subject to flooding, that the Martins were not aware of any structural problems, and that the Martins were not aware of any moisture and/or water problems.
After closing, Nylander discovered a significant amount of water on the basement floor of the home.
The repair estimate was just under $40,000, and Nylander sued the Martins.
Nylander moved for summary judgment, and this case was the result of that motion.
The first defence put forward by the Martins was that Nylander had had an opportunity to have the home inspected by a professional home inspector but chose not to do so. As a result, she should be responsible for any losses resulting from her failure to have the house inspected properly.
The Martins pointed out that the basement wall had a noticeable bow in the wall at the time that they had purchased it which they had never repaired. They argued that it was obvious to Nylander at the time that she inspected the home and so she should be responsible for the costs associated with having the wall repaired.
They also suggested that the water problems that she experienced were caused by unusually heavy precipitation and Nylander’s failure to remove accumulated snow on the walkway adjacent to the wall.
Finally, they admitted that they had experienced water problems in the basement in 1995. They hired a construction company to fix the problem and experienced no further such problems until 2008 when the property was sold to Nylander.
Consequently, they suggested that the statements made in the SPIS were restricted to their experience at the time that they signed the SPIS and were not intended to include historical facts (such as the fact that water penetration had been experienced thirteen years earlier). They argued that they had signed the SPIS in good faith and with good intentions.
The court had no difficulty disposing of the last issue. The court found that it was at least arguable that the Martins were under an obligation to tell Nylander about the past issues experienced with the leakage of water, including the necessity to take precautions by removing accumulated snow from the walkway adjacent to the wall.
On the question of the lack of a home inspection, the court decided that the Martins could not escape liability simply because Nylander had chosen not to obtain a home inspection.
In summary, the court concluded that having signed a SPIS, there was a “very heavy duty” on the Martins to provide accurate and detailed information. Good intentions alone do not protect the seller completing a SPIS. The standard of care on a seller extends beyond good intentions.
In the result, notwithstanding these findings, the court declined to grant summary judgment for several reasons.
Firstly, the evidence before the court as to the extent of the water leakage problem was not complete.
Secondly, the degree to which the structural and water issues were visible upon inspection was not apparent. This was a critical point. In order to succeed in such a case, a buyer must prove that he or she relied on the SPIS in making the decision to go ahead with the transaction. Furthermore, that reliance must be proven to have been reasonable. Given the bow in the wall that was clearly visible, the court was concerned that Nylander’s professed reliance on the SPIS was not reasonable, and left it to a trial judge to decide.
Having said that, the court’s observations concerning the SPIS should constitute fair warning to sellers completing such documents as to their responsibility to be sure that their statements are accurate.