The Agreement to Purchase Your Home
Why your lawyer should review it before you sign:
Most real estate agreements are fairly standard, either prepared by the builder for a new property, or standard forms used by real estate brokers. But the terms are often negotiable. You should carefully review any offer with your lawyer before signing. Here are just a few comments:
The price:
Is the price reasonable? Your lawyer, of course, cannot advise you about market value. But reviewing the offer with your lawyer before signing can give you time to reflect, without pressure.
Is the price clearly marked on the agreement, and do the written words and numerals match? Do the numbers add up - i.e. does the deposit, plus any mortgages taken back and other matters, total the purchase price? (Inconsistencies sometimes arise when offers are faxed back and forth.)
The deposit:
The deposit is usually made payable to the listing broker and held in trust as an advance on the purchase price until the closing of the deal. Its purpose is to comfort the seller that the deal will be completed, and so the seller tries to make the deposit as large as possible.
It is generally paid by uncertified cheque, and large enough to cover the real estate broker’s commission. The purchaser should include a clause that the listing broker invest the deposit in an interest-bearing account or term deposit, with interest earned being paid to the purchaser as soon as possible after closing. Also, that the deposit will be returned to the purchaser if the transaction fails to close for any reason except the fault of the purchaser.
Description of the property:
An accurate up-to-date survey attached to the agreement as a schedule is recommended—many mortgage institutions require one before advancing money. Also, if the dimensions of the property are important, they should be specifically set out in the offer and the words “more or less” should be deleted.
Fixtures and Chattels:
Fixtures are things attached to the property. Chattels are everything else. Examples of chattels are non-built-in appliances, furniture and draperies. Unless the agreement states otherwise, fixtures are included and chattels are excluded.
The purchaser may try to obtain a warranty from the seller that the fixtures and chattels will be in good working order on the date of closing, free and clear of any encumbrance. The seller usually resists such a warranty and, instead, states that the purchaser buys them on an “as-is” basis.
Closing date and Requisition date:
The closing date is when money is exchanged for possession of the property - i.e. the deal is “closed” and the purchaser can move in.
The requisition date is the last date the purchaser’s lawyer can require the seller to clear up any title problems. This may be important, especially if the purchaser is putting a mortgage on the property and the mortgage company requires clear title before advancing funds.
Things your lawyer will consider when reviewing the agreement:
Your lawyer will check whether the seller or purchaser is a corporation, executor, or trustee, to see who will be liable if the agreement does not close. He or she will check the description of the property, the wording of any conditions or warranties, the mechanics of the seller discharging any mortgages, liens, restrictions or liens on the property, the permitted use of the property, inspection terms, GST and tax clauses, and many other matters regarding title and the property. You should fully understand the agreement, its advantages and disadvantages, and consider any additional clauses that may be included in the agreement before signing.
Additional (and often negotiated) clauses:
It is common to include clauses in the offer/agreement about the following (these are not sample clauses - just topics that can be negotiated):
- Description of any outstanding mortgage(s) being assumed or taken back by the vendor on closing;
- Requiring the payment of interest accrued on the deposit, if any;
- Including a condition to the agreement: that the purchaser obtain satisfactory financing from a third party lender;
- Including a condition to the agreement about the sale of the purchaser’s existing home, or a condition that the purchaser be released from a prior agreement to buy a home;
- Including a condition to the agreement about the completion of a home inspection revealing no or minimal building deficiencies;
- In a condominium purchase, including a condition to the agreement that the purchaser must examine and approve the estoppel certificate and condominium documents (which detail the physical condition of the building and the financial status of the condominium corporation);
- Including a right of the purchaser to inspect the property prior to closing to confirm that there has been no substantial damage;
- Including a condition to the agreement about the seller obtaining a committee of adjustment consent to the severance of the property or to a minor variance, the issuance of a building permit for the renovation of the property or the completion of an addition to the building, the rezoning of the property to permit a varied use, etc;
- Requiring an up-to-date survey of the property within X days of the date of acceptance of the offer;
- Description of any tenancies to be assumed by the purchaser on closing;
- Warranty that the property has never been insulated with urea formaldehyde, and that the warranty shall survive closing of the transaction;
- Regarding new homes, confirmation about: a) registration of the builder, as well as the dwelling unit itself, with the Ontario New Home Warranty Program; b) registration status of the plan of subdivision; and c) status of the building permits;
- Regarding new homes, liability for GST, and mechanics of payment;
- The particulars of any easements, encroachments and/or other special title problems.