In every real estate listing, there is generally a reference to the size of the home. In a recent Ontario Court of Appeal decision, the court highlighted the importance of accuracy in this detail when it granted a home buyer’s request for rescission of a sale agreement and return of a $50,000 deposit because the real estate agent had misrepresented the square footage of the home.
Real Estate Agent Misrepresents Size of Home
In January/February of 2017, the then 26-year-old home buyer contacted a real estate agent about buying a house in Ontario. It was the home buyer’s first time buying a home. The real estate agent had worked in real estate for 11 years.
The real estate agent proceeded to show the home buyer approximately 10-15 different properties. The home buyer made offers on several properties, some of which were between 2,500 and 3,000 square feet, but none of the offers were accepted.
Then, on March 15, 2017, the real estate agent showed the buyer a property in Stouffville. During the visit, the homeowner was also present. The home buyer asked the real estate agent about the size of the home; the real estate agent told him that the house was approximately 2,100 square feet. Additionally, during the visit, there were copies of the real estate listing in the kitchen which indicated that the approximate square footage of the property was 2,000‑2,500 square feet.
Following a second visit of the home, the home buyer put in an offer for $730,000 which was accepted by the homeowner. The following day, on March 16, 2017, the buyer provided the real estate agent with a deposit cheque in the amount of $50,000.
In late May/early June, the buyer received an appraisal on the property that was carried out in connection with his mortgage application. The appraisal indicated that the square footage of the property was in fact 1,450 square feet. This appraisal report also appraised the value of the property at $730,000.
In an email dated June 5, 2017, the home buyer wrote to the real estate agent and asked for clarification as to why the appraisal report showed the square footage of the property at 1,450 when the property was advertised as being between 2,000-2,500 square feet. The real estate agent did not provide an explanation.
The buyer then informed the real estate agent that he was not prepared to close the transaction given the true size of the house.
Subsequently, the home buyer sued for a declaration that the agreement of purchase and sale dated March 15, 2017, was null and void and sought rescission of the agreement. He also sued for the return of the $50,000 deposit plus accrued interest.
At trial, the judge granted rescission of the agreement of purchase and sale and ordered that the home buyer be provided with the return of the $50,000 deposit plus any accrued interest. The judge concluded:
“In this case I do not find that [the home buyer]’s inspection of the subject property determined his expectations. He was given representations from both [the real estate agent and the home owner] that the property was 2000 or greater than 2000 square feet and as well relied upon the […] agreement which set out 2000 to 2500 square feet. His inspections did not override his expectation that this was the size of the property. (I take his young age, inexperience with square footage, and being a first time home buyer into account when considering the reasonableness of his belief.)”
The real estate agent appealed the decision, arguing that the trial judge had erred by not accepting the proposition that where a purchaser inspects a property, their reliance on a misrepresentation as to the size of the property is displaced.
Court of Appeal Dismisses Real Estate Agent’s Appeal
The Court of Appeal rejected the real estate agent’s argument, explaining that the remedy of rescission of a contract can be obtained on the basis of misrepresentation where the defendant made a false statement that was material and induced the plaintiff to enter into the contract. It found that the trial judge had not erred by concluding that the real estate agent’s misrepresentation concerning the size of the home was material to the home buyer’s decision to purchase.
The court found that the real estate agent had made misrepresentative statements to the home buyer regarding the square footage of the home. It further found that the discrepancy between the negligently communicated size of the home and the actual size was substantial. It also found that the home buyer had relied on the real estate agent and the homeowner’s representations about the size of the home. Finally, the court found that the trial judge had not erred in taking into account the home buyer’s age and inexperience in home buying, as they were relevant contextual factors.
As a result, the court dismissed the real estate agent’s appeal.
While several factors, including the age and sophistication of the buyer and the significance of the discrepancy, were considered in the final decision, the case highlights the need for accuracy in describing a property’s size. If, for example, a listing claimed the floors were carpeted when they were not, this would be easy for the buyer to see upon inspection. However, the square footage of a home is not something most people could determine for certain just by viewing the property. For this reason, a buyer would be much more likely to rely on the representations of the agent and the seller.
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