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Caveat Emptor - Seller Beware?

Going back for many, many years, real estate transactions were governed by a legal principle known as caveat emptor let the buyer beware. This rule of law put the onus on the buyer to examine the property carefully. If a defect is readily observable it would be up to the buyer to bring that to the sellers attention and if it was not dealt with in the Agreement of Purchase and Sale then too bad for the buyer. The law would not permit a seller to mislead a buyer and required disclosure of hidden defects. However, getting the buyer satisfaction for problems in a real estate transaction usually is time consuming and expensive. In recent years, a new tool has emerged that can protect a buyer. In many transactions a Seller Property Information Statement is completed by the seller as part of the transaction. Such a statement deals with many issues of disclosure including environmental and structural issues. A recent decision in a London, Ontario case illustrates the protection that such a statement can provide a buyer. In that case the sellers property had suffered some serious water damage due to ice backup on the roof. Although the repairs were made, the real estate agent gave the seller bad advice when the disclosure statement was prepared. The seller did not disclose the water damage and the buyers refused to close. The sellers eventually sold the house for $100,000.00 less and sued the initial buyers. The court held that the seller had not intentionally mislead the buyer in the disclosure statement but had been negligent in the completion of the statement and dismissed the sellers lawsuit. The cost to the sellers exceeded $200,000.00 in loss profit, their legal fees and paying the legal fees of the buyers of over $50,000.00. Our advice to a buyer would be to insist that a Seller Property Information Statement be completed and be a condition of accepting an offer. Our advice to a seller would be not to complete a Seller Property Information Statement as even innocent mistakes can leave you exposed to a lawsuit. However, if the statement is to be completed by a seller, be very careful in the completion of the statement and obtain legal advice before the statement is completed. Most lawyers will provide this advice as part of the service to the client in a real estate transaction and obtaining this advice can save many thousands of dollars and much heartache.