Measure Twice - Cut Once. Good advice for DIY projects and for drafting purchase agreements, too.
In a recent ruling from the Ontario Court of Appeal, Issa v. Wilson, 2020 ONCA 756, the court provided relief to a would be purchaser of a home where the square footage of a residential home noted in the MLS listing, and communicated orally by the vendor and the real estate agent, differed materially from the true size of the home.
The facts of the case were explained as follows:
Hassan Issa was searching for a house that was large enough for himself, his parents and his three sisters.
His realtor showed him a home in Stouffville, Ontario. His realtor was also acting for the vendor of the home. In the MLS listing put up by the realtor, he relied on a previous MLS listing dated 12 years earlier, to state that the home size was between 2000-2500 square feet. At trial, the realtor admitted that he was negligent in not having the home remeasured. In conversations between the realtor and Mr. Issa he stated that the home size was 2,100 square feet.
Mr. Issa visited the home twice and during one of those visits was told by the vendor himself that the size of the home was approximately 2,000 square feet.
Prior to closing the purchase, Mr. Issa received an appraisal of the home as part of his mortgage application that indicated the house was 1,450 square feet.
Upon receipt of the appraisal, Mr. Issa elected not to proceed with purchasing the property and started an action seeking a declaration that the agreement of purchase and sale was null and void and requested the return of his $50,000 deposit.
The judge at the trial level agreed with Mr. Issa that he had proceeded with the purchase, partially due to representations from his realtor and the vendor that the house size was 2,000 or more square feet. The trial judge did not agree with the defendant realtor and vendor that Mr. Issa's visits to the home should have overridden his expectations that what he was told was the size of the house was in fact the size of the house.
The court of appeal reviewed the trial level decision and found as follows:
The case law which has held that a visit by the purchaser to inspect the property displaces reliance on earlier misrepresentations by the vendor or their agent is not absolute. In some cases, this has been applied, in other cases it has not - this will be decided by the facts of the case at hand.
Rescission of a contract can be obtained "on the basis of misrepresentation where the defendant made a false statement that was material and induced the plaintiff to enter into the contract: Panzer v. Zeifman et al. (1978), 1978 CanLII 1658 (ON CA), 20 O.R. (2d) 502 (C.A.), at p. 5; Singh v. Trump, 2016 ONCA 747, at para. 156." In this case the court of appeal held that the misrepresentation concerning the size of the home was a material factor in the purchaser's decision to purchase the property. They highlighted following points to support this:
The vendor and realtor both indicated in various manners that the house was between 2000-2500 square feet.
The actual size of the house being 1,450 square feet is substantially different than what was represented to Mr. Issa. This is a material size difference.
As additional evidence that the purchaser was relying on the representations from the realtor and vendor, as soon as Mr. Issa was aware that the size was substantially different, he immediately communicated that he didn't want to close the transaction. Up until that point he had been ready to close.
Finally, the court also held that Mr. Issa's age and inexperience were relevant contextual matters in recognizing his reliance on the representations of his realtor.
Mr. Issa, at the trial level was awarded with the return of his deposit and the rescission of the purchase agreement, at the court of appeal level the appeal was dismissed with costs.
This case is a reminder to realtors and vendors to ensure that the information provided to a purchaser in the original MLS listing and ultimately in a purchase agreement is as accurate as possible to avoid the ability of a purchaser to subsequently rescind the agreement if material misrepresentations are subsequently discovered. This concern does not just relate to the size of the property but can relate to any other material aspect of the property for sale.
For a purchaser, one of the key aspects of this case that worked in favour of the purchaser was that they immediately acted to terminate the purchase agreement once they learned the true size of the property. If the purchaser had continued to take steps to close the purchase after that discovery, it is possible that the court might have held that the purchaser had affirmed the purchase agreement by their actions. For a purchaser it is important that as soon as information is discovered that materially differs from what was represented to the purchaser, they take decisive actions to address that information. They can either rescind the purchase agreement, or reach out to the vendor to discuss amending terms of the purchase agreement to account for this change (for example, reducing the purchase price to account for the smaller size).
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