Two views on property disclosure forms
Sometimes my readers must think I am a self-appointed ombudsman for registrants from coast to coast.
I wish to comment on a recent article by Toronto lawyer and frequent REM contributor Bob Aaron, which appeared in the Toronto Star on May 12. (You can read it at www.aaron.ca.) In it, he says, “Sellers should never sign what is called a Sellers Property Information Statement (SPIS) in Ontario.”
Aaron, a well-known and respected real estate lawyer, writes: “I’m not sure why it happens, but when ordinary, honest citizens are selling their homes and large amounts of money are involved, they sometimes succumb to an overwhelming temptation to become less than candid in signing the paperwork for the transactions.” He cites a case where homeowners declared a specific amenity to be in good working order. When the agreement was signed it was claimed the amenity was working, although later the homeowner admitted it was not working. The seller and the registrant were found 50/50 per cent liable.
Then Aaron cites another case in Nova Scotia, where the seller warranted the water supply in an accompanying Property Condition Disclosure Statement (PCDS), which is similar to the Sellers Property Information Statement in Ontario and to British Columbia’s Property Disclosure Statement.
The Nova Scotia buyers sued successfully and won a large settlement from the sellers. “Justice Gordon Tidman provided an interesting comment on the disclaimer in the disclosure form,” writes Aaron. “ ‘The court is satisfied,’ he wrote, ‘that this disclaimer is for the benefit of the Realtor only and not for the vendor.’ ” The judge said that “Makes clear that the vendors are responsible for truth in their statements.” It is interesting to note that England and Wales have made a similar disclosure mandatory for sellers.
I feel that most sellers are truthful, as are the majority of registrants in all provinces. There are relatively few cases that come before the courts in relation to the vast number of successfully completed transactions. The many happy sellers and buyers that we service can readily attest to this. But there are rotten apples in every barrel.
I remember taking a Buyer Agency course in the mid-90s with Merv Burgard, Q.C., when he emphatically stated: “Discover. Do it. Document it. File it.” I strongly believe that most professionals in our business are prudent enough to do these things as it applies to all our documents.
In Aaron’s column he says, “Sellers signing SPIS forms should keep the name of a good litigation lawyer handy. They may well need it.” He also acknowledges that he has heard from several people in the real estate community, like me, who disagree with him.
I don’t think the form is really that difficult to comprehend, although there are parts that people may not know or understand. If this is the case, they could simply write down that they don’t know, or get in touch with their lawyer to counsel them.
I believe the form was initiated by the Muskoka Real Estate Board, which may have copied it from our U.S. colleagues. Many of the provinces adopted some format of it and use it currently. Some of the boards have made it mandatory. The Toronto Real Estate Board decided not to make it mandatory, because it is a matter of “liability for TREB and it fell under non-jurisdiction under REBBA 2002 for the Real Estate Council of Ontario.”
What protects us as registrants?
I have personally polled 36 registrants from B.C. to Nova Scotia. Not all of them ask the sellers to sign, but most of the full-time professionals do. If sellers refuse to sign, they ask them to draw a line through the form and state that they refuse to sign and initial it. Most of the agents I spoke to agreed that it was a valuable part of the listing agreement.
Aaron suggests that the buyers should get a registered home inspection prior to consummating the transaction. I believe that most of us would do so as a matter of form.
Over the years that I have had the privilege of serving as a manager and a committee member on both RECO and TREB, I do not recall one instance where the sellers have had to “have a good litigation lawyer handy” after signing an SPIS. In talking with many of my peers, this last statement is bordering on “fear mongering,” on the part of Aaron. In the future, I would love to see that solicitors who write for nationally distributed newspapers refrain from brush stroking all parties to a transaction, as being tarnished or dishonest.
An additional note about another of Aaron’s comments, that “it is always a good idea to have the Agreement of Purchase and Sale reviewed by a lawyer before it is signed.”
I think that in some cases, this is a prudent idea. But in a hectic market that most of us are involved with, what happens to “time is of the essence?” Really, is a registrant and his client going to try to reach a solicitor at 11 pm or even later, when some deals are going down?
Most of us are quite professional and astute salespeople who pride ourselves on taking time and effort to ensure our clients are well served. I have yet to see or hear one lawsuit that was a result of SPIS errors or flaws, as a result of a form being signed. It is one form that has been devised to at least assist the registrant in attempting to garner accurate and honest information from our sellers.
In a recent OREA magazine, Burgard writes: “Show the buyers the SPIS.” In a case that he describes where the agent failed to show the buyers the SPIS, the registrant was found liable for his breach of duties. Cost to the registrant and the brokerage was $27,000.
“Agents can be held accountable for failing to protect their clients by informing them of the special risks of a transaction. Warn them. Give them the SPIS,” says Burgard. Two well-versed and respected solicitors: two different opinions!
It is time for the individual boards across the country to seek the assistance of the provinces to step up and make it mandatory to require the forms, to help our registrants become better and more proficient. If the U.S. and England and Wales have done so, what are we waiting for?
It boils down to the ethics of the sellers in most cases. Most are ethical and honest people. What can we do about those who are dishonest? The courts will decide eventually and we, unfortunate souls that we are, will usually be dragged along and found to be at fault somehow.
Honesty is the best policy.
I would like to know your feelings on these issues. And that’s the way I see it from my desk this month.
Thought for the month: “A discovery is said to be an accident meeting a prepared mind.” – Albert Szent Gyorgi 1898-1986
Stan Albert is celebrating his 36th year in active real estate, and is with Re/Max Excellence in Woodbridge, Ont. He serves on committees at RECO and at the Toronto Real Estate Board. He is an established trainer and business consultant and can be reached at email@example.com.