While seller property information statements (SPIS) are not required by law, there are certain legal implications that investors and real estate agents should be aware of. Commercial lawyer Matt Maurer answers a range of questions about the statements.
1. What is a seller property information statement?
A SPIS is a standard form document that was drafted by the Ontario Real Estate Association. It will contain information relating to defects, renovations and other pertinent property information based on the seller’s knowledge and experience.
2. Is completing a SPIS mandatory?
No. Sellers are not required by law to complete a SPIS. However, according to the Real Estate Council of Ontario, once a seller has completed a SPIS their broker or agent is required to tell all potential buyers of its existence. Additionally, if the buyer makes their offer conditional on a SPIS, then from a practical perspective the seller either has to complete one, or not sell to that particular buyer.
3. What are the legal implications?
SPIS have attracted significant judicial consideration in recent years.
The law in Ontario relating to SPIS was settled by the Court of Appeal in 2011. In short, where the seller completes a SPIS it is assumed that the seller intends that the SPIS will be disclosed to prospective buyers to use to inform their decisions respecting the purchase. This creates the relationship necessary in law to hold a seller legally responsible if the information contained in the SPIS is wrong, either through negligence (carelessness) or fraud (deliberately), notwithstanding the large disclaimer that appears at the beginning of the SPIS.
In a recent decision, the transaction was made conditional on a home inspection and financing (but not a SPIS). The agreement also contained a standard entire agreement clause. However, two days after the agreement was signed the buyer asked the seller to complete a SPIS and the seller obliged. The SPIS created an obligation on the seller not only to disclose existing information but also to notify the buyer of any changes to the information contained in the SPIS prior to the closing date.
The seller indicated on the SPIS that the house had not experienced any flooding. After the SPIS was delivered, but prior to the closing, there was flooding in the house. The seller failed to inform the buyer and the buyer ended up suing the seller after the closing when the buyer discovered the flooding issue. The court ruled in favour of the buyer and held that the SPIS and the obligation to make ongoing disclosure trumped the entire agreement clause found in the agreement itself.
4. What are the implications for agents?
Agents representing the seller are under an obligation to guide the client through the form and to provide specific warnings about the implications of completing a SPIS and the importance of ensuring that answers are complete and accurate. These warnings are to include the fact that by completing a SPIS the seller may be providing information to potential buyers that they are not legally otherwise required to provide.
Prudent buyers should, at the very minimum, ask the seller to complete a SPIS, and prudent vendors should avoid voluntarily completing a SPIS without the buyer specifically asking for one. If the buyer makes the request, the seller is under no obligation to do so. The seller’s decision as to whether or not to complete a SPIS at that point will likely depend on the condition of the house and the state of the local market.
Matt Maurer practices commercial litigation at Minden Gross LLP in Toronto. He regularly advises property investors and real estate professionals in all aspects of their businesses and specializes in dispute resolution. He can be contacted at 416-369-4322, [email protected]
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While seller property information statements (SPIS) are not required by law, there are certain legal implications that investors and real estate agents should be aware of. Commercial lawyer Matt Maurer answers a range of questions about the statements