October 9th - 2007

Why you should use the SPIS

OREA’s Seller Property Information Statement (SPIS) is a valuable tool that all REALTORS® should consider using at all times.

OREA’s Seller Property Information Statement (SPIS) is a valuable tool that all REALTORS® should consider using at all times. Typically completed by a seller at the time of taking a listing, the SPIS offers protection for all parties, including the REALTORS® involved in a transaction, by providing important information and helping to disclose known defects in a property.
 
However, there can be problems associated with the form if the sellers don’t fill them out accurately and completely. Some sellers would rather not disclose a problem that could affect the purchase price or even the saleability of the property. Unfortunately they may leave themselves open to legal action if a problem is discovered and it can be proven that the sellers were aware of it. That’s what happened in a recent court case in London, Ontario, (Kaufman vs. Gibson) when the court determined that more information about a possible problem should have been disclosed on the SPIS.
 
But, in another case in Nova Scotia, (Gestner v. Ernst, www.canlii.org/en/index.html) the buyer discovered all sorts of problems with the house she bought including water damage and UFFI insulation and sued to cancel the deal and return the abandoned property to the seller. However, the fact that the seller completed the SPIS helped the court to determine the buyers were given adequate notice of the possible problem and the form saved the seller a lot of headaches and financial hardship. In what was a complicated decision, the court did provide clarity with respect to the role of an SPIS in a transaction. The court noted that the seller completed an SPIS and agreed it would form a part of the contract of purchase and sale relating to the property. The buyer testified that she read the Disclosure Statement prepared by the seller prior to making an offer on the property and relied on the accuracy of the document. The buyer signed the bottom of the Disclosure Statement the same day as she signed the Agreement of Purchase and Sale offering to purchase the property.
 
The court noted: “A Property Condition Disclosure Statement is not a warranty provided by the vendor to the purchaser. Rather, it is a statement setting out the vendor’s knowledge relating to the property in question. When completing this document the vendor has an obligation to truthfully disclose her knowledge on the state of the premises but does not warrant the condition of the property. Support for this conclusion may be found in the Disclosure Statement itself. While the top of the document indicates the seller is responsible for the accuracy of the answers given, the document states: ‘the information contained in this statement has been provided by the seller of the property and is believed to be accurate, however, it may be incorrect and it is the responsibility of the buyer to verify the accuracy of this information…. Buyers are urged to carefully examine the property and have it inspected by an independent party or parties to verify the above information.’”
 
The court in this case clearly recognized that the SPIS is for information only and is not warranted. As well, the case stresses that the possible defects or faults mentioned, served as a warning to the buyer to make further enquiries and determine for themselves.
 
Outline the positives
If your sellers are reluctant to complete the SPIS, ask them to look at it from the point of view of a buyer. If the SPIS is not provided, the buyer may be concerned that there is something hidden and something wrong with the property. Also, if there are competing properties, the fact that there is an SPIS may help the buyer to decide to buy that property rather than another competing property. Both legally and for peace of mind a seller should disclose what they know about the property. In many cases, if a seller has concerns about the property, they are relieved to have a means to inform the buyer so that they will not be accused of hiding anything in the future.
 
There are two disclaimers on the SPIS stating that the information is not a warranty, however, sellers should always be advised to answer the questions accurately and completely in order to be able to defend against any possible future liability. REALTORS® should be cautioned that the SPIS does not take the place of a home inspection or a status certificate. It also does not eliminate the obligation imposed under section 21 (1) and (2) of the REBBA Code of Ethics. – Material Facts, to determine and disclose material facts relating to the purchase or sale of a property.
 
OREA revised Form 220 – SPIS, is a basic form that applies to all property. By completing the form, the seller is providing general information relating to third party ownership interests, leases, easements, encroachments, surveys, zoning, restrictive covenants and taxes, to name just a few items. Environmental issues include possible soil contamination, oil tanks and grow houses. Known structural problems, renovations and any moisture penetration are also disclosed. If any of the answers need further explanation, there is room at the bottom of the form for additional comments.
 
Form 221 is a Schedule that includes questions particular to condominiums such as the amount of the monthly maintenance fees and what they include, any special assessments, pending lawsuits, common elements, restrictions on use and the reserve fund.
 
For most rural properties and cottages, Form 222 would be completed which addresses issues such as the source of the water, its quality and quantity and the sewage system. For waterfront properties, the questions relate to accessibility, (including any applicable costs), shoreline improvements and shoreline road allowance.
 
The SPIS form has proven itself to be an invaluable tool. To help you learn more about how get to the most out of the SPIS, OREA has a continuing education course entitled: “Seller Property Information Statement – Don’t Leave The Office Without It.” The SPIS is also covered in the CE course “Standard Forms.” For more information, or to register for an online course, call 416-391-OREA (6732) or 1-866-411-6732. For classroom courses, contact your local board office.

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Ontario Real Estate Association

Jean-Adrien Delicano

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JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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