The residential real estate market is booming. Buyers often decide whether to purchase a house in a matter of hours or days. So, what happens if the buyer realizes that the square footage of the house is less than advertised? This issue was recently addressed in Issa v. Wilson, 2020 ONCA 756 and Lamba v. Mitchell, 2021 ONSC 1612.
Generally, a contract to purchase a home can be cancelled if the purchaser was encouraged to enter the contract on the basis of a huge misrepresentation involving a false statement. This is known as material misrepresentation. It also appears that other factors are taken into consideration, such as the experience of the buyer with the purchase of property and how important the square footage is to the buyer. Both of the following cases look at whether the incorrect square footage was a material misrepresentation which the buyers relied on in deciding to purchase the property.
In Issa v Wilson, the real estate agent told the buyer that the home was 2,100 square feet. On the listing, the square footage was advertised as between 2,000 – 2,500 square feet. In reality, the home was only 1,450.
The Court decided that this misrepresentation concerning the size of the home was material to the buyer’s decision to purchase the house. Despite the fact that the buyer inspected the home twice before purchasing it, the Court decided that his inspections did not determine his expectations. The trial judge determined that it was relevant that the buyer was quite young, he required a sizable home because his parents and three sisters would live there with him and it was his first time buying a home. The trial judge ordered that the contract be rescinded (cancelled) and the deposit returned to the buyer. This decision was upheld on appeal. The Court of Appeal confirmed that it was not an absolute rule that where a purchaser inspects a property, their reliance on a misrepresentation as to the size of property will be displaced.
In Lamba v Mitchell, there was also a discrepancy in the square footage. The Court decided that the buyers were aware of the actual discrepancy and defaulted on the sale by not closing the transaction.
The house in this case, was listed as being approximately 2,500 to 3,000 square feet, however in reality the home was only 2,155 square feet. The Court determined that this was a discrepancy that gave rise to a misrepresentation which was not insignificant. Despite finding that the discrepancy was material, The Court decided that the buyer was not entitled to cancel the contract to purchase the home. In this case, the Court decided that the incorrect size was not a material misrepresentation which the buyers relied upon in making their decision to purchase the house. The Court based its decision on the fact that both buyers visited the home, and were not misled about the size, particularly given that the buyer was an experienced real estate agent. In addition, the Court decided that as a real estate agent, the Purchaser had access to a brochure on the Multiple Listing Service which contained the accurate dimensions.
A discrepancy in square footage in the listing can, but will not always, entitle the buyer to rescind a real estate contract.
Please note that this article is intended for information purposes only. It is not intended to provide legal advice. If you have any specific questions, please contact a lawyer.