COURT OF APPEAL SAYS “AGENT BEWARE” IN RESIDENTIAL REAL ESTATE TRANSACTION
Richard Macklin —
Court of Appeal Says “Agent Beware” in Residential Real estate Transaction. Vendors Were Also Liable.
A recent case from the Court of Appeal for Ontario reminds us that we are a long way from the days of “buyer beware” in residential real estate transactions. In the event of defects, there are numerous ways that a vendor and a real estate agent may be liable to the purchaser (Krawchuk v. Scerbak (2011), 106 O.R. (3d) 598 (C.A.)).
In Krawchuck, the vendors completed a Seller Property Information Sheet (“SPIS”). The information contained in the SPIS was incomplete in terms of structural damage and false in respect of plumbing problems. In addition, the real estate agent (who acted on both sides of the transaction), was aware the house had a history of structural/settlement problems.
The Court of Appeal upheld the trial judge’s ruling of negligent misrepresentation against the vendors on the basis of the SPIS. Completion of a SPIS is not mandatory but once a vendor decides to fill one out they must do so honestly and accurately. In Krawchuck the SPIS had been incorporated into the main agreement of purchase and sale and thus the vendors’ defence based on an “entire agreement” clause was also rejected.
The Court of Appeal also held that the realtor was negligent (reversing the trial judge on this issue). The Court held the agent owed specific duties to the purchaser in light of her knowledge of the history of settlement problems. In this case she ought to have either personally verified the vendors’ assurances in the SPIS or recommend – in the strongest terms- that the purchaser obtain an independent home inspection before submitting an offer. In failing to do either, the agent was negligent.