One of the most important documents in a residential real estate transaction is the Agreement of Purchase and Sale. We receive many questions from clients regarding the clauses contained in the standard Ontario Real Estate Association Agreement of Purchase and Sale. So, I will look at various clauses contained in the agreement and explain what they mean and how they impact the transaction.
Irrevocability: This offer shall be irrevocable by (Seller/Buyer) until 5:00 p.m. on the 25th day of April 2019, after which time, if not accepted, this offer shall be null and void and the deposit shall be returned to the Buyer in full without interest.
We get a lot of questions about this clause. What it means is that once the Buyer presents his/her offer to the Seller for the property, the Buyer cannot take back the offer until after the irrevocability date. The reasoning behind this clause is to protect the Seller and allow the Seller an opportunity to consider different offers. For example, if the Seller receives four offers and decides to accept offer C, the Seller will inform Buyers A, B and D that their offers will not be accepted. If this irrevocability clause was not in place, Buyer C could then withdraw his/her offer, and the Seller would be left with no buyer since the Seller chose to reject the other three offers.
Completion Date: This Agreement shall be completed by no later than 5:00 p.m. on the 20th day of May, 2019. Upon completion, vacant possession of the property shall be given to the Buyer unless otherwise provided for in this Agreement. The Completion Date is the date on which the actual transfer of title/ownership occurs.
It is important to note that the Completion Date cannot occur on a weekend or on a holiday. Additionally, it is best to try to close on days other than at the beginning and end of a month or the Friday before a long weekend. The Land Registry office in Ontario is only open between 9 a.m. and 5 p.m. Monday to Friday; therefore the transaction must close between 9 a.m. and 5 p.m. If there is a delay in closing the transaction until after 5 p.m., the registration for the change of title (i.e. from the Seller(s) to the Buyer(s)) cannot occur and would have to be held over until the next business day.
Title Search: Buyer shall be allowed until 5:00 p.m. on the 6th day of May, 2019, (Requisition Date) to examine the title to the property at Buyer’s own expense and until the earlier of: (i) thirty days from the later of the Requisition Date or the date on which the conditions in this Agreement are fulfilled or otherwise waived or; (ii) five days prior to completion, to satisfy Buyer that there are no outstanding work orders or deficiency notices affecting the Property, and that its present use (ex: single family residential) may be lawfully continued and that the principal building may be insured against risk of fire. Seller hereby consents to the municipality or other governmental agencies releasing to Buyer details of all outstanding work orders and deficiency notices affecting the property, and Seller agrees to execute and deliver such further authorizations in this regard as Buyer may reasonably require.
This clause sets out the rules concerning the title search conducted by the buyer’s lawyers. The title search is the process of retrieving documents evidencing events in the history of a piece of real property, to determine relevant interests in and restrictions/regulations concerning that property. While this step is important for both the Buyer and the Seller, this clause is more important for the Buyer in the transaction. The Buyer’s lawyer will search the title of the property to ensure that the Buyer will be obtaining a clear and marketable title. If the Buyer’s lawyer finds any issues on the property (i.e. liens or issues with easements/rights of way), the Buyer’s lawyer will send a requisition, or “request”, to the Seller’s lawyer to have the issue resolved before closing or to undertake (which is a legal process) to have it resolved as soon as possible after closing. When the requisition is sent by the date listed in the clause, it will be the Seller’s responsibility to resolve the issues with the title of the property so that the Buyer has good title to the home when he/she takes possession.