Seller Property Information Statements (SPIS)

I am often asked what my opinion is on whether Seller Property Information Statements (SPIS) should be used in a real estate transaction. This question has become more common in the past few years after recent court decisions where real estate agents were held to have not discharged their obligation to properly inform the buyer about defects associated with the property.

The SPIS was introduced by the Ontario Real Estate Association (OREA) who encourages its use. The document asks questions pertaining to the condition of the home and property that is being sold. It is stated on the form that the answers to the various questions posed are being provided for information purposes only and are not considered to be warranties. It also warns that sellers are responsible for the accuracy of all answers that are provided on the form.

I am writing about this topic again due to a reported decision out of the Divisional Court this past November related to SPIS forms: Costa v. Wimalasekera (“Costa”). In Costa the seller’s agent completed an SPIS form with regard to a property located in Erin Ontario, and each response was initialed by the seller indicating that it was true to the best of the seller’s knowledge and belief. Contained in the Agreement of Purchase and Sale was the following condition:

This Offer is conditional upon the Buyer receiving a Seller Property Information Statement completed by the Seller and the Buyer accepting the information on the form as satisfactory in the Buyer’s sole and absolute discretion […] The Seller hereby agrees to deliver to the Buyer within 48 hours of acceptance of this Agreement a Seller Property Information Statement for the property with complete and accurate answers to the best of the Seller’s knowledge and belief to the questions contained therein.

The issue that arose was related to a statement that was made under the “Environmental” heading. It was a question related to whether or not the property in question was subject to flooding; the seller responded “No”. Within a month after the closing date, the buyers noticed that the backyard of the property would fill up with water after every rainfall. It turns out the sellers knew that flooding was a problem that impacted both their property and the surrounding properties due to issues with the original grading of the property. In response to this, the seller tried to argue that “property” referred to the house and not the land. The judge rejected this view and said this interpretation was unreasonable, negligent, and deceitful. Furthermore, he found the statement that there was no flooding to be untrue, inaccurate and misleading.

The lawyer representing the buyers made the argument that SPIS are not that common but when a seller agrees to complete this form there is no room for fudging. The Divisional Court upheld the trial court’s decision, and the buyers were awarded $25,000 in damages from the sellers based on a cost estimate for an engineering study and to undertake the work to fix the problem. You can obtain a full copy of the decision by clicking here.

In my opinion whether an SPIS is involved or not is not the key question. The question is: did the real estate agent discharge his/her obligations to their clients or customers? In Ontario, real estate agents are governed by the Real Estate and Business Brokers Act, 2002, S.O. 2002, c. 30, Sched. C . Under this legislation, agents are required to demonstrate reasonable knowledge, skill, judgment and competence in providing opinions, advice or information. In addition, agents are required to advise a client or customer to obtain services from other persons if the agent is not able to provide the services with reasonable knowledge, skill, judgment and competence or is not authorized by law to provide the service.

While a SPIS can assist agents in discharging their duties under the Code of Ethics it is not a full response to an action against an agent. Undue reliance on the SPIS can even be the reason for the agent not fully discharging his or her obligations. I would suggest that was the situation in the decision out of Sudbury in the Weddell v. Scherbak case. This decision is an example of an agent placing too much reliance on the SPIS resulting in the judge finding that the agent failed to properly discharge her obligations to both the buyer and the seller. Attached is the previous article on the Weddell decision.

The question should not be whether or not an SPIS should be used in Ontario. The proper question is what is the obligation of the real estate agent to both the purchaser and the seller and how best should that obligation be discharged. If the agent feels the SPIS will assist in discharging that duty, then it should be used as a tool to ensure the agent’s duties are fully and properly discharged. What I mean by this is not that agents should have the client fill it out, but rather, the agent should use this document to assist them with creating their own checklist of questions to ask their clients about their property before listing.

To read Advocate Daily’s post on this article, “Information Statements and the Obligations of Realtors”, click here.

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.