Law Times

Law Times • January 14, 2013 Page 13 FOCUS Information statements good for buyers, dangerous for sellers $25,000 award to purchaser a reminder of risks of agreeing to provide SPIS BY MARG. BRUINEMAN For Law Times W hen it comes to buying a piece of property, it appears there's no downside for a buyer asking for a sellers property information statement. But a recent Divisional Court decision serves as a reminder that a seller should carefully consider the ups and the downs when asked to sign a statement. "Once a seller is asked to complete a SPIS, unless their home is flawless, they're left with a difficult decision.  Either they agree and reveal all of the known problems, which will likely result in a reduced offer, or they decline and risk a reduced offer or no offer at all," says commercial litigator Matt Maurer of Minden Gross LLP. "There is essentially zero downside for the potential purchaser to make the request." In Costa v. Wimalasekera, Justice Katherine van Rensburg of the Divisional Court recently upheld a trial judge's decision to award the homebuyers $25,000 in damages from the seller. When selling their house to Fernando and Katina Costa in 2008, Jagara Wimalasekera completed a sellers property information statement as a condition of sale. Within a month after closing, the Costas noticed the backyard filled with water whenever it rained. It would take as long as a week to dissipate as long as there was no further rain. The sellers property information statement is a checklist of items, according to the terms of the agreement, to be completed by the seller "with complete and accurate answers, in the best of the seller's knowledge and belief, to the questions contained therein." The real estate agent completed the form and had Wimalasekera initial each response, including answering no to a question on whether the property was subject to flooding. But Wimalasekera knew there was a problem that affected many of the surrounding properties. Water regularly accumulated in the yard due to the original grading of the property when the contractor removed too much topsoil. When the case came to court, the seller stated in a statutory declaration, based on information he received from the Credit Valley Conservation Authority, that the water was ponding and not flooding. The trial judge found that misstatements made in a statement could create liability for fraudulent or negligent misrepresentation and that the warnings on the form don't absolve the seller of it. The judge rejected the seller's argument that property referred to the house and not the land and concluded that interpreting the question in the statement to apply only to the house was unreasonable, negligent, and deceitful. As a result, he found the representation untrue, inaccurate, and misleading. The judge believed the Costas wouldn't have bought the property had they known about the water accumulation issue and that a routine inspection wouldn't have identified it. He assessed damages at $25,000 based on cost estimates for an engineering study and work to fix the problem. "There was no evidence to suggest that the buyers ought 'Once a seller is asked to complete a SPIS, unless their home is flawless, they're left with a difto have determined, from ob- ficult decision,' says Matt Maurer. serving the slope of the land, or from knowing that there were Rensburg in upholding the trial building restrictions because judge's decision. of the 'wetland' designation, "There was nothing to alert that there was a flooding prob- the buyers to the need to inveslem when it rained," wrote van tigate this issue." Jacob Walinga, representing the Costas, points out that property information statements aren't that common. But when a seller agrees to complete a form, there's no room for fudging. "Basically, the court confirmed the Court of Appeal decision that once you open yourself to making statements, you have to be complete and accurate," says Walinga. In fact, adds Mark Wiffen of Wiffen Litigation Professional Corp., staying clear of the information statement is the best way to stay out of trouble. The problem, of course, is that the seller is essentially waving a big red flag by refusing to sign a statement. "The fact that the seller explicitly answered in the SPIS that the property was not subject to flooding makes this a pretty clear case," says Wiffen. "Many people will therefore point to the SPIS and say that buyers should avoid signing them if they want to avoid potential liability." Maurer notes the Court of Appeal made it clear in 2011 that a completed statement creates the legal relationship necessary to hold a seller liable for negligently or fraudulently giving inaccurate information to the purchaser. "In this case, I think it is obvious that the vendor was trying to pull one over on the purchaser," says Maurer. "If he was not prepared to disclose the problem, he should have declined to complete  the SPIS.  However, you have to  think that by declining, the purchaser would either submit a lower offer than they otherwise would to account for the uncertainty or decide to not submit an offer at all." LT that the title to the property is good and free case, the discharge cannot be registered w good and free from all registered restrictions letter from the relevant municipality or regul cumbrances except as otherwise specifica adjacent properties, and any easements fo provided in this agreement and save and ex are complied with; you (b) any registered m t run with the land providing that such are c es, telephone lines, cable television lines or ple, where the original mortgagee has assig nts for the supply of domestic utility or telep title of the mortgage and the right to receive h do not materially affect the present use of Keeping you central to the real estate transaction.* ements with publicly regulated utilities provid t titleplus.ca * ® The TitlePLUS® policy is underwritten by Lawyers' Professional Indemnity Company (LAWPRO®). Registered trademark of Lawyers' Professional Indemnity Company. 1-800-410-1013 Untitled-3 1 www.lawtimesnews.com 12-10-22 10:01 AM

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