The Ramifications of Sellers Signing Disclosure Forms

Recently one of my sellers asked me whether they would be required to complete what is referred to as an SPIS (Seller Property Information Sheet).

A SPIS is a comprehensive list of questions prepared by the Ontario Real Estate Association (OREA) which is completed by the seller and willingly made available to the prospective buyer of the property. Currently, this form is not mandatory in Ontario, although disclosure statements are compulsory in many parts of the United States. However, there have been discussions in the past about making the SPIS forms mandatory in Ontario.

Many of the questions are relatively straight forward, others are quite technical in nature and may not be as easy to answer.

Examples of questions asked include:

What is under the carpet?

Are you aware of any moisture and/or water problems?

Does the subject property comply with zoning? If not, is it legal non-conforming?

Is the wiring copper, aluminum or knob and tube?

Will the sale be subject to GST?

Are there any encroachments, registered easements or rights-of-way?

Does the survey show the current location of all buildings, improvements, easements and rights-of-way?

Some lawyers argue that signing an SPIS form can be problematic because if any question is answered inaccurately, it could be the basis for litigation.The seller can face legal consequences if they have knowledge of a defect which they do not disclose to the buyer when completing this form.
There was a case a few years ago where the sellers made no comment about an apparent water leak stemming from the windows. In fact, there were both blackening and stains on the window sills caused by a lack of weather stripping and seals. This case was tried in a small claims court. The seller’s position was that the blackening and stains should have been obvious to the buyer and there was no deliberate attempt of concealment.

The judge’s position was that the sellers acted fraudulently by not answering truth- fully the section about flooding and leakage in the home. The sellers voluntarily agreed to complete the seller form and had a duty to be honest with their response. The sellers, who were not satisfied with the decision, escalated the case to the Court of Appeal. The judge upheld the ruling and concluded that the action constituted “Fraud by silence”.

It stands to reason that if a seller is to complete this form, it must be completed accurately and honestly. It should be pointed out that a home inspection report carried out by the buyer does not protect the seller if they misrepresent the condition of the property.

If an agreement of purchase and sale requests a seller to complete a SPIS form, I personally would not dissuade my sellers from doing so. If a seller is reluctant to complete this form it would beg the question of whether the seller is trying to hide something. However, I would review the questions with them carefully and if there is any doubt about the answer, I would recommend they answer “unknown”. There are questions that the average homeowner truly does not have knowledge about. In these instances, if the buyer requires further clarification, he/she can research the answer.

One of the objections of this form is that the average layperson may not understand several of the questions. In this case, I would seek the assistance of the Realtor to ensure each question is interpreted properly.

The intended purpose of the Ontario Real Estate Association in creating these forms is to assist the buyer in obtaining pertinent information about the property. It is stated clearly in this form that the data are provided for information purposes only and do not constitute a warranty. Hence, this checklist in many instances will help the seller provide useful information to the buyer about the subject property. After all, who knows the home better than the existing owner.

Although not commonly utilized in Mississauga, in my numerous years in this profession, I have yet to see a buyer sue a seller because of the information provided on a standard SPIS form. The intended goal or objective of these forms is to ensure proper in- formation ow about the subject property from seller to buyer which inevitably will help many clients avoid the problems that arise because of lack of disclosure.