When you decide to sell your home, your primary goals are to get the best possible price and to have a smooth, clean transaction that doesn’t result in legal trouble down the road. This inevitably leads to one of the most common questions sellers ask: “What, exactly, do I have to tell potential buyers about my property?”
The answer to this question in Ontario is governed by a foundational legal principle known as caveat emptor, or “let the buyer beware.” While this puts a great deal of responsibility on the buyer, it doesn’t mean the seller is free from all obligations. Understanding your specific, and surprisingly limited, disclosure duties is critical to an honest and legally sound sale.
The Guiding Principle: “Caveat Emptor” (Buyer Beware)
In Ontario’s real estate landscape, the primary responsibility for discovering the condition of a property falls on the buyer. The principle of caveat emptor means that buyers are expected to perform their own due diligence, most commonly by conducting a professional home inspection.
This means that as a seller, you are not obligated to create a comprehensive list of every scratch, dent, or minor imperfection in your home. It is not your job to do the buyer’s inspection for them. However, this principle is not absolute. The law carves out a very important exception for specific types of hidden defects.
The Two Types of Defects: Patent vs. Latent
To understand your legal duty, you must first understand the two categories of property defects.
1. Patent Defects A patent defect is a flaw that is visible and can be discovered during a reasonable inspection of the property.
- Examples: A cracked window, a large stain on the carpet, a hole in a wall, or a clearly visible water stain on the ceiling below a bathroom.
- Your Obligation: You have no legal duty to disclose patent defects. The law assumes that a buyer or their home inspector will discover these obvious issues themselves. You cannot, however, actively try to conceal a patent defect (for example, by strategically placing a rug or piece of furniture to hide a damaged floor just before a showing).
2. Latent Defects A latent defect is a hidden flaw that would not be discovered during a reasonable inspection. It’s an issue that affects the underlying value or use of the property that the buyer cannot see with the naked eye.
- Examples: A structural problem behind a newly finished basement wall, asbestos insulation behind drywall, a buried underground oil tank, or a foundation crack that has been cosmetically patched over but is known to leak during heavy rain.
It is only within this category of latent defects that a seller’s legal disclosure obligation exists.
The Seller’s Duty: When You MUST Disclose
Your legal duty to disclose a latent defect only arises if the defect is also material and renders the home unsafe or uninhabitable. A latent defect is considered “material” if it is so significant that it would likely influence a reasonable buyer’s decision to purchase the property or the price they would be willing to pay.
Therefore, you are legally obligated to disclose a latent defect if it meets these criteria:
- It is hidden and not discoverable through a normal inspection.
- It is a material fact that impacts the property’s value or use.
- It makes the home dangerous, potentially dangerous, or unfit for habitation.
Examples of mandatory disclosures include:
- A foundation that is structurally unsound.
- The fact that the property was previously used as a marijuana grow-op, which can lead to hidden mould and electrical system damage.
- Significant and persistent water penetration issues in the basement.
A minor, repaired leak from years ago or an old appliance that is still functional would not typically meet this high threshold.
The SPIS and The Risk of Over-Disclosure
This is precisely why many lawyers advise against voluntarily filling out a Seller Property Information Statement (SPIS). This form asks sellers to disclose a vast amount of information that goes far beyond their legal duty, thereby voluntarily increasing their liability for any potential inaccuracies or omissions.
What About “Stigmas”?
A common grey area is “stigmatized properties.” A stigma is a non-physical, psychological issue associated with a property, such as a death, suicide, or even a belief that the house is haunted. In Ontario, a seller has no legal obligation to disclose these psychological stigmas to a buyer. However, under their code of ethics, real estate agents may have a duty to disclose a material fact if asked a direct question. It is best to discuss a strategy for answering these types of questions with your agent when you sign your listing agreement.
In summary, your legal disclosure obligation as a seller in Ontario is specific and narrow. You are not required to be an open book on every minor flaw. Your duty is to be honest and not conceal anything, and most importantly, to proactively disclose any hidden, material defects that could pose a danger to the occupants. When in doubt about a serious issue, the wisest and safest course of action is always to disclose it. The potential cost of a lawsuit for non-disclosure far outweighs any perceived benefit of staying silent.
