Behold the dangers of written disclosure

The Sellers Property Information Sheet was introduced in 1993 as a way for realtors and sellers to exonerate themselves from non-disclosure of latent defects in a home. (Under law, the seller and realtor are obligated to disclose latent defects, but this disclosure does not have to be in written form.) The idea was that sellers would fill out the SPIS, noting all defects or problems with the property, and this document would serve to official notice to any would-be buyer of the home’s current or potential problems.

The idea was to create a form of disclosure, but the SPIS has actually turned into a litigation nightmare, as a recent Ontario Court of Appeal ruling shows.

The appeal refers to a 2004 real estate deal in Sudbury, Ont. At the time the sellers had completed an SPIS, which was then provided to the realtor and to the potential buyer, Miss. Krawchuk. The SPIS noted that the settling of the foundation had been repaired and that no problems had occurred since the repairs 17 years ago. Based on information contained in the SPIS, Krawchuk purchased the property for $110,000.

Less than a month after moving in, Krawchuk learned that the foundation was still significantly damaged and would cost more than $190,000 to repair. (Worse, the City of Sudbury issued a work order demanding that repairs be completed, since the damage prompted leakage into the city’s sewers.)

Krawchuk went to court.  She argued that the SPIS was misleading and that the damage was, in fact, a hidden defect.

After four years of litigation and over-turned decisions, the Ontario Court of Appeal ruled in favour of Krawchuk — stating that a reliance on the SPIS prompted her to purchase the property with the assumption that the property was not defective.

Even more interesting was that the realtor was also held liable — because she did not verify the statements in the SPIS.

Since the introduction of the SPIS, lawyers (and a few realtors) have strongly advocated against the use of the SPIS. Legal columnist, Bob Aaron, considers this document a ticking legal time bomb.