Whether a buyer can terminate an Agreement of Purchase and Sale due to a difference in property dimensions in the MLS listing and its actual size depends on how material the misrepresentation is. This is demonstrated in two recent cases Lamba v. Mitchell, 2021 ONSC 1612 (CanLII) and Issa v. Wilson, 2020 ONCA 756.

Lamba v. Mitchell, 2021

The recent Superior Court decision addressed the question of whether a buyer can terminate a transaction and receive their deposit back if the square footage of the property differs from that of the MLS listening. Lamba v. Mitchell, 2021 ONSC 1612 (CanLII) concluded that the buyers did in fact breach the Agreement of Purchase and Sale by refusing to close despite the discrepancy between the MLS listing and the actual square footage of the subject property. In July 2020, Mitchell and Bowring listed their Mississauga home for sale on the Multiple Listing Service (MLS). As described in the listing, the home was approximately 2,500-3,000 square feet. They were provided with all realtor’s photos of the home along with marketing materials, pre-listing home inspections and a floor plan which provided accurate dimensions for each room. The brochure that was also provided to prospective buyers visiting the home, stated: “buyer to verify measurements”.

The Purchasers, took interest in the home and signed an agreement to purchase the subject property for 1.2 million with no conditions and had given a deposit of $20,000. Following Lamba’s signing of the Agreement, they had learned that the floor plan contained a discrepancy not shown in the MLS listing, a difference of at least 345 square feet.

Both parties appeared in Court in January 2021, the issue at hand was to decide whether the buyers could terminate the contract based on the incorrect area of the home on the MLS listing. The buyers had asked the court to rescind the Agreement, the sellers had requested forfeiture of the $20,000 deposit.

Based on the law in Ontario, an Agreement may be rescinded if there is a “material misrepresentation” of the property. A reasonable person would have to consider the misrepresentation to be a defining factor in the decision to enter into the agreement. It was found that the MLS listing although erred, was not a material misrepresentation that could have impacted the decision of the buyers as they were provided with all materials to ascertain this information on their own.  

Further Considerations

The case of Issa v. Wilson, 2020 ONCA 756 demonstrates a scenario where the purchaser of a property was permitted to withdraw his purchase agreement and reclaim a deposit of $50,000 due to the misrepresentation of the square footage of the property. In this matter, the discrepancy was that of about 1,000 square feet. It appears based on the relevant case law, that the determining test is the intention behind the purchase and how substantial the misrepresentation is. The intention behind the purchase was to have a home big enough for five people, when the appraisal had shown home size as significantly smaller than what was advertised the purchaser rescinded the agreement.

If the intention of the buyer was not affected, the remedy of rescission may not have been available, such as the case of the Lamba’s. The misrepresentation is required to be material to the agreement and has a direct enticement for the purchaser in entering into the agreement of purchase and sale of the property.

Material Misrepresentation and Caveat Emptor

Caveat Emptor is the general principle that states “buyer beware”. With the exception of defects that are not disclosed by the seller, if a purchaser enters into an Agreement of Purchase and sale with the dependence on a material misrepresentation the purchaser can seek the remedy of rescinding the agreement of purchase and sale.

If you have any further questions on material misrepresentation, or you would like to speak with someone about the legal description of your property, please contact Woitzik Polsinelli’s lawyer Paria Rad at paria@durhamlawyer.ca or you can call her at 905-668-4486 ext. 230 for assistance with this matter.

“This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see or speak to a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”

This blog was co-authored by Angela Victoria Papeo*