Number 483, January 2016
PROPERTY DISCLOSURE STATEMENT TIPS
The BC Court of Appeal recently decided Nixon v. MacIver, the court's newest Property Disclosure Statement (PDS) case.1 Once again, the court held in favour of the sellers. It seems timely to offer a few PDS suggestions for licensees.
Why use a PDS? It makes sense that the seller, the person most familiar with the property, should inform potential buyers about his or her knowledge of it. The PDS gives every buyer the same starting point for inquiring about the property and reduces a Realtor's risk of being sued for misrepresentation.
A seller may want advice when completing a PDS. Review the PDS instructions with the seller and remind the seller to honestly and fully complete it. Warn the seller against assuming or guessing. Say, "If you don't know, you don't know." In Nixon, much of the dispute might have been avoided if the sellers, when completing their PDS, had not wrongly assumed the age of a roof. Even so, the court dismissed the claim against the sellers because they honestly believed their answer to be correct.
If the seller says, "I don't understand this question," consider simplifying the seller's inquiry. You can ask, "What part of the question don't you understand?" If the seller does not understand a particular word, consider consulting a dictionary together and always document the inquiry in your notes.
Suppose a Realtor gives a seller certain advice about filling in the PDS, but the seller rejects that advice? The Realtor should warn the seller about the risks of not following that advice and fully document the exchange.
If a Realtor believes that a seller's answer is misleading or needs clarification, they should explain to the seller why. For example, where a seller describes his knowledge of water damage in the PDS as, "some." In particular, beware the half-truth – the answer that mentions a real problem, but downplays its actual magnitude. Warn the seller that he or she may be sued for giving false or misleading information. If the seller refuses to correct a misleading answer, the Realtor should withdraw.
In a lawsuit, there may be a question whether the buyer relied on the PDS before making an offer. A listing Realtor should record when the PDS is delivered to the buyer or the buyer's agent.
It is important to put the PDS into perspective for a buyer. The Nixon case emphasizes the buyer's own obligation to investigate the property. Subject to a seller's duty to disclose a latent defect, Nixon held that a seller who completes a PDS has no obligation to add extra information beyond answering the specific questions in the form. The court reiterated that the PDS only asks a seller to say if he or she is aware of certain problems. As the Real Estate Council of British Columbia says:2
"Licensees who act for buyers should caution their clients that questions on the PDS worded, ''Are you aware…'' refer only to the present tense. A negative answer does not mean that there has not been a problem in the past or that a past problem will not recur."
Incorporate the PDS into the contract. If a particular statement in that PDS is especially important to the buyer, add that the statement in question, "is a fundamental term of this contract."
Remind the buyer of the importance of a professional inspection and have the buyer give a copy of the PDS to the inspector. The buyer can ask the inspector to note any discrepancies between what the inspector sees and what the PDS says or omits.
In contract law, a buyer may only rescind the contract for innocent misrepresentation by taking legal steps before completion. If a buyer discovers information that is inconsistent with the PDS, advise the buyer to immediately seek legal advice.
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