A recent decision of a discipline panel of the Real Estate Council of Ontario (RECO) could spell the end of the Seller Property Information Statement in Ontario.
The SPIS is a disclosure form published by the Ontario Real Estate Association (OREA). Some real estate agents swear by the form, while others are strongly opposed to it.
I have been very critical of the SPIS because, in my opinion, the questions are ambiguous, technical or complicated, and they require expertise in property law, building code, accounting, zoning and other issues — which most homeowners do not have.
Some agents feel the form exists to protect them from allegations of failure to disclose property defects. But it now seems that the form will only create problems for agents who fail to verify its contents.
Across Canada, the SPIS and similar forms have resulted in about 200 reported court cases since 1997.
A disclaimer on the forms attempts to shield real estate agents from responsibility for the accuracy of the seller’s answers. But that disclaimer may not be effective in light of RECO’s recent discipline decision.
Dale Godfrey is a real estate broker in Sault Ste. Marie. Back in 2010, she represented both buyer and sellers in a purchase agreement for a $105,000 home.
Before the agreement was signed, Godfrey provided an SPIS to the buyer. It stated that there were no known problems with moisture or water infiltration. The buyer relied on that representation in deciding to buy the property.
A subsequent home inspection revealed that the foundation had significant cracks and was very vulnerable to basement water leakage.
The inspection company estimated the cost of repair at $12,000. The buyer’s bank would not advance funds in the face of the home inspection and the buyer was unable to complete the transaction as a result.
Godfrey was charged with breach of several sections of the RECO code of ethics. In an agreed statement of facts submitted to the discipline panel, she admitted acting unprofessionally by failing to verify that the SPIS was accurate, and failing to promote and protect the best interests of the buyer.
Godfrey also admitted that her conduct was unprofessional or dishonourable, or both.
The panel ruled that Godfrey failed to treat her clients fairly, honestly and with integrity, and that she failed to promote their best interests. As well, it found that she failed to exercise reasonable knowledge, skill, judgment and competence in providing services to her clients.
In admitting that she had an obligation to verify the contents of the SPIS, Godfrey allowed the discipline panel to find her in breach of several sections of the RECO Code of Ethics.
Its reasoning seems to be based on an agent’s obligation to discover and disclose material facts relating to a property despite the disclaimer on the SPIS form that the agent is not responsible for its contents.
Godfrey was fined $6,000.
The discipline panel’s decision may well send a chill through the ranks of Ontario’s real estate agents because it ruled that Godfrey failed in her obligation to ensure the SPIS was accurate.
I interpret this case to mean that agents in the future will now be required to verify all the contents of an SPIS or face the consequences in a regulatory hearing. If that is now RECO’s position, it is not difficult to imagine that no agent will ever use the form again.
In the past, OREA has said that it takes pride in the SPIS form because it acts as “an excellent tool” to inform buyers and protect sellers over many years of use.
Last week, when asked to comment on the Godfrey decision, an OREA spokesperson emailed me to say that “the SPIS is another tool in a registrant’s tool kit which can be helpful in determining information about a property.”
In 2009 the SPIS was “excellent.” Now, it’s just “another” tool. As I read it, OREA’s enthusiasm for the SPIS is waning.
If OREA wants to keeps its own agents out of trouble, it should kill the form now.
Bob Aaron is Toronto real estate lawyer. His Title Page column appears on this blog, Move Smartly, and in The Toronto Star. You can follow Bob on Twitter @bobaaron2 and at his website aaron.ca Email Bob