As a first-time home buyer, reading through 5-10 pages of the Agreement of Purchase and Sale may seem quite daunting. In the case of a condominium purchase, the Agreement of Purchase and Sale can be even more lengthy. This article focuses on the Agreement of Purchase and Sale for a free-hold home and helps you gain a basic understanding of what it entails.
The Agreement of Purchase and Sale generally contains an “Irrevocability Clause” which stipulates that the offer shall be irrevocable by a party a certain time, after which time, if not accepted, the offer shall be null, and void and the deposit shall be returned to the buyer in full without interest. This clause affords the purchaser or the seller an opportunity to revoke the offer with the deposit returned to the purchaser.
This date is the “closing date” as commonly known. This is the date by which both the seller and the purchaser should fulfill their obligations under the Agreement of Purchase and Sale and the seller shall deliver the vacant possession of the property to the buyer.
Under the Title Search clause, the buyer is allowed until a certain time to examine the title to the property and to satisfy the buyer that there are no outstanding work orders or deficiency notices affecting the property and the present use of the property may be lawfully continued and the principal building may be insured against risk of fire. It is crucial that as a purchaser, you retain a real estate lawyer prior to the title search deadline to allow sufficient time for your lawyer to raise any objections to the title to seller’s lawyer.
In the Land Titles System, a searcher is entitled to rely on the fact that the party who appears as the owner in the register does have good title to the property. The reason why a title search is indispensable is to prevent fraudulent conveyance. It is important that the owner of the property is the vendor indicated on the Agreement of Purchase and Sale.
Other searches include executions search against the current owner of the property to ensure that no creditor has a claim in the property against the current owner. Usually, a search of executions is updated on the day of closing to ensure that nothing has been filed between the time of the initial search and the date of closing. Abstracts of each instrument affecting title are also reviewed by the solicitor.
Inspection Condition Clause
This clause is usually contained in the Schedule to an Agreement of Purchase and Sale. We have covered the importance of insisting on a property inspection in another article. It is in the best interest of the buyer to have the option of obtaining an inspection report on the home and make an informed decision whether to go ahead with the transaction.
Finance Condition Clause
With the drastic change of the market dynamics, this clause or the absence of this clause is increasingly becoming a minefield. A lot of buyers waive the finance condition with the confidence that they will be qualified for a mortgage. Once the approval of an mortgage proves to be an issue, the buyer is facing the risk of breaching the agreement and being sued by an unaccommodating seller.
The above-mentioned clauses only represent a small fraction of the clauses that a buyer need to be alerted to. It is always a safe approach to consult a real estate solicitor before you enter into a binding agreement with the seller. For a more thorough and specific analysis of your Agreement of Purchase and Sale, feel free to talk to one of our experienced real estate lawyers.
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