Mistakes vs Misrepresentations in Ontario Real Estate (TRESA)

Understanding the difference between a mistake and a misrepresentation is one of the most important concepts in Ontario real estate law. This distinction appears frequently on the Humber real estate exams, particularly in Course 1 and Course 2, and it has serious real-world consequences for practicing agents. Under TRESA, the penalties for misrepresentation can be severe.

What Is a Mistake in Real Estate?

A mistake in contract law is an erroneous belief about a fact at the time a contract is formed. It is unintentional. In real estate, mistakes can occur in several ways:

Common Mistake (Mutual Mistake)

Both parties share the same incorrect assumption about a material fact. For example, both the buyer and seller believe a property contains 2,000 square feet when it actually contains 1,700 square feet. Neither party intended to deceive the other — both were simply wrong.

Mutual Mistake (Different Assumptions)

Each party holds a different mistaken belief. For example, the seller believes the agreement includes the backyard shed, while the buyer believes the shed is excluded. There was no intention to deceive — the parties simply had different understandings of the terms.

Unilateral Mistake

Only one party is mistaken about a material fact, and the other party either does not know about the mistake or does know but does not correct it. This type of mistake becomes legally significant when the non-mistaken party takes advantage of the error.

Legal Consequences of Mistakes

Depending on the type and severity, a mistake may result in:

• Voidable contract — The mistaken party may have the right to rescind (cancel) the agreement
• Rectification — A court may correct the contract to reflect the parties' true intentions
• No remedy — Minor mistakes or mistakes about value typically do not provide grounds for relief

The key point is that a genuine mistake involves no intent to deceive. This is what separates it from misrepresentation.

What Is a Misrepresentation in Real Estate?

A misrepresentation is a false statement of fact that induces another party to enter into a contract. Unlike a mistake, misrepresentation involves one party making a claim that is not true — whether or not they knew it was false at the time.

Innocent Misrepresentation

The person making the statement honestly believes it is true but is wrong. For example, a seller tells the buyer that the roof was replaced 5 years ago because that is what the previous owner told them, but in reality it was replaced 15 years ago. The seller had no intent to deceive but the statement was still false and material.

Negligent Misrepresentation

The person making the statement did not verify the information when they had a duty to do so. For example, a real estate agent lists a property as having 4 bedrooms based on a quick walkthrough without verifying against the municipal records, when in fact one room does not meet the Building Code definition of a bedroom. The agent was not deliberately lying but failed to exercise reasonable care.

Fraudulent Misrepresentation

The person making the statement knowingly makes a false claim to deceive the other party. For example, a seller knows the basement has a history of flooding but deliberately conceals this and states the basement has "never had water issues." This is the most serious form of misrepresentation.

Legal Consequences of Misrepresentation

The consequences escalate based on the type of misrepresentation:

• Innocent misrepresentation: The affected party may rescind the contract and be restored to their original position
• Negligent misrepresentation: The affected party may rescind the contract and claim damages for losses suffered
• Fraudulent misrepresentation: The affected party may rescind the contract, claim damages (including potentially punitive damages), and the guilty party may face criminal charges in extreme cases

RECO Disciplinary Actions for Misrepresentation

Beyond civil liability, registered real estate professionals who make misrepresentations face disciplinary action from RECO under TRESA. RECO can impose:

• Fines up to $50,000 for individuals and $100,000 for brokerages
• Suspension of registration
• Revocation of registration (permanent loss of licence)
• Conditions on registration (mandatory additional education, supervision requirements)
• Reprimands added to the registrant's public record

RECO publishes its disciplinary decisions, so a misrepresentation finding becomes part of your public professional record.

How This Shows Up on Humber Exams

On the Humber real estate exams, you should expect questions that test whether you can:

1. Distinguish between the different types of mistakes and misrepresentations
2. Identify the correct legal remedy for each type
3. Apply the concepts to a scenario (e.g., "A seller states that... Is this a mistake, innocent misrepresentation, negligent misrepresentation, or fraudulent misrepresentation?")
4. Explain the registrant's obligations regarding disclosure and verification

This topic is particularly important in Course 1 (contract law fundamentals) and Course 2 (residential transactions and disclosure obligations). Our Course 1 and Course 2 study guides include practice questions specifically on mistakes, misrepresentations, and disclosure obligations.

How Agents Can Protect Themselves

As a practicing agent, here is how you reduce your risk of misrepresentation claims:

1. Verify everything — Do not repeat information from sellers or other agents without confirming it. Check property measurements, room counts, and renovation claims against official records.
2. Use disclaimers appropriately — Phrases like "to the best of the seller's knowledge" clarify the source of information but do not eliminate your duty to verify material facts.
3. Document your due diligence — Keep records of what you checked, when, and what you found. If a claim is made later, documentation of your reasonable efforts protects you.
4. Disclose material facts — When in doubt, disclose. Under TRESA, the duty to disclose material facts that could affect a buyer's decision is a fundamental obligation.
5. Know the difference between opinions and facts — Saying "this is a great neighbourhood" is an opinion. Saying "the basement has never leaked" is a statement of fact that can be verified and challenged.
6. Use the SPIS carefully — The Seller Property Information Statement is a useful tool but it is not a substitute for professional verification of key facts.

Key Takeaway for Students

The core distinction to remember is: mistakes are about misunderstanding; misrepresentations are about misstating. A mistake involves an erroneous belief shared or held by the parties. A misrepresentation involves a false statement — whether made innocently, carelessly, or deliberately — that induces someone to enter a contract. For your exams and your career, always ask: was this a false statement that influenced the other party's decision? If yes, it is a misrepresentation, not merely a mistake.

Need more practice? Our study guides cover contract law, misrepresentation, and every other exam topic with hundreds of MCQ-style practice questions and detailed answer explanations.