Misrepresentations in MLS Listings – Understanding Legal Risks and Liabilities
A Multiple Listing Service (MLS) Listing (a “Listing”) is most likely the first thing you review in deciding which home to buy. Although it is not a contract, the Listing contains important information that helps buyers evaluate and obtain details about a home, including whether it meets their criteria and intended use. Often, a buyer, or their agent, can confirm the information contained in a Listing. Sometimes, however, this can be difficult. Consider, for instance, representations made about the size of a lot, square footage , or the legal use of certain features within the home (i.e. whether a permit has been obtained for a guest suite).
To the extent possible, it is important to verify key information in a Listing before you enter into an Agreement of Purchase and Sale (“APS”). A Listing that contains wrong information can have serious consequences for both the seller and the buyer. For instance, in some circumstances a misrepresentation in a Listing may entitle the buyer to set aside (also known as rescind) an APS. A court may grant this remedy where (a) the information in the Listing that was misrepresented is material (b) the buyer(s) relied on such incorrect information in deciding to enter into the APS.
The specific facts of each case will always drive what is “material”. For example, where a Listing contained incorrect details about lot sizes, courts will consider (a) whether the discrepancy in size would affect the purchase price (b) whether the buyer knew or should have known about the discrepancy in lot sizes (c) whether the misstatements would impact the purchasing decision of a reasonable buyer.
Usually, buyers will physically visit the property they are about to purchase. This raises the question of whether a buyer’s physical inspection of a property will prevent them from making a claim of misrepresentation based on a Listing. The answer, again, is fact specific. Courts will evaluate what information the buyer knew and/or relied on prior to entering the APS. In one case, an Ontario court refused the buyer's relief to rescind an APS, even where the Listing contained a misrepresentation as to square footage of the home. The Court found that the parties were sophisticated in real estate and had attended the property to do a visual inspection. Accordingly, the misrepresentation would not have impacted the buyers’ decision to make an offer on the home and enter into a binding APS. Again,determiningwhethermisinformationcontainedaListingimpactedthebuyer’sdecisiontoenterintoanAPSwillbedeterminedinthecontextofthespecificfactsgivingrisetotheclaim.
If a Listing contains material information about a property you are considering purchasing, a buyer and their agent should consider incorporating the representation into the APS. By making a key feature of a property a specific term within the APS, you are better able to protect yourself in the event of a dispute down the road.
Sam Presvelos and Evan Presvelos are civil lawyers located in Toronto, Ontario. They have comprehensive experience in dealing with residential and commercial real estate matters including APS breach by both sellers and buyers as well as real estate agent negligence claims.
Disclaimer: The above article is intended for an Ontario audience and is for informational purposes only. This article does not constitute legal advice and should not be taken as such. Reading this article on our website also does not give rise to a solicitor – client relationship. You should always speak with a lawyer about your specific situation if you require any legal help and representation.