The Seller Property Information Statement (SPIS) continues to be the single most dangerous document in current use in the real estate market.
Since 1997, when the form first came into use, there have been 94 reported Ontario court cases centred on the document. Across the country, the total exceeds 250.
Many more have been settled or are unreported.
More than one judge has written that the SPIS presents a ripe ground for litigation.
In a 2007 decision in the case of Kauffman v. Gibson, Justice Gordon Killeen wrote, “It seems that, in the past 10 years or so . . . voluntary disclosure statements . . . have been adopted by real estate boards across Canada. Almost inevitably, they have given rise to litigation over their meaning and reach.”
The latest reported Ontario decision was released last October and concerned a failed real estate transaction. In November, 2011, Gregory Parsons and Jennifer Feeney signed an agreement with Christian Menard to buy his home in Embrun, Ont., for $420,000.
The property had been built on a discontinued landfill site. A condition in the agreement required the sellers to provide an SPIS.
One of the questions in the form asks: “Are you aware of possible environmental problems or soil contamination of any kind on the property or in the immediate area? e.g.: radon gas, toxic waste, underground gasoline or fuel tanks etc.”
The seller answered “unknown,” but did disclose that there were existing waste dumps, disposal sites or landfills in the immediate area. The buyers believed that the answer referred to a chemical disposal site being constructed in the town.
Two weeks before closing, the buyers’ lawyer informed them that part of the lot they were buying was sitting on top of a discontinued landfill site containing metal, glass, plastic and brick but no apparent environmental hazard. The buyers terminated the transaction.
Several months later, the seller sold the property for $330,000 and sued Parsons and Feeney for $100,000 in damages. The buyers counterclaimed for their $1,000 deposit and expenses of $6,500 related to the failed transaction.
In a detailed ruling, Justice Robert Maranger concluded that the seller, who knew about the landfill, was “at best reluctant to advise anyone” about it, and “at worst trying to conceal the fact.”
The judge dismissed the claim and decided that the buyers were entitled to terminate the contract and walk away from the transaction in the manner that they did.
He also awarded the buyers damages of $4,020 for their losses and return of their deposit. In a subsequent decision in December, the judge ordered the seller to pay $30,000 in court costs to the buyers.
The SPIS is complex, ambiguous, confusing and highly technical in parts. It is impossible to complete accurately without the help of a lawyer and home inspector. In fact, it’s so bad that the Ontario Real Estate Association developed another form in 2013 which attempts, unsuccessfully, to explain the SPIS to sellers.
Anybody using the SPIS form will more than likely need another specialist on their team — a good litigation lawyer. It’s a ticking time bomb.
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