Starting Out: Sage Advice for Buying the Right Home for Your Family
By Joseph Griffiths, LLB
Houses are built to live in, and not to look on; he that builds a fair house upon an ill seat, committeth himself to prison – philosopher Francis Bacon
Given that seven in ten Ontarians now own their homes, Bacon’s advice and warning is as apt today as it was almost 500 years ago. In fact, arguably, since the acquisition of a home continues to be the single biggest investment a family will make, finding out after the sale that the house is riddled with significant defects could be worse than prison; that kind of mistake could be financially fatal. Fortunately, there are three easy steps you can take to avoid the home purchase nightmare.
First, consider the benefits of having a real estate agent. The Internet may make it easier to search for suitable property listings but no amount of searching will ever replace the intimate knowledge possessed by an experienced realtor when it comes to evaluating a home from the inside out. Not only will a seasoned agent know what questions to ask a seller, but often they are skilled at weeding out any problems before you have committed yourself to buying the property. Equally, a good agent can help negotiate a reduction in the purchase price if problems do emerge during your investigations. Agents are certainly not infallible but even a weak agent’s insight into a property can save you money and worry.
Second, always insist that the buyer provide a “Seller Property Information Sheet” (SPIS). This is a form of disclosure that is intended to create clarity in the buying and selling process. Unfortunately the form is not mandatory in Ontario and there is some controversy surrounding its use. While there may be merit to the criticisms from a seller’s perspective, the form does provide some measure of disclosure not typically required in the sale of property. That’s because historically, the law in Ontario has followed the legal maxim of “caveat emptor,” meaning buyer beware. Essentially that meant having to do your own investigation of a property to satisfy yourself that you were getting fair value for the money you were spending. In other words, if you didn’t notice a problem or defect before you bought your home, you were traditionally out of luck if you tried to sue the seller later. The use of the SPIS was intended to improve the disclosure between a buyer and seller by giving the seller an opportunity to answer a series of questions about the history of the house. If a seller disclosed a problem on the SPIS and the buyer purchased the home anyway, the seller could use the disclosure as a defence in any subsequent lawsuit.
On the other hand, the courts in Ontario have held that once a seller decides to complete an SPIS he or she must do so honestly and accurately and the buyer is entitled to rely on the representations made by the seller in the form. Once a seller breaks her silence by signing the SPIS, the doctrine of “caveat emptor” is neutralized and the seller must speak truthfully and completely about the matters raised in the form. To ensure this outcome, reference to the SPIS should be made in the offer to purchase and incorporated into any subsequent purchase and sale agreement.
While the SPIS does fulfill its purpose in the vast majority of housing sales, many of the questions can be tricky to answer and may create a false sense of security on the part of both the buyer and the seller. For instance, the seller may feel they have disclosed all of the defects associated with the home while a buyer may rely too heavily on the form rather than engaging in their own independent investigation. While it is important to insist on receiving an SPIS, it is also important that you not put all your faith in that document as proof of the home’s quality or fitness.
To further protect yourself and your family you should insist on having a home inspection completed before the sale closes so that you can uncover any “patent” defects within the home. A fulsome discussion on the law of defects is beyond the scope of this article it is helpful to understand that a patent defect is a problem with the home that could have been uncovered by reasonable inspection by an ordinary purchaser. While a seller isn’t allowed to hide any defects they are not traditionally required to bring patent defects to the buyer’s attention. Not surprisingly, the best way of ensuring that you have found all the patent defects in a home is to pay a registered home inspector to walk through the house with you and provide you with their comments.
As with realtors and the SPIS, having a home inspection is no guarantee that defects will be found, but not doing one will only increase the chance that you missed something important.
The only sure way you have to protect your investment from becoming your personal prison is to do your research and hire qualified professionals who can help uncover any patent defects in the home.
Joseph W.L. Griffiths is a litigation lawyer with the Ottawa firm of Flaherty Dow Elliott & McCarthy.
NOTE TO READERS: The views of the author do not necessarily reflect those of Coyle Publishing. This article is provided as a general source of information only and should not be considered to be personal investment or legal advice, or a solicitation to buy services. Readers should consult with their financial or legal advisor to ensure that it is suitable for their circumstances.