Sellers should not sign the Seller Property Information Statement (“SPIS”) for many reasons. First, and foremost, it is not a required document to create a binding Agreement of Purchase and Sale. Next, it is overly complex, technically difficult to complete and contains ambiguities that make completing the SPIS accurately, difficult. Additionally, the SPIS is a highly litigated form. Many lawsuits have been filed as a result of the SPIS being provided, with inaccuracies, to a buyer.
Seller Property Information Statement – Not Required
Prior to listing, many agents will put the Seller Property Information Statement in front of their client and ask them to complete it. This is done in a casual manner, along with the rest of the listing agreement documents, as though it is routine and necessary. A seller has no obligation to complete the SPIS. The only document required is an Agreement of Purchase and Sale.
After listing has occurred, a buyer or buyer’s agent may request the SPIS be completed, either prior to the making of the offer or as a condition of the offer. A good seller’s agent will recommend against completing the form. However, many sellers are concerned that they will lose an otherwise beneficial deal if they refuse. The implication is that they are hiding something. I always recommend to agents and clients to blame the lawyers: “The reason the SPIS will not be completed is that our lawyer recommended against it”.
Sellers and selling agents should not complete this unnecessary form, in order to best protect themselves from claims, after closing, that the form was completed inaccurately.
Ambiguous and Complex
The form itself is problematic. Many questions are so ambiguous they are difficult to answer correctly. One question asks if there are any defects in any appliances or equipment included with the property. What constitutes a “defect”? Without a definitions section, each individual owner will provide an answer based on a subjective understanding of the word. Some owners may associate the word “defect” with “working or not working” – as in, the dishwasher does not work. Others may define it as “working, but has minor issues that may need to be addressed” – as in, the dishwasher works, but it does not clean very well. Problems can arise if each party’s definition is different: if a seller defines it as in the former manner, and the buyer defines it in the latter manner, the seller believes it is accurate to state that the dishwasher that does not clean well is not defective, while the buyer believes the SPIS was completed inaccurately.
Other questions require technical information that many owners do not know about their property. The SPIS asks about zoning, restrictive covenants, consents to sever and encroachments. Many of these questions would need to be investigated by a lawyer to accurately answer. However, most people only consult their lawyer after signing the Agreement of Purchase and Sale.
Litigation
The SPIS is the subject of many lawsuits. If a buyer believes that the SPIS contains a misrepresentation, which has resulted in the buyer purchasing the property, one remedy available to the buyer is to sue the seller for damages that have resulted. Misrepresentation in a contact is a serious issue and can result in very high awards for buyers, if the buyer is successful. The motivation to sell quickly should not blind sellers to the potential of an expensive lawsuit in the future.
Conclusion
Certain real estate markets (such as in Toronto) have generally (although perhaps not completely) rejected the SPIS. The sellers do not give them and the buyer agents do not ask for them. Other markets have generally accepted that this form should be used. In Ottawa, it does not appear to me that the real estate market has decided. I still receive OREA form Agreements that are conditional on the SPIS being completed. If the real estate market in Ottawa were to generally reject the SPIS, then refusing to complete it would not have the implications that it has now as the potential of “losing the deal” would be reduced. The buyers would not expect it and sellers would not feel pressure to complete it.
If you have any questions, please contact Noah Potechin at 613-563-6692 or by email at [email protected].
