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A court case decided last month emphasizes the risks of using a Seller Property Information Statement. It also illuminates the risks of having the same agent act for both the buyer and seller.
In July 2014, Aden and Shirley Bowman bought a house from Alma and Shelley Emond. The Emonds are mother and daughter.
The house — built in 1976 by Alma’s husband — was a 1,200-square-foot, single-storey building with five bedrooms, one bath and a full basement. The sale price was $180,000 and the Emonds took a vendor-take-back mortgage for 95 per cent of the purchase price.
Their real estate agent acted as the agent for both buyers and sellers. Shelley Emond told her about historical roof leaks but not that in 2013, and again in 2014, she had painted over ceiling stains resulting from the roof leaks.
At the agent’s request, the Emonds completed a Seller Property Information Statement (SPIS). For many years in this column I have been a strong advocate against the use of this checklist-type form. It is difficult to think of any other single form — except perhaps the marriage licence — which has spawned so much litigation, and has produced so much money for litigation lawyers.
In the SPIS form, the Emonds stated that they were not aware of any structural problems, moisture or water problems. They also stated that they had carried out repairs to known roof leakage issues and that there was no unrepaired damage.
Aden Bowman testified at trial that he never saw the SPIS until it was produced during preparation for the resulting litigation. Although the same agent was representing both parties, she did not review the document with the Bowmans.
Two weeks after closing, Aden Bowman began renovations and discovered historical water infiltration and mould growth throughout the wall and floor cavities of the home. When removing the fireplace because it did not comply with the provincial fire code, Aden discovered rotting wall structure and more mould.
The Bowmans sued the agent, her company, the Emonds and the home inspector. Before trial, the buyers and sellers reached an out-of-court settlement called a Perringer Agreement, and the case continued against the home inspector, the agent, and her company.
In his decision last month, Justice Guy DiTomaso ruled that the agent was negligent and breached her duty to the Bowmans by failing to ask probing questions of the sellers and failing to explain the SPIS document to the buyers. He also found that a number of the Emonds’ SPIS answers were incorrect.
The judge ruled that Alma and Shelley Emond were liable for 30 per cent of the buyers’ damages, and that the agent and her company were responsible for 70 per cent of the damages. The judge found that the inspector conducted a detailed verbal and written report, and dismissed the case against him.
In finding that the home was uninhabitable due to extensive mould and water damage, Justice DiTomaso assessed the plaintiffs’ damages at a total of $450,215 — all of this on a house that sold for $180,000.
Posted On: Friday, March 29, 2019
Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at email@example.com, phone 416-364-9366 or fax 416-364-3818.