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2. Duty to inform

Adverse factors: Declarations by the seller


2.1 Description sheet

2.2 Adverse factors

2.2.1 Declarations by the seller

a) Complete the DS or DSD form with the seller

b) Complete the DS or DSD form with a seller other than a natural person who owns the  immovable

i) Legal person

ii) Trust

iii) Mandatary

2.2.2 Specific cases relating to the history of the immovable


2.2 Adverse factors

A licensee must inform the party represented and all other parties to a transaction of any known factor that may adversely affect the parties or the object of the transaction.1

Adverse factors may of course relate to the quality of the immovable and its functionality. But they can also vary depending on the parties involved, their values, perceptions, religion, age, etc. They can be totally subjective and not related to the objective qualities of the immovable. For example, some people may not want to buy a property that belonged to a person suspected of being a member of a criminal organization or where there are concerns about unexplained phenomenon.

Once a licensee has knowledge of a factor which may adversely affect a party to the transaction, regardless of the source of information, he must disclose it, after making his due diligence. However, due diligence does not mean an investigation.

The information the licensee discloses must be the information he received. But the licensee is also required to be proactive, i.e. he should not wait for the buyer’s questions in this regard. After all, the buyer has no reason to think of such a situation or ask questions about it. Also,  even if the information or events date back a few years, they can still be relevant and must be disclosed.

The licensee must also be able to provide the source of this information, allowing him to provide objective information.

The buyer's broker who receives information from the seller or the seller's broker must pass it on to his client. 

He must also provide him with all the necessary explanations to ensure that he understands and advise him on the possible implications or consequences on the transaction.  

In addition, it is important that the buyer's broker understands his client's beliefs and values. This way, the buyer's broker will be able to ensure that his client makes an informed decision while respecting his buyer's profile.


1 S. 85 RBR

2.2.1 The declarations by the seller

The mandatory form Declarations by the seller of the immovable (DS) or its version for an immovable held in divided co-ownership (DSD) is an excellent tool to help licensees meet their duty to verify and allow them to uncover, in accordance with generally accepted practices, the factors that could adversely affect any of the parties. 

This form is an added value to protect the interests of brokers’ clients by minimizing the risk of legal action for sellers and allowing buyers to enter into a transaction with a better knowledge of the condition of the property. It is an additional way to ensure transparency in a transaction and thereby better protect the interests of all parties.

The DS form must be used for the sale of a chiefly residential immovable containing less than five dwellings by a natural person, including an immovable held in undivided co-ownership. For any transaction involving a divided co-ownership, licensees must use the DSD form.

This form is a mandatory annex that is part and parcel of brokerage contracts. The licensee must complete the form jointly with the owner and have him sign it when signing the mandatory exclusive or non-exclusive brokerage contract to sell.

Also, any promise to purchase form must be accompanied by the mandatory DS (or DSD) form attached and identified in clause 13.1. Like any other document that forms an integral part of the promise to purchase, the DS (or DSD) form and all related documents must be sent to the mortgage lender. The latter may then set the terms of the loan to be extended to the buyer in full possession of the facts. This form is also given to any inspector upon request.

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a) Complete the DS or DSD form with the seller

The licensee must complete the DS or DSD form jointly with the seller.  The presence of the licensee when the seller completes the form is essential to ensure that the seller provides complete and accurate answers to the questions asked. This is an opportunity for the licensee to ask any questions about the state of the building and to conduct further verifications.

More specifically, regarding the DS or (DSD) form, the licensee must:

  1. Explain to the seller his legal obligation under the Civil Code of Québec to declare all adverse factors.
     
  2. Explain to the seller that the declarations are important because:
    1. They allow him to properly inform the buyer about the state of the immovable and thus reduce the risk of legal action related to unpleasant surprises.
    2. They promote transparency and allow the buyer to make his decision with a better knowledge of the immovable.
       
  3. Inform the seller of the broker's duty to inform all parties to a transaction of any adverse factors2.
     
  4. Explain to the seller that he must:
    1. Answer questions to the best of his knowledge and in good faith, providing clarifications as necessary. If there are elements on which he has no knowledge or questions he is unable to answer, the reason can be explained in clause D15 of the DS form under  "Details," or D15 of the DSD form under “Details and major improvements to the private and common portions”.
    2. Disclose factors of which he was made aware by previous owners, not just factors of which he has personal knowledge.
    3. Provide his broker with the available documents supporting his answers (invoices, warranties, plans, estimates, permits, reports, notices, leases or other).
    4. Specify the answers he provides(details must be provided in section D15: servitudes, other charges, restrictions, factors not mentioned in other sections, details on the points raised in the form).
    5. Sign the form.
    6. Accept that this form be given to any other person involved in the transaction (prospective buyer, broker, inspector or other).
    7. Notify his broker (or the buyer’s broker) if he obtains additional information on the immovable after signing the form or if changes must be made to the declarations on this form.
       
  5. Explain to the client each of the questions on the DS (DSD) form.
  6. Ask the seller questions to obtain all the necessary clarifications to the answers he provided.
  7. Gather and verify documents supporting the seller's declarations. For example:
    1. Certificate of location and cadastral plan.
    2. Previous inspection/expert reports:

In addition to checking the previous description sheets and DS (DSD) forms available on the information listing service, the seller's broker should ask the seller about the existence of a previous inspection or expert report.

If applicable, he must obtain a copy, read it carefully, and be sure to disclose any adverse factors in the DS (DSD) form and/or the description sheet. If the seller has performed work to remedy the situation, the licensee must obtain from the seller all documents showing that the work has been done (expert reports, plans and specifications, quotes, invoices, etc.), disclose them and make the documents available.

Simply remedying a situation does not exempt the licensee from ensuring that this information is disclosed by the seller, such as:

  • Water infiltration, sewer backup
  • Growing cannabis
  • Flooding
  • Fire
  • Infestation
  • Etc.

c. Inspection/expert reports during transaction.

The seller's broker must update the DS (DSD) form when an inspection disclosed by a promisor buyer reveals the existence of adverse factors. He must obtain a copy of the inspection report and read it carefully.

This update can be done by using an Amendments form to enhance the DS (DSD) form or by completing a new DS (DSD) form.

The licensee must inform all prospective buyers of these adverse factors and make the report available.

  1. Notice of non-compliance.
  2. Renovation invoices.
  3. Documents related to the septic tank, weeping field and water supply system.
  4. Maintenance or warranty contracts.
  5. Declaration of co-ownership:
    1. Financial statements
    2. Financial forecasts
    3. Bank account statements
    4. Minutes
    5. Special assessments

The seller’s broker must ask his client if he has received a notice of special assessment from the syndicate of co-owners and, if so, obtain a copy and put it in the file.

if the seller has received a notice of special assessment, check “yes” under clause D14.10 of the form Declarations by the seller of the immovable – Divided co-ownership and detail this declaration in section D15.

The licensee must advise and insist that his client complete the Request for information to the syndicate of co-owners (RIS) form. This form provides an overall picture of the situation, particularly with regard to any outstanding common expenses, future contributions to be expected, the balance in the contingency fund, any legal action undertaken against the syndicate, etc.

  1. Obtain and carefully read all documents in the seller's possession pertaining to his declarations (invoices, certificates of compliance, inspection or expert reports, permits, plans, leasing or instalment sales contracts) and immediately place them on the agency's file.
     
  2. Take the appropriate steps to support all of the seller's statements contained in the DS (DSD) form. When documents are not available, the licensee must explain the reason in the appropriate section of the DS (DSD) form.
     
  3. Make ongoing amendments to the DS (DSD) form based on additional information obtained about the property, if any.

For this purpose, the licensee must use the Amendments (AM) form, which must then be signed by the seller. In clause M1 under "Other,” you must indicate the number of the DS (DSD) form that it amends. The Amendments (AM) form used to amend the DS (DSD) form must be attached to it and given to any prospective buyer. In addition, the seller’s broker, who indicated on the detailed description sheet that a DS form exist, must specify on the sheet that the DS form has been amended by an AM form. This indication on the sheet should take the following form: “DS 12345 amended by AM 67890.”

Remember that clause D15 of the DS form can be used not only to indicate the major improvements made to the immovable, but also to specify any positive answer entered on the form. If additional space is required, the form Annex G - General related to the form should be used.

IMPORTANT: A seller may refuse to answer the questions contained in the DS (DSD) form even if he has knowledge of certain elements, simply because he does not want to make any declarations on the immovable. If the seller refuses to complete and sign the DS (DSD) form, or if he indicates on the form “I refuse to complete the form” and signs it (which amounts to the same thing), the licensee simply cannot enter into a brokerage contract with this client.

2 S. 85, RBR

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b) Complete the DS (DSD) form with a seller other than a natural person who owns the  immovable

i) Legal person

If the seller is a legal person, the use of the DS (DSD) form is not mandatory, but is strongly recommended since it contains information on the immovable that is essential to the drafting of a promise to purchase (e.g. the nature of the water supply and sewer services). It is suggested that you obtain this information from the seller and enter it in the space provided on the form. Financial institutions repossessing a property or, for instance, real estate developers operating within a company need this information to sell an immovable.

ii) Trust

Particular attention must be paid in the case of trusts, in order to determine whether or not the use of the DS (DSD) form is appropriate. This will depend on the nature of the patrimony. In the case of a succession, this form is always mandatory.

iii) Mandatary

If the seller is reachable, the licensee must make an effort to obtain answers to questions describing the condition of the immovable.

If the seller is not reachable, the mandatary may provide answers to the best of his knowledge, since he has a power of attorney to act on the behalf of the seller.

If the mandatary is unable to answer questions about the physical condition of the immovable (e.g. if acting as the liquidator of a succession), he must include a statement under clause D15 of the DS (DSD) form indicating who he is and why he cannot answer.

In any case, this does not release the licensee from his duty to verify and he should remain particularly vigilant.

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Last updated on: December 13, 2022
Numéro d'article: 264836