Purchasing a home can be a daunting task, even in ideal situations. Design, purchase price and transaction costs, mortgage qualifications, closing date, future value, suitability for familial or other needs are just a few of the plethora of considerations. Whether you`re buying new or used, you ultimately want to make a good investment. However, in the case of a used home purchase, the vendor’s disclosure regarding the particular attributes and any problems with the home is critical to the soundness of your investment.
In Krawchuk v. Scherbak, 2011 ONCA 352 (CanLII), the Ontario Court of Appeal, considered the role and duty of a vendor and a real estate agent with respect to representations made in the course of selling a home which had serious defects. In the case, Zoriana Krawchuk purchased her first home in June, 2004 from Timothy Scherbak and Cherese Scherbak. Shortly after moving in, Ms. Krawchuk discovered serious structural problems, specifically a compromised foundation. The City of Sudbury issued an order requiring that the problems be rectified. The repair process, during which Ms. Krawchuk was forced to live elsewhere, disclosed plumbing problems as well. The repair costs exceeded the $110,100 she had paid for the property. However, Ms. Krawchuk recovered almost this amount by claiming through the title insurance policy she had acquired at the time of closing.
Notwithstanding this recovery, Ms. Krawchuk sued the vendors for breach of contract or, in the alternative, for fraudulent or negligent misrepresentation. She also sued Wendy Weddell, the agent acting for both she and the vendors and the brokerage for which Ms. Weddell worked, Re/Max Sudbury Inc., (collectively, the “real estate respondents”) for fraudulent or negligent misrepresentation and in negligence.
In soliciting an offer for purchase, the vendors completed a document known as a Seller Property Information Sheet (“SPIS”) with respect to the property. The SPIS is a two-page, pre-printed standard form document prepared by the Ontario Real Estate Association. Its purpose is said to protect sellers by establishing that correct information concerning the property is provided to prospective buyers. The vendors were assisted by the real estate agent in completing the SPIS.
The court concluded that even though statements made in an SPIS are not warranties, they may still be the basis of liability as representations. Furthermore, the vendors had a special relationship with the purchaser that gave rise to a duty of care based on the SPIS. The court determined that the information provided by the vendors in the SPIS was incomplete with respect to the structural issues and false in relation to the plumbing problems. Although the completion of an SPIS is not mandatory, once a seller decides to fill one out, he or she must do so honestly and accurately and the purchaser is entitled to rely on the representations contained in the SPIS. Thus, it was reasonable for the purchaser to rely on the statements in the SPIS.
The court, therefore, concluded that the purchaser was entitled to recover damages even though she had already recovered under the title insurance policy. In this regard, the private insurance exception applied to allow double recovery.
If you have questions about disclosure regarding a real estate transaction, please contact Andrea Kelly.
Andrea Kelly, Lawyer, has extensive experience in wills, trusts, powers of attorney and estate administration matters. She provides clients with a high standard of timely professionalism and expertise, incorporating a very thorough fact finding process. This is quite often enlightening for her clients and facilitates individually tailored services. If you would like to know more, feel free to use the easy contact form or read Andrea’s bio.