Homebuyer Permitted to Rescind an Agreement of Purchase and Sale After Being Misled About the Property
By Daniel Waldman, Pallett Valo LLP
In Issa v Wilson, 2020 ONCA 756, the Ontario Court of Appeal affrmed that a buyer could get out of an Agreement of Purchase and Sale when they were induced into entering the contract by misleading information.
In Issa, a young homebuyer retained a real estate agent to purchase a home. The agent informed the buyer that the home was over 2,000 square feet, relying on information from the vendor, as well as the Multiple Listing Service (“MLS”) listing of the home. The agent did not carry out any measurements to verify the square footage of the home.
Before the transaction closed, the buyer obtained an appraisal of the property, which indicated that the home was only 1,450 square feet. The buyer decided not to complete the purchase of the home and commenced an action to void the transaction and get his deposit back.
The court found in favour of the buyer. It was explained that a contract may be rescinded on the basis of misrepresentation where the defendant makes a false statement that was material and induced the plaintiff to enter into the contract. It was held that the misrepresentation regarding the size of the property was material to the buyer’s decision to purchase it.
The court emphasised the following:
- The agent and vendor made statements in the MLS listing and to the buyer regarding the square footage. At trial, the agent admitted that he was negligent in making these statements, and the vendor admitted that he informed the buyer that the property was about 2,000 square feet.
- The discrepancy between the represented size of the property and the actual size was substantial.
- The buyer’s reliance on the representations regarding the size of the home was supported by the fact that he was ready to close until his discovery of its actual size, when he immediately communicated that he was not prepared to close.
- The buyer was young and inexperienced.
When it comes to contracts, parties can seldom escape their obligations by relying on prior representations. Homebuyers should therefore take all necessary steps to perform their due diligence before they commit to an Agreement of Purchase and Sale. However, Issa demonstrates that, in certain circumstances, the court will carve out exceptions to this general rule, especially where a vulnerable and inexperienced party can prove that they were misled and taken advantage of.
Daniel WaldmanGGI member firm
Pallett Valo LLP
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Pallett Valo LLP is one of Ontario’s Top 10 Regional Law Firms. The firm practices in the areas of business law, commercial litigation, commercial real estate, construction, insolvency and corporate restructuring, employment and labour, and wills, estates, and trusts.
Daniel Waldman is a member of the commercial litigation practice and a member of the Remedies Group. Daniel has a commercial litigation practice with an emphasis on real property litigation, including commercial leasing, commercial real estate, construction law, and debt collection.
Published: Real Estate Newsletter, No. 13, Summer 2021 l Photo: karamysh - stock.adobe.com