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"They paid the consequences of not having a perfect memory," says Best. "They tried their best to be forthright, but the courts found they did not try hard enough." The court's finding could have an impact on real estate law even as far away as British Columbia, according to Kelowna real estate development law- yer Peter Borszcz, a shareholder in Pihl Law Corp. Until now, he says, courts in British Columbia, as elsewhere in Canada, have generally been in line with a Manitoba Court of Appeal rul- ing that the vendor has a duty to answer questions in a disclosure statement honestly and completely. But Borszcz is concerned the Ontario appeal court has now set a far higher standard. He worries that B.C. courts could be influenced by this or that it could become the law of the land as a result of an appeal to the Supreme Court of Canada. He notes that Justice Gloria Epstein's ruling states: "The standard of care extends beyond honest intentions. The obligation is to provide, to the extent possible, accurate and complete information." Consider the amount of negotiation and deliberation that goes into disclo- sure statements made in commercial real estate transactions, says Borszcz, and you get a measure of the legal risk that an unsophisticated homeowner could incur in filling out a statement, relying only on advice from a real estate agent, since lawyers are very seldom involved in the early stages of a resi- dential house sale. "If I was selling a house, I'd be crossing out the form and writing, 'As is,'" he says. Amelia Leckey, a partner in the Toronto office of Miller Thomson LLP, who represented the real estate agent in Krawchuk, says she doesn't know what her client could have done differ- ently. There was clearly a defect in the property. It was therefore necessary to protect the vendor by disclosing it. And the SPIS is the only way approved by the real estate board to make that dis- closure, she says. "The agent disclosed the information given to her and is now held liable for incomplete disclo- sure, despite the fact that the vendors estate agents. It depends on where the sale is taking place, he says. In a hot market, such as Toronto, where buy- ers are in a hurry to make a purchase, there is seldom any demand or need for disclosure statements. If you are in a depressed market, on the other hand, "you're going to be signing one of these things because everything else is for sale and nothing is selling, and you'd better come up and start disclosing things." And in rural areas where there are "It would be foolhardy for a seller ever to sign an SPIS again." PETER BEST didn't give her complete disclosure," says Leckey. But the appellate counsel for the purchaser David Steinberg, a lawyer with Pape Barristers in Toronto, says the court applied "common sense jus- tice" in finding that the realtor, who was acting as a dual agent for both par- ties in the transaction, failed to fulfil her responsibilities to Krawchuk by not advising her to have the house checked out by a home inspector or structural engineer before completing the pur- chase. Real estate lawyer Cesia Green, a partner with Wall-Armstrong & Green in Barrie, Ont., says the decision will potentially "push Ontario into even more of a buyer beware system," because buyers and real estate agents will now be very hesitant to use the disclosure statements. But sellers and agents don't necessarily have that choice, according to lawyer-turned-real-estate-adviser Brian Madigan, who currently teaches a course on disclosure law for real Read the Ontario Court of Appeal's at all kinds of potential latent problems with wells and septic tanks — and neighbours or local contractors who are likely to spill the beans about any property defects anyway — disclosure is often necessary, Madigan adds. But the problem, says Madigan, is that the "SPIS has to be the worst document that's ever been put together." Lubos Pesta agrees, but he has a solution. A residential real estate law- yer with Walsh Wilkins Creighton LLP in Calgary, he is legal counsel to the Alberta Real Estate Association's stan- dard forms and practice committee. He says the problem with the prop- erty disclosure statements that became commonplace in his province about 10 years ago was that they are alien to the Canadian legal system because they had their origin in California state law. "They were asking questions that were way above and beyond what a seller's duty is to disclose under Canadian common law," he says. Now, he says, the Alberta real estate industry seldom uses these forms, as it has replaced them with a set of obliga- tions that is incorporated into the list- ing contract that an agent enters into with the vendor. This now includes a disclosure requirement whereby the vendor is, for example, asked if he or she is aware of any defect in the prop- erty which is not visible that would create a structural problem or health risk — a disclosure that is completely consistent with the requirements of common law. Freelance journalist and business writer Kevin Marron can be reached at kevin@ kevinmarron.com. www.CANADIAN Lawyermag.com SEPTEMBER 2011 21 tin yurl.c K r a w chuk v. Scherbak chuk. om/kr a w