Articles

Question: I entered into an agreement of purchase and sale of a property as the buyer, but discovered that there are issues with the property shortly before closing, what do I do?

Answer: In the case of pre-construction properties, there is usually an implied warranty that such properties are fit for habitation, and built with decent workmanship. No such warranty is implied in most cases for resale properties. For resale properties, the maxim, buyer beware, applies. You are deemed to accept the state of the property existing at the time you signed the contract to purchase it. 

Therefore, do carefully inspect the property, and document the state of the property, when you sign the agreement. 

What if the problems only appear after you have signed the contract?

The Ontario Real Estate Association's standard form agreement of purchase and sale stipulates that the property is at the risk of the Seller pending closing. This means that the Seller is theoretically responsible for what happens to the property prior to closing. The standard form contract also stipulates that where there is insurance coverage for these scenarios, the Buyer may receive the benefit of such coverage. 

Finally, the standard form contract stipulates that where the damage to the property is "substantial", the Buyer may walk away from the deal. 

However, what if there is no insurance coverage and the damage of the property is not substantial enough? Here is where things get interesting. 

The answer is not straightforward, but it exists. You will be running against the clock, so find an experienced litigation lawyer as soon as possible.

Question: I am the Seller or Purchaser of a property. My real estate solicitor discovered that there are outstanding work orders on the property prior to closing. What do I do? 

Answer: Work orders or open building permit typically means that there are construction works that are required by the relevant authorities to be done on your property, but were not done. 

In general, outstanding work orders are serious issues that need to be dealt with before closing. The law typically sees these issues as fundamental issues affecting title, which basically means that the Buyer is entitled to walk away from the deal, if these issues are not resolved. 

If you are the Seller, and the Buyer raises the issue of work orders on your property before closing, you need to deal with this objection from the Buyer. 

Fortunately, the Ontario Real Estate Association's standard form agreement of purchase and sale, and the relevant case law of Ontario, stipulates that title insurance can be an acceptable solution to work order or open building permit issues. 

There is a range of methods in which these issues can be resolved through title insurance. When you encounter outstanding work order or open building permit issues, you are advised to seek legal advice from a litigation lawyer as soon as possible, whether you are on the buying, or the selling side.

Questions: I made an offer for commercial lease through my real estate agent. The Landlord accepted that offer. I thought we had an agreement. But the Landlord later provided me another long lease agreement with terms that I could not agree to. What is going on? What do I do? 

Answer: There are typically two legal documents in a commercial lease - an offer to lease and the lease agreement. The offer to lease may be understood as a short-form preliminary agreement, setting out the key or essential terms of the commercial lease. The lease agreement may be understood as the final and more comprehensive legal agreement, which typically expands on the terms of the offer to lease. 

It is not unusual that a Tenant happily signs an offer to lease, but is later surprised when the Landlord hands him/her a long, sophisticated lease agreement, containing unexpected terms that he/she could not agree to. 

What then can the Tenant do, to get out of this sticky situation? It can never be too trite to reiterate that every case is different. But in general, the lease agreement is required to conform, and be consistent with the terms of the offer to lease. Both parties are well advised to pay close attention to the offer to lease, and use this document to hold the other party to the bargain.

What if the parties' dispute with the lease agreement relate to terms that are not dealt with by the offer to lease? This is usually the point that calls for the intervention of a dispute resolution or litigation lawyer. 

As a general tip, real estate agents and entrepreneurs should be mindful, when drafting or negotiating the offer to lease, to clearly address the following questions: 

Is this offer to lease intended to be binding? 

To what extend can either party introduce terms in the lease agreement that are not mentioned in the offer to lease? 

What happens if the parties disagree with terms in the lease agreement that are not mentioned in the offer to lease? 

When are the parties allowed to walk away from the deal, and when will the deposit be forfeited, if they do not agree on the lease agreement? 

Will the lease agreement replace the offer to lease, or merely supplement the offer to lease? 

In commercial leasing, prevention is better than cure. The party who enjoys advantage in commercial lease disputes is typically the party who engages legal advice or ass at an earlier stage in the negotiations.