OREA lawyer ‘emphatically’ supports disclosure forms

Front Page, Stan Albert Aug 15, 2011
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Lou Radomsky

By Stan Albert

As many of REM’s readers know, I’ve thundered on about using Seller Property Information Statements (SPISs, as they are known in Ontario) from time to time. Toronto lawyer and columnist Bob Aaron has dubbed me the “unofficial ombudsman” for Ontario Realtors. Be that as it may, I asked Lou Radomsky, Ontario Real Estate Association Standard Forms Committee legal counsel, to answer some of the slanted views of Mr. Aaron. It’s my fervent hope that some of you will weigh in on this article.

Lou was called to the Bar in 1977. He is an OREA Real Property Law instructor and he also instructs the Real Estate Council of Ontario Update Course. Lou has written and presented a variety of other courses.

Stan Albert: What gave rise to the SPIS?

Lou Radomsky: The SPIS was originally developed in Ontario by one of the boards. It was created to perform a number of tasks. It was and is meant to afford the real estate salesperson an opportunity to gather information about and become familiar with the property. It also gave and continues to give the seller the chance to be forthright about issues on the property that would be of interest to a buyer. OREA saw the benefits and value of the information provided by the form and created its own.

Albert: How many jurisdictions use a form similar to the SPIS?

Radomsky: Virtually every provincial and territorial association has some version of this form available.

Albert: Why does the form have a number of questions that may not apply to a property?

Radomsky: The form is a written format of questions a Realtor is supposed to ask when taking a listing. The Realtor would go through a series of questions to become knowledgeable and informed about the property. In any conversation of that nature there will be questions that the Realtor asks that have no application to a property. However, by having these questions addressed in the form, in the event that the question is appropriate, then it has been asked.

Albert: Do you believe that the completion of the form should be mandatory?

Radomsky: There are instances where the form would not be appropriate; as in a power of sale, an estate sale, a tenanted property to be sold or where the seller does not exhibit a working knowledge of the property. However, the benefit to having a written format is that the answers have been documented. The effect is to ensure that a buyer would become aware of issues that might affect their decision to buy.

Further, the use of the form is meant to provide the disclosure necessary to avoid litigation. A buyer who has been told of a deficiency in advance of making an offer on a property will have great difficulty pursuing successful litigation on that issue. The benefit of the written format is to avoid any dispute that might arise with a verbal disclosure vs. written disclosure.

Albert: What do you think about the court cases that are out regarding the SPIS?

Radomsky: There are many cases where the use of the form was a deciding factor in protecting the seller and the sales representative or broker.

Albert: How is the form meant to be completed?

Radomsky: It is not appropriate for the Realtor to leave the form behind and ask the seller to complete it in the Realtor’s absence. The Realtor’s job is to meet with the seller while the SPIS is completed. The Realtor is to explain what the question is asking and not to provide an answer.

Albert: What cautions would you suggest to anyone completing the form?

Radomsky: Primarily, be honest. Most of the litigation where the sellers were found liable came from circumstances where the court did not believe that the sellers were telling the truth.

It needs to be emphasized that the use of the form is like any other tool; it must be used and completed correctly. The difficulties arise when that does not happen. Some of the cases have illustrated this. It is expected that the seller diligently reviews the questions before answering them. A cavalier(Showing arrogant or offhand disregard) approach might result in a determination that the seller was negligent in completing the questions.

It should also be noted that there are questions that the seller may not be able to answer. If this inability results from lack of knowledge, then the form provides a place for responding that way – “Unknown”. If the inability is because the question does not apply, then it is appropriate to answer “n/a”. If the seller does not understand the question then it is important that an explanation be provided so that the seller can correctly respond.

Err on the side of caution. Better to disclose a repair that was completed a while before the sale of the property, than to have the buyer discover the issue after closing when it has become a bigger issue.

What used to be afforded the protection of the principle of caveat emptor has eroded over time. The courts expect sellers to be forthright about what it is they are selling.

This is, in most cases, the most expensive undertaking that buyer and seller will undertake in the lifetime. We should hold sellers accountable for trying to “slide one by”.

Today, we instruct Realtors that disclosure is imperative. This is also prescribed by Section 21 of the Code of Ethics.

Sellers are under an obligation to disclose defects on the property, in particular, defects that a court might consider a latent defect. A latent defect is typically in regards to a structural matter of which the seller has knowledge and the defect is not readily apparent. The ones that most often find their way to a court are leaks.

Latent defects can be pursued in a court in the absence of a SPIS. The SPIS affords the seller the opportunity to tell the buyer. Upon disclosure a successful court action would be extremely problematic.

In a current circumstance consider the Krawchuk v. Scherback case where ultimately both the sellers and the salesperson were held liable. The trial judge came to the conclusion that the sellers were not forthright but rather were dishonest in not disclosing defects on the property and held the sellers liable. On appeal the court found the sellers liable and the sales representative liable as well. The sales representative in a multiple representation situation had advised the buyers to remove a home inspection condition.

The Appeal Court said: “To avoid liability in negligence, a real estate agent must exercise the standard of care that would be expected of a reasonable and prudent agent in the same circumstances.”

The Court of Appeal determined that the salesperson was obligated to engage in further investigations where a visual inspection revealed issues. These included a “sloping floor” and the statement by the sellers that there had been a repair done 17 years previously and there had been no further issues.

On the other hand, take the Cotton v. Monahan case in 2006 where the buyers purchased a home and discovered a large number of latent defects. The buyers pursued the sellers and the real estate salesperson, claiming damages. After a review the court determined that the buyers had been advised that there had been construction done to the premises without a permit and that the buyers should consider a home inspection. The buyers chose not to have one done. Upon discovery of the defects, they sued the sellers because they felt that the sellers had concealed these defects. There was a SPIS completed and provided to the buyers.

The court determined that the sellers and the salesperson were forthright in all their dealings with the buyers and had not concealed anything. The action was dismissed.

Albert: So do you think it is a good idea to complete the SPIS?

Radomsky: Emphatically yes! If completed appropriately, it gives the buyers valuable information. It affords the sellers the chance to be forthright(Direct and without evasion; straightforward) in their knowledge of the property. Problems arise with or without the form, when the sellers attempt to mislead or conceals issues. These can lead to litigation whether there is a SPIS or not.

Consequently, by offering the SPIS to a seller to complete it allows the seller to tell the buyer of anything that might be of value to the buyer in deciding whether to purchase a property.

Stan Albert, broker/manager, ABR, ASA at Re/Max Premier in Vaughan, Ont. can be reached for consultation at stanalb@rogers.com. Stan is now celebrating 41 years as an active real estate professional.


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TREB fires back at Competition Bureau
Front Page Aug 19, 2011


The Toronto Real Estate Board (TREB) filed its official response to the Competition Bureau’s complaint on Friday, requesting that the Competition Tribunal dismiss the application with costs payable to TREB.

“We have patiently and tolerantly waited for the opportunity to respond to the Competition Bureau, and today we filed a response rejecting the commissioner’s position and outlining why we believe the application has no merit,” says TREB president Richard Silver in a news release.

“TREB has followed through on its commitment to provide Realtor members with greater flexibility to serve their clients by developing a Virtual Office Website (VOW) policy. The VOW policy will allow for secure password-protected websites designed to allow consumers to search and display MLS listing data, with the benefit of a Realtor member’s oversight, supervision and accountability,” says the release.

TREB says the commissioner “is pressuring TREB to release private data about individual consumers openly on the Internet. This could include personal contact and financial information including sale prices. TREB believes that would be reckless and a violation of the law and will harm consumers in the process of buying and selling real estate.”

“Not only does the Commissioner’s Amended Notice of Application continue to endanger the privacy rights of consumers, but we do not believe it can succeed under the Competition Act. The Commissioner’s Amendment is unnecessary posturing for publicity. Consumers simply deserve better,” says Silver.

TREB’s response says the commissioner’s application “ignores the copyright of TREB and its members,” stating that the exercise of its rights of copyright “is not an anti-competitive act” under the legislation.

TREB says the Competition Bureau must satisfy the tribunal that “TREB substantially or completely controls the markets identified by the commissioner for the purpose of this application, namely, the supply of residential real estate brokerage services to home buyers and sellers….”

But it says TREB does not supply residential real estate brokerage services either to buyers or sellers, and “has no legislative authority” to do so.

It also says that neither TREB’s Access Terms for the MLS, nor the board’s Proposed VOW policy “will or are likely to substantially prevent or lessen competition, whether in the manner alleged by the commissioner or at all.”

The response says, “Consumers of residential real estate brokerage services already have a number of search tools open to them for the purpose of identifying and then narrowing the search to those properties of interest to them. A number of providers offer services to home buyers and sellers that do not rely on those home sellers acquiring the traditional suite of residential real estate brokerage services offered by ‘bricks and mortar’ brokers…Further, there are no restrictions whatsoever placed by TREB on its members that preclude members from also making their listings available through the multitude of websites and listing services not affiliated with TREB.

“The commissioner’s application significantly undervalues both the services that many brokerages offer home buyers and the very real role brokers play in stimulating trade in the relevant markets. The work of a broker is not meaningfully lessened by reason of home buyers having undertaken their own searches…”

The response continues, “While identifying properties of interest is certainly an important aspect of the buying process, it is by no means either the most time intensive aspect of the service brokers provide, nor the aspect of service that is of greatest value to the home buyer. Any suggestion to the contrary is simply inaccurate.”

To view the full response, click here.



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Opinion: The pendulum is swinging back
Front Page Mar 7, 2012
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By Bill Hubbard

Selling real estate 40 years ago was a very different job than it is today. Brokerages were brokerages. They brought something to the table for their Realtors. Companies generally took 50 per cent of the gross commissions earned but they handled all the marketing and advertising in return for those fees. Brokerages were partners with the sales reps in the business of finding and servicing buyers and sellers. Then the pendulum swung.

Independent contractor status swung into the business and the birth of the 100-per-cent concept was born. Brokerages stopped being brokerages and started being landlords. They sold a brand and they sold space and called it a desk fee.

Some companies refused to adapt and tried desperately to hang onto those high fees and the old model of doing business. If those companies hung onto their old concepts of the business, they did not survive. Franchisees and franchisors and independents all had to eventually assume that the fees had to be reduced if they were going to compete and survive. The salesperson had spoken and we as brokerages had to listen.

The real estate business continued on like this for a couple of decades. Then something happened. The birth of the Internet has changed this business for ever. It took our product away.

Our product in the ’60s, ’70s and ’80s was information. We had The Book – our MLS book. Not long after we started showing houses to a buyer with our MLS catalogues, the buyer realized that they had to have that book. But we were forbidden to give it to them even though a lot of us did – but just as a tease. We would never just give away our product, the information. That would be like being a car salesperson and coming to work Monday morning and all the cars had been given away on the weekend because the owner had gone mad. The salespeople would wander around the lot wondering what to do.

But that is exactly what the Internet did to our business. It gave the information away – free, if you can believe it. All of a sudden we had an entire industry that had to find a new product. We had to find a new way to bring value to the table.

That value had to be service and expertise. It was the only way to distinguish ourselves from our only real competitors, the buyers and sellers themselves. Because Realtors were independent business people now and the Internet had changed their product, they now had to find a way distinguish themselves as a better, more profitable way to sell or buy a home compared to the buyers and sellers doing it by themselves. Not only that, throw in a new business model that is showing the sellers how to sell their home online for little or no money. Imagine that.

Realtors in the ’90s and right into the first decade of the 21st century were focused on one major advertising ploy, search engine optimization (SEO). This was challenging and hard work with lots of late nights. How do I get my listings to come up before anyone else’s listings? Then the last knife got thrown into the backs of the over-worked Realtors of the early 2000s: Web 2.0.

In this broker’s opinion, social media is the final weight that is going to swing the pendulum back. It all dawned on me when I was sitting in my office with one of my Realtors discussing her goals for the next year. She was crying. She said, “Bill, I am working twice as hard as I did last year and making half as much money. I am up until one or two in the morning doing YouTube videos, Facebook ads, Kijiji ads, Craigslist ads and Castanet ads and then trying to do all the communications with my clients as well.”

A light went on in my head. The pendulum was swinging back. Realtors needed brokerages again. Right around that time I was introduced to a very different brokerage model in Kelowna B.C. that was so far outside the box I could not believe it was actually working. Ken and Grant Wiebe, a father and son team, owned the Century 21 office in Kelowna and had created a compensation plan called Vision 25. In this plan the brokerage took back control of the marketing and advertising. They sent out a professional photographer to take the pictures, they supplied and installed the signs, they did all the social media marketing including YouTube. They also sent newsletters to all the Realtor’s client base and they did it all for the same split as I was charging.

I later found out that the name Vision 25 came from the notion that the program was predicted to increase the effectiveness of the Realtor so they did 25 per cent more production than the board averages. When they made more money the brokerage made more money and that would finance the new services. Gutsy call if you ask me.

To shorten up the story, it worked. The sales reps’ average production gradually increased to the point where it not only financed the program but made the office more profitable as well.

We now believe that the real estate industry is heading towards a shake up. To survive, brokerages are going to have to stop being landlords and go back to being brokerages. There will be no room for the middle of the road brokerages. There will be a market for people who want to do it themselves and there will be a market for people who want the absolute best in marketing, advertising, expertise and service.

We have since purchased the office in Kelowna and have converted our Vernon and Enderby B.C. offices to Vision 25 as well. The system has held true to its original form. Our customers are getting a level of service and marketing that far exceeds where most brokerages are at. We are supplying those services to our Realtors for no additional costs and our profits are up because our Realtor’s incomes are up in a market where times are tough. The pendulum swung and we are back to being partners with our Realtors, sharing the responsibilities of great service to our customers.

Bill Hubbard is owner/broker of Century 21 Executives Realty in Vernon and Enderby B.C. and Century 21 Assurance in Kelowna BC. He is a 23-year veteran Realtor, and an author and trainer. His book, the Encyclopedia of Selling Real Estate, is designed as an training manual for Realtors.
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