The following is excerpted from a Toronto Star column by noted real estate Lawyer, Bob Aaron.
Back in the spring of 2004, Timothy and Cherese Scherbak signed a listing agreement to sell their property on Boland Ave. in Sudbury, using the services of Wendy Weddell and Re/Max Sudbury Inc. The Sellers Property Information Statement (SPIS), which they signed at the same time, resulted in years of litigation, hundreds of thousands of dollars in legal fees, and damages amounting to twice the value of the house.
Following an open house, Zoriana Krawchuk signed an agreement to purchase the house from the Scherbaks.
The offer was not conditional on financing or home inspection, and came in at $10,100 over the $100,000 asking price.
Shortly after closing, Krawchuk discovered that the entire north foundation wall and the northern portions of the east and west foundation walls had settled and were continuing to sink into the ground below. The settling resulted in the failure of proper support for the floor joists and building above.
The city of Sudbury issued a work order requiring the problems to be rectified.
Correcting the foundation problem required lifting the home from its foundations, followed by excavation, removal and replacement of the cement basement floor, foundations and subsoil, and placing the house back on the new foundations.
Moving the home caused significant cracking of the interior finish in many areas, which required further repairs.
Fortunately, Krawchuk had purchased title insurance on the closing of her property, and the title insurer reimbursed her more than $105,000.
Krawchuk was still in the red on the deal. She estimated her total damages to be $191,414.94 and sued the sellers, the agent and Re/Max.
In the lawsuit, she claimed that the sellers were liable to her for breach of contract and misrepresentation. She argued that the problems with the foundation were hidden defects, which made the house uninhabitable, and that the Scherbaks had deliberately camouflaged them by attempting to level out the living and dining room floors back in 1995.
A significant component of the Krawchuk claim was based on the SPIS completed by the sellers. The SPIS is a controversial two-page form in widespread use throughout Ontario for residential transactions.
Its stated purpose is to protect sellers by disclosing correct information about the property to buyers.
On the SPIS form signed by the Scherbaks, the question “Are you aware of any structural problems?” was answered: “NW corner settled – to the best of our knowledge the house has settled. No further problems in 17 years.”
Steve Barrow
on Aug 31st, 2009
@ 6:34 pm:
Every lawsuit I have seen where the SPIS was used as grounds for the suit shows one of two things.
1) The REALTOR when asked told the clients that there was no need to disclose whatever the issue was.
2) The sellers outright lied or grossly understated the nature of the issue.
The SPIS can protect both the seller and the buyer if used properly. I think the key is proper and informed use of the SPIS by both the buyer and the seller.
Caveat Emptor must always apply.
Chris
on Aug 31st, 2009
@ 9:06 pm:
Steven, while my hope would be that the SPIS CAN be used, the number of lawsuits preclude the use, and I suspect that the Realtor’s Errors & Omissions insurer would be hesitant to provide protection, given that a lawyer of Mr. Aaron’s standing is saying not to use them.