1.
Agreements of Purchase and Sale
These are the written
contracts whereby vendors and purchasers bind themselves
contractually to a transfer of an interest in property.
Generally Agreements of Purchase and Sale are
prepared by the realtor involved in the transaction,
sometimes in consultation with the lawyer for either the
vendor or the purchaser.
The Agreement of Purchase and Sale sets the rights
and obligations as between the vendor and the purchaser
and is therefore an important contract. Careful vendors
and purchasers will ask for an opportunity to review the
contract with a lawyer before signing.
From the vendor's perspective the agreement should
clearly establish the following:
a) the identity of the purchaser;
b) the selling
price and terms of payment
c) a description of
everything which goes with the selling price;
d)
evidence of disclosure of easements or rights-of-way or
major
From the purchaser's perspective important items to
be contained in the agreement include:
a) a clear description of the property being offered
for sale;
b) a disclosure statement relating to the
property's condition signed by the vendor;
c) the
right to have the property professionally
inspected;
d) the right to withdraw from the
transaction if the inspection reveals defects;
e) the
opportunity to obtain financing, together with the right
to withdraw if financing is not available;
f) a
description of the chattels to be included in the
purchase price;
g) confirmation that the use intended
by the purchaser for the property is permitted by
law;
h) disclosure of third party interests in the
property (tenancies, easements, right-of-way);
i)
disclosure of environmental issues;
j) a reasonable
opportunity to conduct a search of the title to the
property and other searches and to make requisitions.
The legal principle known as "caveat emptor" or "let
the buyer beware" applies with some limitations to the
sale of an interest in real property (land and
buildings). Simply put, it is the responsibility of the
purchaser to make whatever inspections and searches
relating to the property to ensure that the purchaser is
getting what he/she has bargained for. A vendor has an
obligation to disclose hidden defects of which the
vendor is aware or should be aware which could
substantially interfere with the purchaser's enjoyment
of the property. Otherwise, however, the vendor's
obligations to the purchase end with the closing of the
transaction which occurs when a deed is exchanged for
the purchase price.
2. Inspections
In most cases a purchaser will be
provided with a disclosure statement completed and
signed by the vendor to help the purchaser identify
problems with the property. Vendors must carefully avoid
any misrepresentation of the actual state of affairs in
these documents.
In most cases purchasers request that the Agreement
of Purchase and Sale include a provision for an
opportunity to have the property professionally
inspected. Purchasers must carefully read the
documentation relating to the inspection. Normally the
contract for the provision of inspection services by a
Home Inspector will contain words limiting the liability
of the inspector if he/she fails to discover or report a
problem in the property. In particular, purchasers
should be aware of the things which will not be included
in the inspection and determine whether or not other
inquiries need to be made in respect of those items, ie:
the inspection contract may indicate that there will be
no inspection of or report relating to the adequacy of a
septic system, in which case the purchaser would wish to
make further inquiries.
3. Search of Title
The title or ownership of
interests in land is a matter of public record. The
purchaser's solicitor has a duty to conduct a careful
search of the documents relating to the specific
property in order to determine that the vendor named in
the Agreement of Purchase and Sale has the right to
convey the property described in the contract. If the
solicitor discovers defects in title it is his/her duty
to ask for such defects to be corrected before the
transaction is closed. The solicitor sends a "letters of
requisitions" to the solicitor for the vendor within the
time allowed for making requisitions as set out in the
Agreement of Purchase and Sale. Unresolved issues as to
the title of the property can be presented to a judge of
the Ontario Superior Court of Justice in accordance with
the Vendors and Purchasers Act, (c. V.2 Ontario
E-Laws).
4. Other Searches
Other searches to be conducted
by the solicitor for the purchaser include the
following:
a) search for Sheriff's executions (record of
judgments) against the present or previous owners of the
property;
b) municipal searches including taxes,
zoning, work orders and environmental issues.
Where problems are discovered they will be referred
to in the solicitor's letter of requisitions.
5. Mortgage Financing
A purchaser will normally
arrange his/her mortgage financing by direct involvement
with the mortgage lender. The mortgage is a contract
whereby in return for loan of money to assist with the
purchase the purchaser gives the lender an interest in
the property. If there is a default in payment of the
mortgage the lender will have the right to crystallize
its interest in the property by way of power of sale or
foreclosure. Because the mortgage document creates an
interest in property, it must be in writing and
registered at the Registry Office.
The mortgage is an important contract and it is
important that both the lender and the borrower have
legal representation. Normally the lender (bank or trust
company) will be satisfied to let the purchaser's
solicitor prepare the mortgage documentation and provide
a letter of opinion to the lender confirming that the
mortgage has been registered and has created a binding
interest in favor of the lender in the property.
Sometimes the lender will insist on having its own legal
representation in which case the borrower (purchaser)
needs to be concerned as to whether or not his/her
interests are being protected in these circumstances.
6. Closing of Transaction
The date for the closing
of the transaction is set out in the Agreement of
Purchase and Sale. On that date the vendor and the
purchaser are expected to each be in a position to
finalize the transaction. The vendor should have
satisfied all requisitions and be in a position to
present a deed which is in a form acceptable for
registration at the Registry Office. The purchaser is
expected to be in a position to pay the purchase price.
Where the purchaser is obtaining mortgage financing
he/she has to be ready to register the mortgage so that
the lender will make the funds available for the closing
of the transaction.
Normally the representatives of the vendor and the
purchaser meet at the Registry Office to exchange
documentation and funds.
7. Reporting Letter
After the closing of the
transaction the solicitor for each party will prepare a
reporting letter providing a summary of all of the
important details relating to the transaction and its
closing.
