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Updated 11th April 2023
When it comes time to make your offer to purchase a house, your Realtor will provide the form of offer and assist in its completion. The form itself is four pages long. Once accepted (and the deposit paid), the offer creates a binding contract between the buyer and the vendor. The offer sets out all the terms, such as possession date, price, and items included or excluded. Realtors also use another form, one called the Property Disclosure Statement. This form is an Appendix to the contract. The contract itself refers to the form. The parties decide when completing the offer whether this Appendix will form part of the contract. While the Appendix is optional, I know from experience that Realtors present the Property Disclosure Statement as mandatory. Most of my vendor clients do not know it is optional.
The Property Disclosure Statement is a series of 19 questions about the state of the property. The questions cover items such as zoning, electrical, leaks and so on. It is meant to provide the buyer, who has limited knowledge about the property, some background. If you are buying the home, this form helps you understand some of the home's history. HOWEVER, it is not a guaranty. The vendors are not making a representation that no problems exist. The vendors are simply stating that they have not experienced any problems as far as they know. From a buyer's point of view, this could lead to a false sense of comfort. For better or for worse, the law in Manitoba still states that buyers are responsible for making their own inquiries. (This principle is called Caveat Emptor). Vendors are not obligated to disclose problems, even if they know the problems exist.
Vendors should not state in the Property Disclosure Statement that they have not experienced problems if, in fact, they have. If this occurs, vendors are liable for the statement. For vendors to rely on the principle of Caveat Emptor, they must remain silent if they know of a problem. So, for example, if vendors know the foundation leaks, they are not obligated to disclose it. It is up to the purchaser to have an inspection done. However, if vendors check off the "no" box in the Property Disclosure Statement at questions no. 6 or 8 representing that the foundation does not leak, they will likely be found liable for misrepresentation. Buyers, however, can avoid all of this by having the property inspected before possession. If problems are discovered, a buyer will have more success dealing with the problem upfront. Once possession occurs, a buyer must take the vendors to court, and it becomes significantly more difficult to resolve, if at all.
If you are a buyer, I usually advise that you have a home inspection performed. The Standard offer to purchase includes a pre-printed condition for the buyer's benefit at paragraph 8 (c). It reads:
That by ______a.m.p.m. on the _____ of _______, 20___ the buyer obtain, at the buyer's expense an inspection of the property, satisfactory to the buyer, by an inspector chosen by the buyer.
Should the inspection reveal anything concerning, you, have the option to terminate the contract. I also usually advise purchasers to request a completed Property Disclosure Form from the vendors. This condition is found in paragraphs 7 (a) and (b). However, if I choose between a completed Property Disclosure Form and a home inspection, I would always recommend the inspection.
If you are a vendor, I would likely not recommend completing the Property Disclosure Statement. While this may give the impression that you have something to hide in a market where the Disclosure Statement is normally complete, legally, you cannot benefit from this form. The form will only benefit the buyer.
You have lived in your home for 15 years. In the Property Disclosure Statement at question no. 7 about knowledge of flooding or seeping from any source, you check off the box "yes". In the explanation box on page 2, you write:
Exterior water tap froze and broke – caused some flooding in the rec rm. – thus, all doors, flooring & carpeting, & lower 3 ft. of all walls replaced
The buyers, however, are not concerned about the rec room. When viewing the property, they noticed blackening and staining around some windows. The buyers and the vendors would not be communicating directly, so the vendors would be unaware of the buyers' true concerns. The vendors are simply aware the buyers made a request for a complete Property Disclosure Form.
In this case, a court would most likely find the vendors liable for the damage around the windows. This fact scenario actually occurred in Manitoba, in the case Alevizos v. Nirula. The judges agreed with the finding that the vendors must have been aware of the problem because the staining was so obvious. An expert witness testified that water would have pooled around the windows. It didn't matter that the stains were obvious to the buyer. As soon as the vendors stated that the frozen tap caused the only "flooding and seepage", they became liable for any other "flooding and seepage".The court found that by checking off the box "yes," the vendors became obligated to list all of the problems related to flooding and seepage. By only listing one problem, they actively concealed a second problem.
I can imagine when the vendors completed the form, they weren't even thinking about the windows. They might have lived with those windows simply thinking that the water was due to condensation. However, that did not matter. The court put a lot of emphasis on the fact that the vendors did not disclose the leaking. The vendors would have been better off not completing the form. Justice Kroft had the following warning in his decision:
"This judgment should, in my view, be taken as a warning about the routine use of the [Property Disclosure Statement]. Representations as to the condition of the property are inevitably going to be requested and given. I do not believe that these concerns are ever going to be safely dealt with by filling in the blanks on a short form carried in the real estate agent's briefcase with his or her other supplies."
This article is presented for informational purposes only. The content does not constitute legal advice or solicitation and does not create a solicitor-client relationship (this means that I am not your lawyer until we both agree that I am). If you are seeking advice on specific matters, please contact TLR Law at 204.925.1900. We cannot consider any unsolicited information sent to the author as solicitor-client privileged (this means confidential).
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