All houses have history, and no houses are perfect. However, some houses might have worse history than the others, making the sale quite difficult due to these past events.
In situations like these, sellers might wonder of how much of these past histories they have to disclose to a potential buyer. Here, we will discuss all you need to know so you can be protected from future legal issues while ensuring you can sell the house ASAP.
Before we discuss specific elements that might or might not be required to disclose, it is important to understand that there are rules and regulations that will only apply to real estate agents, but not to private home sellers.
Before we can discuss this, however, we must first learn about the difference between patent and latent defects.
Refers to visible and obvious defects that can be seen by anyone viewing the home or directly visible by a professional home inspector. The homeowner, thus, cannot conceal these defects.
Some examples of patent defects might include visible stains and cracks, missing items (i.e. missing railing or broken fence), and so on. Legally, both the seller and real estate agents are not obligated to disclose patent defects, but on the other hand they are commonly visible to the naked eye, especially during a home inspection.
Latent defects are defects that are not apparent to the home viewers, and in some cases are not discoverable by professional home inspectors. It’s worth noting that sometimes, even the homeowner is not aware of the existing latent defects.
However, latent defects can be serious, for example, structural defects can be dangerous in the long run, as well as a house with defects caused by flooding or fire damages.
The seller must disclose latent defects if they know about the existence, and if the defect is serious enough to harm the potential buyer’s health and safety. However, if they didn’t know about the latent defect in the first place, they are not accountable.
Seller Proprietary Information Statement (SPIS)
SPIS is an optional form in Ontario—it’s not legally required—that can be requested by the potential buyer. Some real estate brokerages might also require their agents to fill out SPIS for any potential sales.
The seller and the seller’s agent might refuse to complete an SPIS form, especially in a hot market where the seller can simply move on to the next potential buyer.
SPIS, once filled, can legally bind the seller, where the seller is held responsible for incorrect information due to negligence or deliberation. For example, if the seller can be proven to know about existing structural damage, but it’s not mentioned in the SPIS, the buyer can legally sue the seller.
It is worth noting that filling out an SPIS is highly complex, so unless it’s absolutely required by the potential buyer— and there are no other candidates—, you might want to avoid filling it out.
There are also cases where completing the SPIS form is difficult for the seller. For example, when the property is previously rented and the seller does not have sufficient knowledge about the house’s physical condition. Another example is when the house is being sold by a bank under power of sale.
Death In The House—Required Disclosure?
If someone died in the house, is the seller obligated to disclose the fact?
Legally, there is no law in Toronto and Ontario requiring a private seller about disclosure regarding a death occurring in the house, even if it’s caused by murder or suicide. However, it’s considered ethical practice to disclose deaths during the sales negotiation.
On the other hand, realtors are governed by RECO (Real Estate Council of Ontario) and/or other real estate organizations which might have binding regulations regarding this. If you—as the seller—, work with a real estate agent. The realtor might be obligated to disclose the fact to potential buyers, especially for events such a a murder.
Physical Damages and Defects Disclosure
In general, the seller should disclose physical damages on the property of which they have knowledge of, even if it’s a latent defect, such as:
- Basement leakage, especially when it happens seasonally
- Termites, bed bugs, and other infestations
- The conditions of the wiring in the house, as well as other electrical appliances
- When some additions to the house was added without building permits (i.e. illegal basement apartment)
- Lea in your drinking water
Examples of Latent Defects That Will Require Disclosure
In general, any latent defects that are dangerous—or have the potential to be dangerous/unfit— for the potential buyers, should be disclosed.
Remember, however, that the seller will not be liable for these latent defects when they have no prior knowledge about these defects. Some examples where the disclosure for latent defects is required are:
- Mold. Most experts will agree that mold can be categorized as a latent defect, and might be harmful to the resident’s health.
- Asbestos. It’s common to have asbestos in the house if the house was built before 1979—when asbestos was banned in Canada—.
- When criminal activity happened in the house. I.e. the house was used to grow marijuana or as a meth lab, or the house was used for illegal rooming
- If the house has been flooded or there was fire-related incidents
The general principle is, if the seller or the representing real estate agent is asked a question by the potential buyer, they shouldn’t provide a false answer. It is also worth considering that agents might be legally obligated (at least by the governing association) to disclose defects and past events at the earliest possible convenience.
While indeed, disclosure about unfortunate events and defects might hurt the chance to sell the house quickly, it will protect the seller and the realtor from future legal issues—which can be even more expensive and time-consuming.