The Importance of Disclosure

One of our favourite column-writing lawyers, Mark Weisleder, has another great article about the problems of disclosure. 

 

He mentions the plight of a couple selling their home. A week before closing, their basement flooded; something it had never done before. They paid for the repairs and, certain that it was a one-time thing and that the problem was fixed, they didn’t mention anything to the Buyers. A few weeks later, the basement flooded again, only this time the Buyers had to pay several thousand to fix the problem.

This situation is not an uncommon one. On the one side, you have basically honest people who didn’t know they needed to mention something. From their point of view, it had never happened before and they had paid to fix it, so the flooding was really a non-issue. They didn’t mention it, not out of spite or maliciousness, but just because they didn’t know they should have. 

On the other hand, you have a couple who is reasonably frustrated by this new expense that comes so soon after their new purchase. They had thought they were protected by the home inspection and by all the signed agreements, and yet here they were with a flooded basement. 

Unsurprisingly, the situation went to court. The Sellers were lucky that the judge sided with them in saying that it was a reasonable assumption that the flooding was a one-time occurrence given past history. Had it gone the other way, the Sellers could have been liable for several thousands of dollars above the cost of repairs. 

Mr. Weisleder summarizes the lesson quite well: 

The lessons from this case are:

 •  For Sellers, disclose all problems you know about. If you are not sure, err on the side of disclosure.

 •  If you as a seller sign an SPIS (Seller Property Information Statement), to be safe, do not permit it to be attached to the agreement. That way, you will be protected if you made a mistake in completing it.

 •  Buyers should not rely on the SPIS because it is not supposed to be a warranty; it is just to be used for information purposes.

 •  If something matters, always include it in your home purchase agreement. Do not rely on verbal promises or advertisements.

The moral of this story- ALWAYS disclose EVERYTHING. If you aren’t sure if it’s relevant, check with us and we’ll let you know if the information should be passed along.