Seller Disclosure in Ontario: Latent Defects and the SPIS

Ontario Downsizing is an information resource written by real estate agents on the operating team at eXp Realty. This page is general information, not legal advice. Disclosure rules come largely from case law and from guidance by the Real Estate Council of Ontario (RECO), which administers the Trust in Real Estate Services Act, 2002 (TRESA). Whether a specific problem must be disclosed is a legal question for an Ontario real estate lawyer.

Caveat emptor: what buyer beware means in Ontario

RECO's Bulletin 7.4, effective December 1, 2023, says Ontario is a buyer-beware jurisdiction for patent defects. A patent defect is one a buyer or inspector can detect through reasonable observation: a cracked window, a stained ceiling, worn flooring. The seller does not have to disclose a patent defect, but the seller must not conceal it. Painting over a stain or placing furniture to hide damage in order to mislead a buyer moves from silence into concealment.

Buyer beware also puts work on the buyer: view the home carefully, arrange an inspection and ask questions. A seller who gives an answer to a direct question needs to give an accurate one. If you do not know the answer, say so rather than guess.

Latent defects: what you must disclose

The duty to disclose is different for a latent defect. RECO defines a latent defect as one that makes the property unfit for habitation, or dangerous or potentially dangerous, and that is generally not apparent on reasonable inspection. RECO also says the seller's duty to disclose comes from case law and not from TRESA.

Two practical points follow.

• The test turns on both the severity of the defect and whether a reasonable inspection would find it. A hidden problem that is minor is not necessarily a latent defect, and an obvious problem is not latent whatever its seriousness.
• You do not need direct knowledge to be at risk. RECO says a seller can be liable if wilfully blind, which is to say deliberately avoiding finding out. It also tells agents to advise sellers to get a legal opinion on whether a defect is latent.

For an older home, the realistic list of things to think about is long: past water damage behind finishes, problems with the foundation, an aging septic system, outdated wiring or heating. Our guide on preparing an older home for sale explains how to find and sort those items before listing. If something serious turns up, ask your lawyer whether and how it must be disclosed.

This page does not say whether specific conditions, such as a former grow operation, count as latent defects, because we have not confirmed a rule on that from an official source. Those questions belong with a lawyer.

Stigmas: deaths, crimes and similar matters

RECO's Bulletin 7.5 addresses what it calls stigmas, such as a death on the property, a crime, a notorious prior owner or a remediated former marijuana grow operation. RECO says legislation does not deal with these, and it treats them as non-physical, buyer-specific concerns. Buyers are told to raise them with their agent early.

For a seller, the sensible approach is to avoid untrue answers. If a buyer asks you directly and you are unsure how to respond, talk to your lawyer first. Your agent can explain how such questions are usually handled but cannot give you a legal opinion.

The Seller Property Information Statement (Form 220)

The Seller Property Information Statement, or SPIS, is a questionnaire a seller can fill out about the home's condition and history. The Ontario Real Estate Association's forms bulletin calls Form 220 the Seller Property Information Statement and notes a companion form, Form 225. The SPIS is voluntary.

RECO's consumer page explains that an information statement may be for the agent only and not shared, or it may be intended for buyers. If you give your agent a statement meant for buyers, the agent must tell every interested buyer it exists and provide a copy on request. RECO Bulletin 3.1 states the same duty for agents.

Think carefully about whether to complete one. Some points in favour: it can reduce disputes about what you told the buyer, and it makes you go through the home's history before you list it. Some points against: an inaccurate statement can expose you to legal action. An OREA bulletin from 2007 warns of that risk and cites a London, Ontario case, Kaufman v. Gibson. That bulletin is dated, but the principle is plain: only state what you know to be true, and answer "unknown" where that is the truth.

Fill it in from records where you can, such as invoices for repairs, permits and past insurance claims, and keep copies of what you provide. If any answer troubles you, ask your lawyer before you list. See also flood and storm insurance when downsizing, since water and storm history is often part of what buyers ask about.

What your agent must disclose, and what you should tell your agent

RECO Bulletin 7.4 says that if the seller's agent knows of a fact the seller must legally disclose, the agent must disclose it to every interested buyer and use best efforts to get a written acknowledgement. That means a seller cannot ask an agent to stay quiet about a latent defect the agent knows. Be open with your agent from the start so that you can plan together how to deal with a known problem.

Other agency disclosures apply as well:

• Ontario.ca says realtors must be registered with RECO, follow a Code of Ethics under TRESA and carry deposit insurance. Consumers may be covered up to $200,000 per claim.
• RECO's Information Guide must be given to a buyer or seller before services or assistance are provided.
• Multiple representation, where one brokerage acts for both buyer and seller, is not permitted unless each client agrees. The brokerage must give written disclosure and all clients must agree in writing. The brokerage cannot advise on price or terms, and RECO says to get independent advice, for example from a real estate lawyer.
• Remuneration terms that could affect whether an offer is accepted must be disclosed to anyone making a written offer.

Our messages are to agents on the operating team at eXp Realty. Ask any agent you meet how they handle disclosure, multiple representation and competing offers before you sign a listing agreement.

Competing offers and what can be shared

Disclosure also covers offers. Under RECO Bulletin 4.1, the seller's agent must tell every person who made a written offer the number of competing offers. The agent may not share the content of offers unless the seller gives written direction, and personal or identifying information can never be shared. A verbal offer is not a competing offer. The seller can change the direction at any time.

If you expect more than one offer, talk through the process with your agent before the listing goes live, so that you know what will be shared and when.

Selling from an estate or for a parent

Sales on behalf of someone else raise the same disclosure questions and some extra ones. Ontario.ca says that if a deceased person's real property must be sold, a Certificate of Appointment of Estate Trustee or a Small Estate Certificate should be obtained before anyone signs an Agreement of Purchase and Sale. A person selling a parent's home may know less about its history, which makes an honest "I do not know" and good records more important. See helping a parent sell their home for the wider picture.

Getting ready before you list

The best time to deal with disclosure is before the sign goes up. A pre-listing inspection is one way to learn what a buyer's inspector would find, and it turns a surprise in the middle of a sale into a known item you can repair, price in or explain. It also shows you what is patent and what may be latent. If the inspector finds something serious that was not visible, talk to your lawyer before deciding what to tell buyers.

Gather the home's paper trail at the same time: permits, receipts for roofing, windows, furnace and electrical work, warranties and any reports on the septic system or well. Buyers value a clear record, and it protects you if a question arises later about when a repair was done and by whom. Keep a copy of every document you hand over.

If you are moving out already, do not let the empty house hide problems. A home that has been vacant can develop leaks or damp, and the cost of an unnoticed problem can fall on you. Have someone check the house regularly while it is listed. Our guide on clearing out your home and moving day covers the practical side of emptying a house.

A seller's disclosure checklist

• List any past water damage, structural repairs, pest problems or insurance claims, and gather the paperwork.
• Do not conceal anything a buyer could otherwise see. That includes cosmetic cover-ups.
• Ask a lawyer whether any known hidden problem is a latent defect.
• Decide, with your agent, whether to complete an SPIS and whether it is for buyers or for the agent only.
• Answer buyers' direct questions truthfully and say when you do not know.
• Tell your agent everything you know so that the agent can meet RECO's disclosure duties.
• Keep copies of anything you give a buyer.

Next steps

Disclosure sits inside a larger sale. Work out what you may keep in estimating net proceeds and check the tax treatment in capital gains and selling your principal residence. If you are choosing your next home, see condo, townhouse or house. The Law Society Referral Service offers a free consultation of up to 30 minutes with a lawyer or licensed paralegal, which is a reasonable first step if you have a specific question about a defect. When you are ready, contact us to reach an agent on the operating team at eXp Realty.