Home Buyer Has No Duty To Challenge Seller's Honesty in SPIS

Completing a Seller Property Information Statement ("SPIS") can increase the seller's risk when selling a home. If the seller is untruthful, partially truthful or fails to disclose something important, the purchaser may have grounds to set aside the agreement to purchase. The purchaser has no obligation to question whether the seller is being completely honest or to investigate further, but rather, can rely on the SPIS as a true representation of the condition of the property. Effectively, a SPIS shifts the doctrine of caveat emptor (let the buyer beware) to that of caveat venditor (let the seller beware). A recent court case, Menard v Parsons, illustrates this point.

The purchasers thought they had found their dream home located on two well-manicured lots. What they did not know is that several decades early, the lots had been used as a landfill site. The sellers filled out a SPIS with the following information.

“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.” to which the seller indicated “unknown”.

“Are there any existing or proposed waste dumps, disposal sites or landfills in the immediate area?” to which the seller indicated “yes”.

At the time, there was a battle between the town and the surrounding area regarding a proposed chemical disposal site being constructed. The disagreement had received ample coverage by the local news and the purchasers assumed that the positive response to the question about an existing or proposed waste site related to the chemical disposal site. They agreed to purchase the property for the price of $420,000.

Prior to closing, the purchasers discovered that the property was built on an existing landfill and refused to close the transaction. of $420,000 was accepted and they made plans to move in. Eventually the sellers were able to find another buyer but having now disclosed that the property was built on an existing landfill, they received only $330,000 for the sale. They sued the original purchasers for the difference in price and for incidental costs related to the aborted transaction. The purchasers counter-sued for their incidental costs related to the aborted transaction.

The main argument advanced by the sellers was that of caveat emptor, that the buyer takes a property with any defects that could have or should have been discovered by a routine investigation. As stated: “absent fraud, mistake or misrepresentation, a purchaser takes existing property as he finds it, whether it be dilapidated, bug infested or otherwise uninhabitable or deficient in expected amenities, unless he protects himself by contract terms”.

The court rejected that argument stating that the seller had made two misrepresentation when filling out the SPIS. First, the simple "yes" answer related to the proposed or existing waste site was insufficient to accurately inform the purchasers that the property was located on a landfill. The answer provided had to be taken in the context that there was a proposed dump site in the vicinity that was well known in the community. The proposed site was being strongly resisted. Taken with the fact that the property was built upon a “discontinued landfill site” and not “a proposed or existing landfill site” buttressed the proposition that the answer was misleading.

Additionally, answering “unknown” to the question “are you aware of possible environmental problems or soil contamination of any kind on the property or in the immediate area” was incorrect given the history of this property and the knowledge of the sellers.

A seller does not have to complete an SPIS is not mandatory. However, once the seller decides to fill one out, he or she must do so honestly and accurately and the purchaser is entitled to rely on the representations contained in the SPIS. Once a vendor breaks his silence by signing the SPIS, the doctrine of caveat emptor falls away as a defence mechanism and the defendant must speak truthfully and completely about the matters raised in the unambiguous questions at issue.

Menard v Parsons, 2015 ONSC 4123 https://www.canlii.org/en/on/onsc/doc/2015/2015onsc4123/2015onsc4123.pdf

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