Property Condition Disclosure in Ontario: What Sellers Must Tell Buyers

Many buyers find a problem after closing: a leak behind a wall, a failing foundation, a history nobody mentioned. Many sellers worry that an honest answer will cost them a sale or that silence will cost them later. Both want to know where the line is.

This article explains the key ideas: latent and patent defects, the Seller Property Information Statement, and the principle of buyer beware. It also covers what happens to the deposit if a deal falls apart. It is general information, and a real estate lawyer can apply it to your facts.

Latent and patent defects

The rules turn on whether a defect is hidden or visible. RECO states that a seller must disclose latent defects, meaning defects that make a property unfit for habitation, dangerous or potentially dangerous. A seller does not have to disclose patent (visible) defects, but must not conceal them.

RECO also notes that the duty to disclose a latent defect comes from case law, not TRESA. In practice this means the answer in a given case depends on its facts, and it is worth getting legal advice when a serious problem is involved.

What buyer beware really means

Under buyer beware, the buyer is expected to do their own inspections and due diligence before waiving conditions. That is why home inspections, status checks and questions to the seller matter. The principle is not a free pass for sellers, though. RECO notes that concealing a patent defect may mean the principle does not apply.

• Buyers should inspect the property and ask questions before waiving conditions.
• Sellers should not hide a visible problem, for example by painting over a stain.
• Both sides should keep written records of what was asked and answered.

The Seller Property Information Statement

A Seller Property Information Statement is a form in which the seller records what they know about the property. It can be completed for buyers or only for the seller's agent. If it is meant to inform buyers, the agent must tell every interested buyer it exists and give a copy on request.

It reflects only the seller's personal knowledge. A seller who answers carefully and honestly is better protected than one who guesses or leaves out something they know. A buyer should treat the statement as a starting point, not a substitute for an inspection.

When a seller can be liable for hidden problems

A seller can be liable for a latent defect without direct knowledge if the seller was willfully blind about it. Willful blindness is deliberately avoiding finding out something you suspect. A seller cannot avoid the duty by refusing to look into a problem they have reason to suspect.

Whether a particular seller is liable depends on what the defect is, what the seller knew or suspected, what they said and what the buyer could have found out. Buyers who find a problem after closing should keep records and photos, avoid repairs that destroy the evidence, and speak to a lawyer promptly. Time limits can apply to legal claims, and a lawyer can confirm them.

If the deal falls through: the deposit

Disclosure disputes sometimes end a deal before closing, and then the deposit becomes the issue. A brokerage must deposit a deposit it is to hold into its real estate trust account within five business days, and may pay it out only in accordance with the terms of the trust. If the buyer and seller dispute who gets it, the brokerage can release it only under a mutual release signed by both, or under a court order.

RECO consumer deposit insurance responds to brokerage theft, fraud, insolvency or misappropriation of funds, and does not resolve a disagreement between buyer and seller about entitlement. Money held two years with entitlement unclear must be paid to RECO.

What to do next

The steps differ slightly for buyers and sellers, but both should act before anything is signed.

• Sellers: list every problem you know of, including past leaks, repairs and insurance claims.
• Sellers: answer the Seller Property Information Statement honestly and keep a copy.
• Buyers: ask to see the statement if one exists, and ask about anything that worries you.
• Buyers: book an inspection and make sure it is done before you waive conditions.
• Both: communicate in writing so there is a record.
• If you find a serious problem, keep evidence and speak to a lawyer before you sign a release or take the matter further.

Frequently asked questions