Disclosing information to buyers not an issue of if, but...

Posted on: Monday, November 26th, 2012

The contents of this article were obtained directly from an article posted on Advocate Daily’s Website which can be accessed by clicking here.

The definition of “material fact” in the Real Estate and Business Brokers Act’s Code of Ethics regulation should be amended to add clarity, says Barrie real estate lawyer Shari Elliott.

“There is not enough guidance provided,” she says of the regulation, found under s. 21 of O. Reg. 580/05, adding it is a “very grey area.”

A recent Toronto Star report tells the story of a Bowmanville couple who sued those involved in selling them their home after learning it was the scene of a double murder 15 years earlier. Read Toronto Star

That discovery led to a lawsuit against the real estate firm, an agent and the house’s former owners for allegedly failing to reveal the home’s history, the report says.

Elliott says home owners and real estate agents are “not legally bound to disclose historical facts about the home,” though the agent is required to follow the Code of Ethics that calls for material facts to be disclosed.

“The problem stems from the fact that the definition (of material facts) provided is ‘a fact that would affect a reasonable person’s decision to acquire or dispose of the interest,’” says Elliott.

“I believe that the definition of what is considered a material fact needs to be amended to provide more clarity. You will never be able to cover all the items that might be considered a potential stigma as this list will likely grow over time and is specific to each purchaser, but by having a ruling on items that are commonly occurring, new items could be handled by making a comparison.”

Elliott says Ontario legislation doesn’t address the obligation to disclose a murder, whereas guidance exists in Quebec and many American states.

“It is interesting that this story is about a 15-year-old murder and a property that has changed hands already since the murder,” she says. “Even if you look to the jurisdictions that have a law requiring disclosure of a murder it is generally limited to the past three years.”

The advice Elliott says she provides to agents who have properties with potential stigmas is to let the sellers know their consent is needed to disclose the information if and when it becomes necessary.

“I suggest that sensitive information not be included in a listing which would unnecessarily impact the marketability of the property for the seller,” she says. “I suggest that the listing say simply ‘before presenting an offer contact the list agent for further information.’ This allows the agents an opportunity to share information that might be considered a potential stigma but only to an interested purchaser. The issue for me is not whether to disclose but when and how.”

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

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