Bizarre Form Warns Against Signing SPIS Form

Bob Aaron in Legal, Home Selling

Home and Paperwork
In the wake of a flood
of court cases involving the Seller Property Information Statement
(SPIS) and its counterparts across Canada, the Ontario Real Estate
Association (OREA) has introduced a strange new form designed to warn
sellers about signing the SPIS.

Property disclosure
forms consist of a complex series of questions that agents sometimes ask
sellers to complete. Some agents believe — incorrectly — that the form
shields them from liability for undisclosed defects in the house.

Since the form first
appeared in 1997, it has been the subject of about 230 court cases
across Canada — and new ones are appearing at the rate of about one a
month. Indeed, it is difficult to think of any other single form —
except perhaps the marriage certificate — which has spawned so much
litigation and has produced so much money for litigation lawyers.

Rather than place the
warnings about signing the SPIS form right on the form itself, the new
form 225, entitled “Important Information for Sellers,” contains a
caution for anyone about to sign the disclosure form.

In a huge understatement, the warning form states “care must be taken when the form is completed.”

“If there is some
question as to whether a particular item should be mentioned on the
form,” the warning notes, “it is better to err on the side of caution
and provide the information along with an explanation, e.g. a defect
that has been repaired.”

In my view, erring on the side of caution would require that the form be shredded.

The text continues:
“With the high volume of property transactions that take place, there
will inevitably be disputes between seller and buyers, whether or not an
SPIS has been completed. The SPIS, when completed, may become an issue
in such a dispute.

“There have been cases
where a court has determined the sellers completed the SPIS accurately,
honestly and to the best of their ability and the evidence provided by
the SPIS is favourable to the sellers. There have been other cases where
a court has determined that a seller has not been forthcoming with
important information on the SPIS or has provided misleading information
to the buyers.”

The warning form makes
no mention of the frequent criticisms that have been levelled at the
SPIS by the courts, here in this column, and elsewhere. Filling it out
completely requires technical, legal, construction, environmental, tax
and accounting expertise far beyond the capacity of most individuals,
and indeed, most agents. Many of its questions are ambiguous or unclear
at best.

Some of the questions
ask about events which occurred prior to the ownership of the seller,
and would be completely beyond his or her knowledge.

Sellers signing the
form are asked impossible technical questions about encroachments,
easements, restrictive covenants, drainage restrictions, local levies
and heritage designations.

But the biggest zinger on the new warning form is that it fails to clearly state the law on a seller’s disclosure requirements.

It says, “Whether or
not the seller completes an SPIS, the law requires a seller to disclose
hidden material defects to a property.”

Correctly stated, the
law requires a seller to disclose any hidden defect which renders the
property uninhabitable or dangerous. Telling a lay person to disclose
“material” defects without defining the term is both unhelpful and

I can’t think of any
other document in any area of law that exists solely to warn consumers
about the dangers of signing a different form altogether. To me, the
concept of a separate warning form is simply bizarre.

It makes me wonder
whether the real purpose of the form is an attempt to shield the agent
from getting sued for asking the seller to sign the SPIS.

In a recent blog about
the SPIS, lawyer Simon Parham writes, “Buyers love them. Lawyers hate
them. Sellers should be wary of them.”

In its attempt to dig
itself out of a hole created by a very bad disclosure form, OREA’s new
warning form has only succeeded in making the hole that much deeper.

Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron
in Toronto and a past board member of the Tarion Warranty Corp. Bob
specializes in the areas of real estate, corporate and
commercial law, estates and wills and landlord/tenant law. His 
Title Page column appears alternate Fridays in The Toronto Star and alternate weeks on Move Smartly.  E-mail

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