When a person is selling their house, they may complete a Property Disclosure Statement (PDS). A PDS contains a series of questions about various aspects of the property and, for each, asks the seller to indicate whether or not they are aware of any issues or problems with that aspect. Examples include:
- Are you aware of any problems with the water system?
- Are you aware of any problems with the sanitary sewer system?
- To the best of your knowledge, are the exterior walls insulated?
- Are you aware of any damage due to wind, fire or water?
A completed PDS can be provided to prospective purchasers so as to give them an idea about the state of the property. Unfortunately, disputes can arise when the buyer discovers a problem with the property that, according to the PDS, the seller’s stated was not problematic.
It is important to remember that a PDS is not necessarily a warranty. Rather, its main purpose is to put buyers on notice with respect to known problems with the property. The answers to be provided by the sellers are to be true based on the sellers’ current actual knowledge. Essentially, a PDS only requires a seller to say whether or not they are aware of any problems. Therefore, in order to amount to a misrepresentation, a seller who knows of a problem would have to indicate on the PDS that they don’t know of a problem.
Even if the seller did make a misrepresentation in the PDS, the buyer would have to establish that they relied on that misrepresentation to their detriment. Incorporating the representations made in a PDS into the actual contract of purchase and sale can be evidence of reliance. However, the standard form PDS warns that the buyer should still make their own inquiries and is entitled to have the property professionally inspected. When a buyer who has been given a PDS proceeds with having the property professionally inspected, that is evidence that they did not, in fact, rely on the representations made in the PDS in deciding to purchase the property.