The following are common examples of legal clauses that can actually work to your disadvantage if not worded correctly:
1. Survey Clause:
a. Homebuyers can have a survey clause added in to the agreement; however, most buyers today purchase title insurance instead. If you feel the need to request a survey, keep in mind who will be paying for it as they can be anywhere from $700 to $1200. Also consider the amount of time needed to obtain it and review it before the completion of the sale.
b. From the Sellers perspective, remember that a survey of your property may not be up-to-date. Maybe an addition (i.e. swimming pool) has been added. As a vendor, you may have to bear the cost of a new survey if it is required by the buyer. It is always best to offer the survey of the property to the purchaser if available. If not specified, you may be on the hook to provide one!
2. Home Inspection Clause:
a. Previously, this clause stated that the buyer can rescind their offer if they were dissatisfied with the outcome of a home inspection. This led to minor repair issues being used against the seller by allowing the purchaser to kill the deal when they had a change of heart. Not only would the seller have declined other offers by this point, which may not be lost forever, but his or her home may now be labelled as a ‘problem house’ which subsequent parties could use against the seller in negotiations. Further, the seller is now stuck listing a property on the market again, thereby incurring additional carrying and listing costs.
b. This clause can sometimes state that the seller has the option to fix any items flagged by the home inspection. This wording protects the buyer and the seller; the former is buying a house that meets structural standards, and the latter is protected against the buyer having a change of heart. Not all agreements are written this way; how it is stated will reflect the interests of the one offering. Always remember the significance of accepting an offer or changing the clause at the risk that the other party may reject the change and end the agreement.
3. Swimming Pool Clause
a. If the property contains a swimming pool, there should be a specific legal clause addressing it. Some agreements provide a warranty to the pool to survive closing. A broad clause protects the buyer; however, the seller may request a clause indicating that, at the time of closing, he or she believes the pool to be in good working order.
b. A common question from a vendor is: “I have a swimming pool which does not have a permit. Must I disclose this to a potential purchaser? The answer: “Buyer Beware” is the law in Ontario. The purchaser buys at his or her own risk, and buys the property “as is.” This is why it is critical for them to have their own inspection. However, if a vendor is specifically asked whether or not their pool has a permit, they cannot lie or misrepresent the property. So, while they do not have to volunteer this information, they cannot avoid the truth if asked about it directly.
By being aware of these legal issues, and by seeking advice from an experienced real estate professional and obtaining legal advice, you can protect yourself against unnecessary cost and hardship. Make sure to consult a lawyer at Mullun to ensure your interests are protected!