Law Times

LAW TIMES • OCTOBER 31, 2011 FOCUS PAGE 13 Information form can land clients in trouble Ontario appeal court ruling sends message about risks of using document BY DARYL-LYNN CARLSON For Law Times T here are increasing problems related to the use of seller prop- erty information statements that have some lawyers advis- ing clients that they shouldn't use them. Many lawyers have refer- enced the matter of Krawchuk v. Scherbak that made it to the Ontario Court of Appeal last May. It has since led to lawyers advising their clients not to al- low a seller to use a seller prop- erty information statement un- der any circumstances. In Krawchuk, the appeal court reversed the trial decision and held a real estate agent and her employer liable for negligence in fi lling out the statement. Th e case stemmed from a property in Sudbury, Ont., for which the real estate agent, rep- resenting a couple who wanted to sell their home, fi lled out one of the forms. But after buyer Zoriana Krawchuck purchased the home for $110,000, she noticed that the foundation of the house was sinking. Th at resulted in the need to lift and renovate the entire home, a project that cost twice the value of the house. A seller property informa- tion statement is optional to fi ll out. It's a two-page form with a number of questions that the seller can answer related to the condition of the home, prop- erty surveys, the type of wiring, and other details. It was originally designed to assist real estate agents and pro- tect them from lawsuits, says Brian Madigan, who practised law for 25 years and is now a broker with Royal LePage In- novators Realty. He teaches a course for real estate agents on seller property information statements and has written a pa- per about the usefulness of the forms for vendors and agents. "Th e document is intended to be comprehensive and it's designed to protect real estate agents," he says. He suggests that lawyers should ideally assist clients and their real estate agents with the form to ensure its accuracy. "Th is is a document that covers about 20 points and it's meant to disclose factual information about the property," he says. "So it's best if the lawyers could sit down with their clients to deter- mine the answers with accuracy." Madigan notes that the Real Estate Council of Ontario re- quires buyers' agents to con- fi rm whether the document purchaser received $25,000 in costs for the appeal from the sellers and a further $25,000 in costs from the real estate agent. "It is a very important docu- ment and it's imperative that both the seller and the agent consult a lawyer if they can to make sure the document is ac- curate," says Madigan. incomplete. Better to leave things unsaid than make repre- sentations that allow you to be sued afterwards." Bob Aaron of Aaron & Aaron has also written about the state- ments. He says Krawchuk should serve as a warning to both law- yers and real estate agents. He believes that while some It is a very important document and it's imperative that both the seller and the agent consult a lawyer if they can to make sure the document is accurate. has been completed and that there can be problems if sellers don't fi ll them out accurately. He believes Krawchuk is particularly important, for real estate agents and lawyers, since the appeal court awarded half of the $110,000 in dam- ages against the sellers and the other portion against the real estate agent. In addition, the TitlePlus_LT_Nov3_08.qxd 10/27/08 11:11 AM Page 1 In a paper he wrote about the statements, he's emphatic that the strong promotion of the document by a real estate agent could be detrimental. "Lawyers, nevertheless, in a large measure, have advised their clients not to sign the document," Madigan wrote. "Why? Because the informa- tion may be inaccurate or people may view the outcome of the case as specifi c to the facts, the matter does serve as an example of how the court can hold an experienced real estate agent responsible for fail- ing to verify a seller's form. "Th ere could be legal ramifi - cations when a seller signs this form, and it could be costly," says Aaron. Ultimately, sellers who use the form do so at their own peril, he adds. Ideally, Aaron suggests sellers and their real estate agents should consult a real estate lawyer who's familiar with the forms if they're considering fi lling one out. "Th ere is no way around it," he says. "It could end up going terribly wrong." Ultimately, the forms shouldn't be used, he says, as there can be numerous liabili- ties due to their intricacy and the need to have so much detail in the information about the property that's for sale. Aaron adds that he has writ- ten about the forms to get the word out to both lawyers and real estate agents so they know that the document is perilous to use. "Th ere are many things that can go wrong, so people should know what can happen and what lawyers and real estate agents should look for," he says. Built just for you Together we have all the tools The TitlePLUS® Program works with you to help protect your clients from title risks.1 assist you, through our legal services coverage2 real estate partner! result of an error or omission in your real estate transactions. 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