Even in light of the on-going COVID-19 pandemic, springtime in Ottawa brings rising temperatures and with those rising temperatures the real estate market really heats up. In today’s market, properties are coming onto the market and buyers are so eager to purchase that they do not protect themselves with proper conditions in the Agreement of Purchase and Sale (the “Agreement”). Before signing that Agreement, you definitely want to take a good look at the conditions, if any, within the Agreement because once signed and all of the conditions have been waived or fulfilled, the Agreement is a binding contract between the buyer and seller which cannot be changed unless both parties agree to do so.
Typical conditions listed in an Agreement of Purchase and Sale include; financing conditions, home inspection conditions, if you are looking to purchase a condominium, a condition for the review of the Status Certificate and related documentation, and another popular condition is that a lawyer has reviewed and approved the terms of the offer.
Let’s take a look at these conditions in a bit more detail to show why they are important.
A financing condition allows a buyer to terminate the Agreement of Purchase and Sale if the buyer(s) does not qualify for financing. In today’s market, many buyers’ should obtain a pre-approval from a bank or mortgage broker before beginning their property search. While this is a highly recommended first step, you will need to remember that the house also needs to be approved from your lender as well. It is ideal that both you and the potential property have qualified for financing before you should waive the condition. The risk of not having a financing condition could lead you to purchasing a property you cannot afford.
A home inspection condition gives the buyer(s) an opportunity to hire a home inspector to ensure there are no major problems with the property. Depending on how the condition is worded, if the buyer(s) was not satisfied with the inspection report they may asked for the deposit to be returned and walk away from the Agreement.
The purpose of status certificate condition is to allow potential buyers of condo units to have as much information as possible about their unit as well as the physical and fiscal situation of a building. The status certificate is a document that provides information concerning the financial status of a unit and of the condominium corporation. Its main focus is to inform a prospective buyer of the monthly common fees, any arrears or liens that a particular unit might have, comment on the budget for the fiscal year, and of any special assessment that is being contemplated by the board.
Accompanying the status certificate, will be the condominium’s declaration, by-laws, budget, reserve fund, insurance confirmation, rules, minutes of the last annual general meeting, and mention of any lawsuit involving the corporation.
There is no legal obligation that you obtain and review a status certificate when considering purchasing a condominium unit. However, agreeing to buy a condo unit without doing so is quite risky and unwise. As noted above, there is very important information you should be aware of before signing the papers, and you may be taking on some unwanted issues. The bottom line is that a condo status certificate will illustrate any additional or unanticipated liabilities that come with purchasing the condo.
As a buyer or seller, if you require any of these conditions, it’s extremely important to make sure that they are present before you sign, and that you fully understand what you are agreeing to.
Failing to include conditions puts the buyer(s) in a precarious position as they are at the mercy of the “Caveat Emptor” clause applied to real-estate purchasing. This is frequently translated to “buyer beware”. The Latin phrase is actually taken from a much lengthier Latin phrase “Caveat emptor, quia ignorare non debuit quod jus alienum emit” which translates literally to “Let a purchaser beware, for he ought not to be ignorant of the nature of the property which he is buying from another party”. What this means is, unless the seller intentionally hides a known defect from the seller, the buyer is responsible for identifying any defects and ascertaining the condition of the property they are purchasing BEFORE they agree to purchase.