Property Condition Disclosure Statement #179

By Gerry Neely
B.A., LL.B.

The decision of the British Columbia Real Estate Association to provide a Property Condition Disclosure Statement to be completed voluntarily by owners should be welcomed by licensees. It is a constructive approach toward reducing law suits against licensees and minimizing liability based upon allegations of misrepresentations made by licensees in real estate transactions.

The following list illustrates just a few of the cases in which licensees were involved in court proceedings because of a vendor's misrepresentation: the septic system is fully operational; the heating costs of the greenhouse are -, there is a drilled well; the flow from the well is 3 1/2 gallons per minute; the house is fully insulated; the house is not insulated with UFFI; no, we never have any water problems in the basement (or with the roof); all rental increases were lawfully made; the financial information is substantially accurate; the lot was filled with clean fill; land is free of noxious weeds; land is fully serviced and ready for immediate building; the property is registered in my name only.

Some owners will resist the request that they complete the disclosure statement. The habitual fixer-upper of dilapidated houses or the occasional handyman who makes improvements without checking to see whether a building permit is required, may find it difficult to answer question 2(g). Some questions force an owner who would prefer to equivocate to answer an unequivocal yes and no where the question applies to the property being offered for sale. While the disclosure statement is not compulsory, requests from both selling agents and purchasers to the listing agent for the disclosure statement and the response that it is not available, will raise a suspicion where perhaps none exists. The suspicion itself will put pressures upon owners to complete the disclosure statements. In addition, purchasers will want to incorporate the disclosure statement in the standard form contract, to avoid the effect of paragraph 9.

Licensees should take the time to make themselves aware of the pros and cons of the disclosure statement from the perspective of all parties, both to overcome the owner's resistance and to be able to explain the advantages to the purchaser. For the owner, truthful answers provide a defense to an action by a purchaser who alleges that misrepresentations were made by the vendor or by the vendor's agent acting with the authority of the vendor.

The disclosure statement serves the purchaser as a source of information about the property and a check list against which the purchaser can evaluate information received from other sources, and as proof of the vendor's representations.

What the disclosure statement doesn't do is relieve either the prudent licensee or purchaser from the duties and responsibilities they now have. Those duties bear repeating. The listing agent's duty is to ascertain and verify all pertinent facts about the property before putting it on the market. The selling agent's responsibility is narrower, but is to check the "completeness and accuracy of all information which is usual or customary for brokers to verify, and of all other information as to the completeness and accuracy of which he is in doubt before conveying that information to a prospective purchaser." In addition, of course, there is a duty to verify the accuracy of an-y information the purchaser requests the licensee to obtain.

A judge has also said in one of the throwaway lines one finds in judgements, that it is not unreasonable for a selling agent to have relied upon the listing agent to disclose all material information. This throws the obligation back to the listing agent who should not rely upon the information provided by the owner where it is possible to check the accuracy of that information.

As for purchasers, even though the courts give less weight to the importance of "caveat emptor", it is still their responsibility to deal with any defects they can see, or seek explanations about inconsistencies in information provided.

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