It is becoming increasingly popular for a buyer to request that a seller sign a Seller Property Information Statement (“SPIS”) as part of a residential real estate transaction. The Ontario Real Estate Association (“OREA”) developed a SPIS form for both freehold and condominium residential properties.
What is a Seller Property Information Statement?
The SPIS is a pre-printed document that is meant to protect sellers by establishing that correct information about the property is provided to prospective buyers. However, when the seller completes and signs a SPIS, the seller’s ability to rely on the doctrine of caveat emptor meaning “Buyer Beware” is eliminated. The doctrine of caveat emptor provides that, absent of fraud, mistake or misrepresentation, a buyer takes an existing property as he or she found it. Since the representations made in the SPIS will be relied on by a prospective buyer, a special relationship is formed between the seller and the buyer, which has been deemed, at law, to give rise to a duty of care.
Is a Seller Property Information Statement obligatory?
Sellers are not obligated at law to deliver a SPIS to a prospective buyer. If a seller elects to complete a SPIS it must be done honestly and accurately. Once completed, the SPIS forms part of the Agreement of Purchase and Sale and the buyer is entitled to rely on it.
It has been found at law that the statements in the SPIS are not warranties, but may be the basis of liability as representations. A buyer is entitled to rely on the representations made in the SPIS and is not obligated to challenge the seller’s honesty and forthrightness. The buyer is also not obligated to complete a home inspection to make his or her own determination regarding the state of the property. A seller cannot use the lack of a property inspection as a defence to a claim of negligent misrepresentation stemming from the SPIS.
The SPIS creates a continuous obligation to disclose any latent defects, which are defects that are not discoverable by reasonable inspection of the property. The Court of Appeal for Ontario has recently established that real estate agents have a duty to question the veracity of the seller’s statements and have a duty to verify material facts about a property. The Court also found that real estate agents have a duty to warn their seller clients about the implications of completing an SPIS and of the importance of ensuring complete and accurate answers to the SPIS questions. Real estate agents acting for buyers also have a duty to confirm if a SPIS has been completed and forms part of the Agreement of Purchase and Sale.
A seller should consult with a lawyer prior to completing the SPIS in order to understand the legal implications of completing and signing this document.
If you have questions about the Seller Property Information Statement, or require assistance with one, please get in touch with us.