Selling your home? What you need to know about property condition disclosure forms

It's a document many people rely on when buying a house, but real estate lawyers differ on whether the property condition disclosure statement is a minefield or essential tool.

For Toronto real estate lawyer Bob Aaron, it's a "horrible form" that's responsible for hundreds of lawsuits across the country.

"I think they are the most dangerous forms in all of real estate, commercial, residential and industrial everywhere in Canada," he told CBC News. 

The disclosure document is called different things in different provinces, but the idea is that it requires those selling a home to disclose any problems with the property. It's often legally incorporated into the purchase and sale agreement.

Sellers must be honest

Unlike Aaron, Halifax real estate lawyer Andrew Nahas said the property condition disclosure statement (PCDS) is an important document. He sees it in approximately 90 per cent of the real estate cases he handles and makes a practice of reviewing it.

"It's great to give the buyer a snapshot of some of the potential major issues that could have happened in the past, and for a seller to be honest if there were any issues and can avoid any headaches or surprises in the future," Nahas said.

The PCDS asks structural, mechanical and zoning questions. In rural areas, it includes questions about the property's water supply and septic system. It also covers electrical, plumbing and heating systems.

Used in court

When Joel and Denyse Doherty purchased a century home in Nova Scotia's Annapolis Valley in 2013, there was no question they wanted a PCDS.

It would prove to come in handy.

The couple credits the document for helping them win a 2015 small claims court judgement for more than $14,000 after discovering their newly purchased home had septic issues a few months after moving in.

"I think it was absolutely the entire case," Doherty said.

The document used in Nova Scotia asks: "Are you aware of any problems with the existing [septic] system?" In this case, the seller answered "No."

In addition, court evidence showed when the Dohertys called a septic company to investigate their problem, they were told the company had been there prior to the sale. The company had pointed out the septic issues to the previous owner, who had made his own attempt to fix the problem without the appropriate government approval.

The adjudicator ruled "the statements of the condition of the septic were made negligently." The seller appealed the decision and lost.

'Complex, ambiguous, confusing'

Not all sellers may understand the importance of the PCDS, which is why Aaron calls the document "dangerous" and "troubling."

"It's complex, ambiguous,confusing and highly technical in parts," Aaron said. 

"It's impossible to complete accurately without the help of a lawyer and home inspector. It's so bad that the Ontario Real Estate Association developed another form in 2013 which attempts, unsuccessfully, to explain the document to sellers."

Home sellers are not usually held accountable for what are called "patent" defects — those that can be seen when viewing a home. It's considered the buyer's responsibility to investigate anything that is an obvious problem.

However, "latent" defects — those that are hidden, and that the owner is aware of — must be disclosed on the PCDS.

What should seller include?

Sellers who fill out the document and innocently leave out information they consider irrelevant may find themselves paying up.

For instance, if they have repaired the roof, they need to disclose that, even if the work was carried out years ago and solved the problem. Disclosing the repair may protect the seller if the roof issue resurfaces after the sale.

At the same time, sellers cannot be held responsible for a problem they did not know about, according to a 2014 Nova Scotia small claims judgement that dealt with a leaky roof.

Joel Doherty said the importance of the document is in the details.

"Whether buying or selling, make sure that both parties understand the importance you're placing on the agreement and that you're both approaching it as openly and honestly as you can," he said.

Lawyer Andrew Nahas said sellers should fully understand what they are signing, as it can "certainly can come back to nip you."

Is lack of PCDS a red flag?

No province makes a PCDS mandatory, although some real estate boards in Ontario require it as part of a property sale.

It is widely used across the country, with the exception of Alberta, where the real estate association stopped using it in 2003, although no one is able to say why. 

In P.E.I., the real estate association has decided that any property which does not include a PCDS will be sold "as is, where is."

Many real estate agents will recommend sellers fill out the document. Those who don't may raise red flags.

"Certainly whenever I see an agreement that comes in that has that clause struck out I want to know why it's struck out, whose idea it was to be struck out and certainly my advice on that point is to know what you're buying and get a very thorough inspection," Nahas said.