Real Estate Agent Liable for Vendor Misstatement

In the case of Krawchuk v. Scherbak, the Ontario Court of Appeal held a real estate agent and her employer equally liable with the sellers for negligent misstatement in filling out a Seller Property Information Statement.

The Scherbaks listed their property with an agent. The purchasers used the same agent. After Krawchuk bought the house, she discovered that the foundation walls were sinking into the ground, resulting in the failure of proper support for the floor joists and building above. Correcting the problem would cost almost double the original purchase price. Krawchuk sued the Sherbaks, the agent and the broker for misrepresentation in failing to disclose the hidden defects. A significant part of the Krawchuk claim was based on the SPIS form completed by the Sherbaks. The form is intended to protect sellers by disclosing correct information about the property to buyers . The trial judge found the Scherbaks liable for negligent misrepresentation. He dismissed her claims against the real estate agent and broker. On appeal, the Court noted that the “issue of primary importance” in the case was “the duty of a real estate agent to verify information provided by the vendor about the property.” The Court of Appeal upheld the judgment against the Sherbaks, but also made the real estate agent equally liable for “egregious lapses” during her representation of both purchaser and vendors. On the SPIS form signed by the Scherbaks, the question “Are you aware of any structural problems?” was answered: “NW corner settled to the best of our knowledge the house has settled. No further problems in 17 years.” The Court of Appeal wrote that the agent ought to have inquired further into the Sherbaks’ incomplete disclosure that the foundation issues had been resolved years earlier. Failing that, she should have urged Krawchuk to hire a home inspector or make the offer conditional on an inspection. Having failed to protect the buyer made the real estate agent equally liable with the sellers for damage. Here is a
link to the case.