Misrepresentation In Square Footage Leads To Rescission Of Agreement Of Purchase And Sale

• Published date: 04 December 2020
• Subject Matter: Real Estate and Construction, Real Estate
• Law Firm: Gardiner Roberts LLP
• Author: Mr James Cook

A misrepresentation by the seller and real estate agent as to the square footage of a residential property in Stouffville, Ontario resulted in the rescission of the Agreement of Purchase and Sale ("APS") and the return of the $50,000 deposit: Issa v. Wilson, 2020 ONCA 756 (CanLII).

The plaintiff, a 26 year old first time home buyer, wanted a home large enough to live with his parents and three sisters. He retained the defendant real estate agent to help him find a suitable home. The same real estate agent acted for the seller of the property.

The agent told the plaintiff that the home size was 2,100 square feet, but this information came from the seller and a 12 year old listing of the home. The MLS listing, based on the same information, represented the size of the home to be 2,000-2,500 square feet.

However, the agent did not measure the home himself to confirm the dimensions.

The buyer visited the property twice before making an offer to purchase, and observed all the rooms while accompanied by family members. During one visit the seller told the plaintiff that the property was about 2,000 square feet.

The APS was signed and shortly before the scheduled completion date, the buyer received an appraisal of the property in connection with his mortgage application. The appraisal indicated that the size of the home was only 1,450 square feet.

The buyer then decided not to complete the purchase of the home. Litigation ensued with the buyer seeking the rescission of the APS and the return of his $50,000 deposit, which was opposed by the real estate agent and the seller.

In 2019, a trial occurred. Prior to trial, the agent admitted that he was negligent in failing to verify the size of the home. However, the defendants maintained that the plaintiff was not entitled to rescission since the plaintiff had visually observed the property and had entered into the binding APS before receiving the appraisal.

The remedy of rescission may be obtained on the basis of misrepresentation where a defendant makes a false statement that is material and induces the plaintiff to enter into the contract: Panzer v. Zeifman et al., 1978 CanLII 1658 (ON CA); Singh v. Trump, 2016 ONCA 747, at para. 156.

In the circumstances, the trial judge found that the buyer was entitled to rescission based on the misrepresentations of the square footage as being 2,000 (or more) square feet. The misrepresentation was "material" and notwithstanding that the buyer had conducted inspections to see...