It’s time to sell. And you want everything to proceed smoothly. You want to get all your funds from your purchaser on the day of closing: that’s especially important if you need them for the purchase of your next house and you’re buying the same day. You don’t want last minute attempts to negotiate a price reduction (“abatement”) because the purchaser says there’s something wrong. You’ve budgeted carefully and are relying upon every dollar you’re supposed to get.
And you don’t want any problems after the sale either. That’s true whether you’re happy about your sale (all excited about your new place) or sad (selling your matrimonial home and maybe renting because of a divorce). Either way, when you hand over the keys you’d like to be done. No stress, no law suits. We understand that. And at Anderson Adams, if we’re acting on your sale we’ll do all we can to make that happen.
But most of the time, you’ve already signed back the Agreement of Purchase and Sale (APS) before the deal comes to our office. If the purchase was conditional on home inspection or on financing, those conditions have been waived and the deal is firm. So if you’re contemplating selling your house, what’s one thing you can you do to ensure that your sale does close smoothly?
Don’t sign an “SPIS” form. SPIS means “Seller Property Information Form”. Although the Ontario real estate industry encourages vendors to fill out and sign an SPIS, the SPIS is never mandatory. When you read over the SPIS you might think it’s okay – especially if the wording on the SPIS indicates your knowledge of your property could be “inaccurate or incomplete”. You don’t like to be disagreeable and so you may fill it out and sign it with the thought, “I’ll just do the best I can.”
However, you’re really being asked to provide information you don’t have. Particularly if you’re selling an older house, you just don’t know for sure if the basement has ever flooded. Or whether the roof has ever leaked. Or what kind of insulation is wrapped around those pipes behind the walls. Once you fill out an SPIS, every potential buyer can get a copy. And if something goes wrong after closing, you can be pretty sure that the buyer will seek to rely upon that SPIS, maybe alleging you deliberately withheld negative facts. So keep in mind: you don’t have to sign an SPIS ever. Not before listing your property; not when you sign back on the Agreement of Purchase and Sale; not before closing. But if you do sign an SPIS it’s not going to help you. It may be used against you.
There have certainly been a lot of SPIS law suits. People get emotional about their homes and they tend to persist in these law suits. That’s why an SPIS law suit may start in Small Claims Court, get appealed to Divisional Court, and go from there to the Court of Appeal. It’s quite hard to predict with confidence how these SPIS law suits will be resolved.
Consider the sad story of the sellers who filled out an SPIS stating that their basement had never flooded: and then experienced a minor basement flood a few days before the scheduled closing of their house. They figured it was a one-time event. Not so much a “flood” as a bit of rain coming in over the basement window wells. They cleaned up, they didn’t tell the purchaser, and the basement flooded again a few days after the purchasers moved in. Those sellers were sued for “negligent misrepresentation”, because the SPIS they’d signed after their Agreement of Purchase and Sale stated they would tell the purchasers about any “important changes” to the information in that SPIS.
The trial judge decided that the SPIS wasn’t part of the Agreement of Purchase and Sale because the APS included an “entire agreement” clause: and so the sellers were not on the hook for the damages. On appeal the Divisional Court held that because the representations made in the SPIS came after the APS, the “entire agreement” clause did not protect the sellers. Fortunately for the sellers, however, the Court of Appeal held that the purchasers had not actually relied upon the “no flooding” information in that SPIS. The purchasers relied upon their home inspector, who didn’t even have a copy of the SPIS. Without “reasonable reliance” the purchasers could not make out their claim in negligent misrepresentation.
The amount at issue? It cost less than $1,700 for the sellers to clean up the damage from the flood which occurred while they still owned the house. But it took eight years for the case to work its way through the courts. We can be sure that the sellers’ total legal costs were not fully compensated. The purchasers had their own legal costs, plus the costs they were ordered to pay to the sellers, and of course the costs of fixing up the flood damage which occurred after they took possession of the house. Not a good experience for anyone. But if that SPIS hadn’t been signed, most likely the purchasers would never have initiated that law suit.
To SPIS or not to SPIS? Here at Anderson Adams we’re pretty clear on that issue. If you’re selling your house, just say no.
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