What Happens if Someone Lies on a Property Disclosure?

The Consequences of a Dishonest Property Disclosure

Buying a home is a significant financial decision. Buyers rely on sellers to provide honest information about a property’s condition. The property disclosure statement is a key document in this process. It details the seller’s knowledge of any issues with the home, from a leaky roof to foundation problems. Sellers complete this form to inform potential buyers about the home’s history and current state. This transparency helps build trust and allows buyers to make an informed choice. It protects everyone involved in the transaction.

However, problems arise when a seller is not truthful. A seller might omit a known issue or directly lie to make their property seem more attractive. This action can lead to serious problems for the new homeowner. The buyer might discover costly defects only after moving in. These surprises can turn the dream of homeownership into a financial and emotional burden. Understanding what happens if someone lies on a property disclosure is vital for both buyers and sellers to appreciate the importance of honesty in real estate.

Understanding the Property Disclosure Statement

A property disclosure statement, often called a Seller Property Information Statement (SPIS), is a questionnaire completed by the property seller. The document asks specific questions about the property. These questions cover topics like the electrical system, plumbing, roofing, and structural integrity. The seller must answer these questions to the best of their knowledge. This form is a formal way for sellers to reveal any known defects that could affect the property’s value or a buyer’s enjoyment of the home.

The form makes a clear distinction between two types of defects. Patent defects are problems that are easily visible during a viewing, such as a large crack in a wall. Buyers are expected to see these themselves. Latent defects are hidden issues that are not discoverable through a normal inspection, like mould behind a wall or a faulty septic system. Sellers have a legal duty to disclose any known latent defects that make the home dangerous or uninhabitable. Failing to do so is a serious matter. The completed statement becomes part of the real estate transaction documents.

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Related Article: What are the Rules of Disclosure?

Legal Options for a Deceived Buyer

When a buyer proves a seller lied on the property disclosure, they have legal options. The buyer can sue the seller for misrepresentation. Misrepresentation occurs when one party makes a false statement that convinces another party to enter into a contract. The legal action aims to recover the financial losses the buyer suffered because of the seller’s dishonesty. This process typically involves filing a claim in court to seek compensation for the damages incurred.

To win their case, the buyer must prove several key points.

• The statement was untrue.

  The buyer needs to provide evidence that the seller’s claim on the disclosure form was false.

• The seller knew the statement was untrue.

  The buyer must show the seller was aware of the defect and chose not to disclose it or actively concealed it.

• The buyer relied on the statement.

  The buyer has to demonstrate that the false information was a key factor in their decision to buy the property at the agreed price.

• The buyer suffered damages.

  The buyer needs to show a financial loss, such as the cost of repairs or a decrease in the property’s value.

If successful, a court may award damages to cover repair costs, making the buyer whole again.

Possible Defences for a Seller

A seller accused of lying on a disclosure form is not automatically found liable. The seller can present defences in court. A common defence is that they were genuinely unaware of the defect. The disclosure requires sellers to reveal known issues, not problems they do not know about. For instance, a seller may not know about a slow leak inside a wall that only became apparent after the new owner moved in. They can argue they cannot disclose what they do not know.

Another defence is that the issue arose after the buyer took possession of the property. A seller could argue that the appliance worked perfectly at the time of sale and broke down due to the buyer’s use. The principle of “caveat emptor,” or “buyer beware,” also plays a role. This principle places a responsibility on the buyer to perform their own due diligence, like getting a home inspection. A seller might argue the defect was discoverable through a proper inspection, shifting some responsibility to the buyer. However, this defence does not protect a seller who actively hides a problem.

The Real Estate Agent’s Responsibility

Real estate agents also have a critical role and responsibilities in the disclosure process. An agent representing a seller must advise their client to be truthful on the disclosure statement. Knowingly helping a seller hide a defect is unethical and illegal. The agent has a professional duty to promote a fair and honest transaction. They must not participate in any form of misrepresentation. This duty protects the integrity of the profession and the parties involved.

Agents also have a duty of care to the buyer. Even if they do not represent the buyer, they must not mislead them. If an agent knows about a latent defect, they have an obligation to disclose it. An agent who is aware of a seller’s lie or ignores obvious red flags could be found liable alongside the seller. This could lead to a lawsuit against the agent and their brokerage. It can also trigger disciplinary action from their governing real estate council, potentially resulting in fines or the loss of their licence. Professional agents prioritize ethical conduct.

The Value of Honesty and Thorough Checks

The question of what happens if someone lies on a property disclosure reveals the serious legal and financial fallout from dishonesty. For sellers, the message is clear: transparency is essential. Disclosing all known issues protects you from future lawsuits and ensures a smoother, more ethical sale. Attempting to hide a defect often creates bigger problems later. A truthful disclosure builds buyer confidence and upholds your integrity. It is the foundation of a successful real estate transaction where both parties feel secure.

For buyers, this highlights the importance of thorough due diligence. Never rely solely on the seller’s disclosure statement. Always hire a qualified home inspector to conduct a detailed examination of the property. Review the disclosure carefully with your real estate agent and ask questions about any unclear or concerning points. An experienced agent can guide you through this process, helping you analyze the information and make an informed decision. Taking these steps protects your investment and provides peace of mind as you purchase your new home.