A Homebuyer Is Permitted To Rescind An Agreement Of Purchase And Sale After Being Misled About The Size Of The Property

• Published date: 23 December 2020
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Contracts and Commercial Law, Real Estate
• Law Firm: Pallett Valo LLP
• Author: Mr Daniel Waldman

A recent case involving a real estate transaction gone awry confirmed an often-used but seldom successful remedy; namely, that a written contract can be voided based on a prior oral representation. In Issa v. Wilson, 2020 ONCA 756, the Ontario Court of Appeal affirmed that a buyer can get out of an Agreement of Purchase and Sale when they were induced into entering the contract by misleading information.

In Issa, a young, first-time homebuyer retained the services of a real estate agent to assist him in purchasing a home to live in with his family. The agent informed the buyer that the size of the home was over 2,000 square feet. In obtaining this information, the agent relied on a representation made by the vendor of the property, as well as the Multiple Listing Service ("MLS") listing of the home from 12 years earlier. However, the agent did not carry out any measurements to verify the square footage of the home.

The buyer was given the opportunity to visit the property and inspect it to verify these representations before executing the purchase agreement. The buyer met with the vendor of the property during his visit and was again informed that the home was about 2,000 square feet. Relying on the information provided by the agent and vendor, the buyer executed an Agreement of Purchase and Sale and provided a deposit.

Before the transaction closed, the buyer obtained an appraisal of the property, which indicated that the home was only 1,450 square feet and not 2,000 or more, as represented to him by the agent and vendor. The buyer decided not to complete the purchase of the home and commenced an action against the real estate agent and vendor seeking a declaration that the Agreement of Purchase and Sale was null and void and a return of his deposit.

The trial judge ruled in favour of the buyer. The court considered his young age, inexperience in measuring property and the fact that he was a first-time homebuyer, in holding that his inspection of the property did not override his expectation that the home was 2,000 square feet or more as was represented to him by the real estate agent and vendor.

The defendants appealed the decision, arguing that the trial judge erred by not accepting the proposition that a homebuyer's reliance on a misrepresentation regarding the size of a property is displaced once the buyer performs an inspection of the property. The Court of Appeal disagreed with this submission, stating that this was not absolute law. Although it...