Many Canadians dream of owning a home, where they can decorate the interior as they please, start a family, raise children, renovate, improve, invest, and hopefully, watch the value of their home rise over time!
The purchase and sale of real estate is often the most important and expensive transaction Canadians will make in their lives. Much thought and effort is put into such a purchase, including a realtor to find the desired property in the desired neighbourhood, home inspectors to ensure there are no defects with the property, banks to provide financing, and lawyers to close the deal. This blog deals with home inspections and the law behind defects in real estate.
When someone wishes to purchase a house, the doctrine of caveat emptor applies. Caveat Emptor is the principle that the purchaser alone is responsible for checking the quality and suitability of the property before a purchase is made. Purchasers can hire professional home inspectors to verify the quality and suitability of the property. Indeed, realtors often make a home inspection a necessary condition prior to closing the Agreement of Purchase and Sale.
Home inspectors can only be expected do so much during their inspection: they can look for defects that are patent, meaning; obvious flaws discovered by superficial inspection of a qualified professional. However, a home inspector cannot inspect for latent defects, that is, they cannot be expected to look behind drywall to detect mold or other potential defects that could only be found by destroying parts of property itself.
The doctrine of caveat emptor takes the patent/latent dichotomy into account. As such, potential purchasers are only responsible for checking the quality and suitability of the real estate in regards to patent defects, whereas vendors are responsible for any concealed patent or known latent defects. No one is responsible for latent defects that were unknown to either the purchaser or vendor, and title insurance will usually cover unknown latent defects.
Enter the Seller Property Information Statement, also known as SPIS. The SPIS is a form that includes a broad list of questions in relation to the property, including questions such as:
1. Are you aware of any structural problems with the property?
2. Is the property subject to flooding?
The SPIS does not provide any definitions of key words, such as flooding or structural problems. Suffice it to say, the SPIS creates a breeding ground for litigation and is arguably the biggest cause of property litigation.
The form itself can be filled out by the vendor voluntarily at the purchaser’s request. There is absolutely no obligation on the vendor to fill out the SPIS. If the vendor does choose to complete the SPIS, then according to the Ontario Court of Appeal case of Krawchuk v. Scherback et al., 2011 ONCA 352, their representations may be relied upon by the purchaser.
Once the vendor’s representations are relied upon by the purchaser, what could otherwise have been a latent defect for which the vendor is not responsible becomes a representation for which the vendor can be liable if the representation is inaccurate.
Remember that the questions on the SPIS are very broad, and could end up meaning something very different than what the vendor interpreted when completing the SPIS. If it turns out the vendor made a mistake in filling out the SPIS, then the purchaser may be motivated to sue the vendor for negligent and/or fraudulent misrepresentation by the vendor.
In these types of cases, the devil is in the details. If you are a vendor being sued for negligent/fraudulent misrepresentation due to representation made in an SPIS, the lawyers at Vice & Hunter can help by looking at your Agreement of Purchase and Sale, and all the other relevant documents leading to the Agreement of Purchase and Sale. Likewise, if you are a purchaser who relied on the representations made in an SPIS, only to find out the representations were untrue, the lawyers at Vice & Hunter can assist you in determining whether you have a cause of action against the vendor.
If you need assistance with a purchase, please feel free to contact Lynn Le Mesurier at firstname.lastname@example.org, or if you are having difficulties after a purchase, please contact Patrick Simon at email@example.com.