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Once a seller completes an SPIS, a buyer can rely on it

Toronto real estate lawyer Daniel Bernstein says there is no legal requirement for a homeowner to complete a Seller Property Information Statement (SPIS) in Ontario — and he would strongly advise vendors not to sign one.

A SPIS is a standard form created by the Ontario Real Estate Association, which can be completed by the seller of a house. It would be provided by their agent to the seller for completion, explains Bernstein, a lawyer with Weltman Bernstein.

In the form, sellers would provide general information about their property including:

  • How long they’ve owned and/or occupied the property;
  • Whether there are any easements, rights of way or encroachments;
  • Whether there is a survey, when it was done and whether it shows the location of all buildings, improvements, rights of way or encroachments;
  • Whether there are any disputes as to the property’s boundaries;
  • Whether there are any restrictive covenants, and many other matters.

Bernstein says a SPIS can also provide more specific information about the seller’s property such as:

  • Various environmental matters (underground tanks, radon, flooding issues, etc.) and whether the home is near a conservation area, windmills, waste dumps or landfills;
  • Whether there have been any structural changes to the property and if so, has the seller made improvements or renovated the property and were permits obtained; and
  • The state of HVAC system, pipes and electrical wiring, plumbing, floors, etc.

“In Ontario, there is no legal requirement for a seller to complete an SPIS and I would counsel every single vendor that I represent never to sign one,” Bernstein tells AdvocateDaily.com.

The form states that it’s “designed in part to protect sellers by establishing that correct information concerning the property is being provided to buyers.” It further provides that “any person who is in receipt of and utilizes [the SPIS] acknowledges and agrees that the information is being provided for information purposes only and is not a warranty as to the matters … even if attached to an Agreement of Purchase and Sale.”

The problem, Bernstein says, is that many of the form's questions are so difficult and technical that sellers may need to speak to a lawyer, surveyor or contractor to honestly answer them.

“For example, how would a seller know what the exact zoning of the property would be or whether there are ‘encroachments’ shown on a survey? Would an average seller even know what the word ‘encroachment’ means?” he says. “How would a seller know whether a Conservation Authority has jurisdiction over their property or what restrictive covenants are?”

He says if buyers are concerned about any of these matters, they should write conditions into the Agreement of Purchase and Sale to allow the professionals hired by them — for example, lawyers, surveyors or building inspectors — to come up with the answers.

“Why not let the buyer make an informed decision on the property before the deal closes?” he says.

Bernstein warns another problem with a SPIS, from a seller’s perspective, is the result of the Ontario Court of Appeal’s decision in Krawchuk v. Scherbak, 2011 ONCA 352 (CanLII).

Krawchuk dealt with, among other things, certain statements made by the sellers in the SPIS regarding the state of their home’s foundation and plumbing,” he says.

Responding to a question in the SPIS about the home’s foundation, the sellers said the northwest corner of the house had settled and, to the best of their knowledge, the house had settled and they had no further problems in 17 years.

After closing, the purchasers determined the foundation walls were sinking into the ground. The sellers also said on the SPIS that they were not aware of any plumbing problems with the house but, in fact, once or twice a year they experienced a sewer line blockage that prevented water and sewage from discharging into the municipal system.

“The court found against the sellers, ruling that they made negligent misrepresentations and stated that the buyers should be able to rely on the sellers' statements in the SPIS,” Bernstein notes. “The court also held the sellers' real estate agent liable for damages.

Bernstein says even though the SPIS contains a warning for buyers to make their own enquiries and that there is no warranty being made by the seller, once a seller completes the form, a buyer can rely on it.

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