The Disclosure Statement in Family Court
By Brian Madigan LL.B.
(Ontario Real Estate Source)
This is a very unusual case involving the use of a Seller Property Information Statement. Actually, the SPIS formed part of the evidence in a contempt of court matter in Superior Court of Justice (Family Division) before Justice Mackinnon in Ottawa in October 2003.
Briefly, the Zadegans were involved in a series of legal proceedings that arose out of the breakup of their marriage. Issues of child support, the division of net family property and the sale of the family home were brought before the Court and resulted in a number of Court Orders.
The Court directed that the family home be sold. Mrs. Zadegan occupied the house with the children and she was basically opposed to the sale. It appeared that she did everything in her power to frustrate the potential sale.
She refused to appoint a real estate agent, but finally did so when threatened with another court application; she refused signs in the neighbourhood, she refused showings unless they were very convenient to her schedule. All in all she was quite uncooperative.
The matter came on for hearing to determine whether or not she was in contempt of Court, for it was the Court which had ordered the sale of the house. This was not simply a request by her husband.
Mrs. Zadegan took the position that the property was unsaleable. There were leaks in the basement which would cost $20,000 to repair and she didn't have the money to do those repairs. She took the property off the market and failed to lower the price into the range that had been established in the proceedings. The failure to sell suited her own convenience since she continued to occupy the premises in the meantime. The more she could do to thwart the sale the better.
Obviously, in determining whether she was in contempt of Court, her credibility and her motivation were factors that were taken into consideration.
Here is the review by the Court of the execution of the Seller Property Information Statement signed by Mrs. Zadegan:
" Exhibit 13 is the Ontario Real Estate Association Seller Property Information Statement that was completed and signed by Mrs. Zadegan on 1 November 2002 with respect to 1667 Marronier Court. The instructions state that the answers must be complete and accurate for the purpose of establishing that correct information is being provided to buyers. In completing the form, Mrs. Zadegan noted two problems with flooding in the basement: one caused by an outside pipe rupturing, which was repaired in December 2001 by adding a second sump pump; and, the second caused by the float in the sump pump being burnt and replaced on 28 October 2002.
 In cross-examination, it was suggested to her that this information was quite different from that set out in her affidavit filed in the present proceedings. She was asked these questions and gave these answers:
Q. Okay, so would you agree with me that by the time you wrote this on November 1st, 2002, what happened was 1) a ruptured outside pipe and 2) a burnt sump pump.
A. These were two occasions that happened, yes.
Q. Were there more?
A. And there were much more.
Q. There were much more?
A. Yeah, the builder said to me if we write that down...
Q. I don't want to know what the builder said to you.
Q. That's hearsay.
A. Okay, I tell you that if I put everything down there, I could not sell the house at that price. I didn't mention all of them, I just said this and I thought the problem was solved but it's not solved.
. . .
Q. You just admitted that this document may not be quite true.
A. They were small amount of water there, I wasn't going to tell people that this house has problems, not to get the fair amount of price for it.
 Thus, there are many contradictions in Mrs. Zadegan's evidence with respect to the water problem in the basement. These contradictions affect her credibility."
Significance of SPIS
Please not that Mrs. Zadegan said about the SPIS: "....I wasn't going to tell people that this house has problems, not to get the fair amount of price for it." Clearly, she lied, and she was prepared to lie in order to get her way.
As you probably can imagine, the trial Judge conclued that she was in contempt of Court.
This is a rather new and novel use of the SPIS. If you decide to make false statements, it is not only the purchaser who may sue you. These same false statements can effect your credibility in other legal proceedings. Basically, it's just the same as if the statements were sworn under oath. While, there was no criminal charge of perjury, there was a finding of contempt of Court in a civil matter, which still can result in sentencing and confinement.
This raises a new level of obligations for realtors. You may have to point out risks associated with the completion of the SPIS that go beyond potential liability to the prospective purchaser.
Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888