The design of MLS listings strongly encourage real estate agents and their sellers to share as much information about a property as possible, including the measurements of each room and overall size of the property. By and large, the inclusion of property size information is standard practice and an expectation of all listings.
However, even when provided, many listings will include a disclaimer that “buyer and buyer’s agent to verify all measurements.” So what happens when a buyer purchases a property under the mistaken belief that it measures 2,000-2,500 square feet, and later finds out, before closing, that is it actually only 1,450 square feet? The Ontario Court of Appeal in Issa v. Wilson, 2020 ONCA 756 answered that question.
The buyer, Hassan Issa, a 26-year-old, first-time homebuyer, enlisted the services of real estate agent Wasim Jarrah of Keller Williams Realty Centres to assist him in buying a property. Issa was told by Jarrah that the home he was interested in buying, in Stouffville, Ont., was about 2,100 square feet. The agent had obtained this information from the seller as well as from a previous listing for the home. Neither the agent nor Issa had verified the measurement themselves.
Prior to making an offer, Issa visited the home twice. During his second visit, he met with the seller, John Wilson, who told him that the property was about 2,000 square feet.
Issa made an offer to purchase the property and that offer was accepted.
When Issa’s bank did an appraisal of the property, he learned that the property was actually 1,450 square feet. He immediately communicated to the seller that he did not want to complete the purchase of the home and requested the return of his $50,000 deposit.
When the seller refused, Issa commenced legal proceedings seeking a declaration that the Agreement of Purchase And Sale was null and void and requested the return of his deposit.
The case proceeded to a one-day trial. After hearing the evidence of the parties, the trial judge found in favour of the buyer, Issa. She wrote: “In this case I do not find that Mr. Issa’s inspection of the subject property determined his expectations. He was given representations from both Messrs. Jarrah and Wilson that the property was 2,000 or greater than 2,000 square feet and as well relied upon the MLS agreement, which set out 2,000 to 2,500 square feet. His inspections did not override his expectation that this was the size of the property. (I take his young age, inexperience with square footage, and being a first-time homebuyer into account when considering the reasonableness of his belief.)”
Keller Williams Realty Centres appealed to the Ontario Court of Appeal. The court agreed with the trial judge for four reasons:
- Both the real estate agent and the seller had made explicit representations to the buyer about the size of the property. Further, the agent agreed that he was negligent in making the statement;
- The size discrepancy between what Issa thought he was buying (2,000-2,100 square feet) versus the actual size (1,450) was significant – it represented a 42 per cent difference;
- The buyer’s actions showed that he was ready to close the transaction up until the time he discovered that the representation was incorrect and when he found that out, he immediately communicated his intention to the seller; and
- There was no error made by the trial judge in referring to the buyer’s age and inexperience with buying a home.
The court went on to say that there is no absolute certainty that just because a buyer personally inspects a property, that he or she cannot rely on a representation made to him/her about an aspect of that property, by the seller or an agent. That inspection, in and of itself, does not displace any representations made.
Further, where there is a misrepresentation, a contract can be rescinded if the false statement was material and enticed the innocent party into signing the contract. In this case, the court found that information about the size of the property was material to the bargain and was a big factor in Issa’s decision to purchase. The court ruled in favour of the buyer, rescinded the agreement of purchase and sale and awarded the return of the deposit to the buyer.
Lessons learned: It is crucial that any statements made about a property be independently verified, particularly where such verification can be done with relative ease by the party making the representation.
Failing which, the party to who the representation is made may be able to rely on the veracity of the statement provided, particularly if that statement was material in their decision-making.