Legal Clauses in the Agreement of Purchase and Sale: Protect Yourself!

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!

It’s time to close, now what?

Closing on a real estate deal is a congratulatory time. The seller, freeing themselves of a past liability and the buyer, excited for a bright future for their new purchase. The seller walks away with money in the bank, and buyer walks away with money out of the bank, a new piece of real estate, and liability. For the buyer, the liability aspect of this should be especially concerning, and more so if the property will include chattels, such as a washing machine, dryer, dishwasher, and cabinetry. The purchase and sale agreement typically includes a clause to insure the chattels will be in working order. This sounds fair and nothing to be concerned about, but what does it really mean?
A purchase and sale agreement survives only through closing, this means, after closing if the property or chattel is discovered to be in subpar or in non-working order, the buyer typically left without a remedy for snoozing past the guarantee afforded in the purchase and sale agreement. The onus is on the buyer to examine the property and its chattels before accepting the keys. Don’t fall victim to inheriting problems. Conduct a walk-though of the property on the day of closing and when in doubt examine, examine, examine!. Below I have listed items which should be inspected before accepting key’s to your new property:
• Test all of the appliances – make sure appliances which are included are in satisfactory working condition;
• Test all of the plumbing, open all faucets; check that the water pressure is satisfactory and drainage is sufficiently rapid;
• Test the air conditioning and heating system – check if both adjust as you adjust the temperature;
• Examine all walls and ceilings for spots which might indicate water damage or leaks;
• Examine the basement floor, walls, and ceiling for water damage, leaks, or history of flooding;
• Examine for cracks in concrete foundation walls and floors – keep in mind that thin hairline cracks may be normal in concrete because it shrinks when drying;
• Examine all doors and cabinets to ensure that they open and close with ease;
• Examine the attic (if there is one) to make sure the insulating material covers all floor areas leaving that the vent areas open to allow air to flow freely;
• Examine the fireplace (if there is one) – make sure the vent is functional and that it draws.
• Read the property description as it is laid out in the purchase and sale agreement to insure that it conforms to what you see during the walkthrough;
• When in doubt examine, examine, examine!
Upon completing your walkthrough produce a list of all defects to the seller. Before closing, in writing, require the seller to commit to repairing the defects before or after the closing. If the repairs are to be completed after the closing and transfer of title, the list of defects along with the seller’s commitment to repair after closing become a part of the closing documents.

Restrictive Covenants in Real Estate Transactions.

A restrictive covenant is basically an agreement by one party (the covenantor) to do or not do something with the land he or she is buying from another party (the covenantee). This means that a covenant is a promise made by the buyer to the seller. The covenantor is bound by the burden of the covenant, while the covenantee has the benefit of the covenant.

As long as the original parties own the land in question, there are no issues as it is a simple contractual matter. The main issue is whether or not covenants will run with the land; in other words, whether the covenant will still be enforceable on a subsequent landowner.

At common law, the general rule is that the burden of a covenant cannot run with the land. However, the common law will allow the benefit to run in certain circumstances, if the following conditions are met:

1. The original covenantee had the legal estate in the land which is to be benefited.
2. The successor in title to the original covenantee obtains the same legal estate, and the benefit was intended to run with the land, it was not a mere personal covenant. Not a personal promise that depended on the identity of the original covenantee.
3. The covenant must touch and concern the land which is to be benefited (the “dominant” land).

In equity, a covenant can be enforced against successors in title to the original covenantors if the following four requirements are met:

1. Covenant must be negative in substance (i.e. – don’t do something).
2. There must be a dominant and servient tenement.
3. The covenant must touch and concern the land of the covenantee.
4. Successors-in-title to the covenantor must have notice of the covenant.

Do not hesitate to contact Elmira Chimirova, a lawyer with Mullun, if you would like to know more on this topic. Elmira can be reached at or (800) 878-1630 ext. 102.

Real Estate Practice Tips: 7 Things You Need to Know With Respect to Your Real Estate Transaction.

1. Just because your sale closes on Thursday does not necessarily mean you get your cheque same day. It could be the next day.
2. Do not plan movers early in the day if you are buying, you may not receive keys until late in the day. Professional movers are expensive.
3. There will probably be a penalty on your mortgage payout.
4. Arrange for bridge financing. Buying/selling on the same day is stressful.
5. HST is, in general, in addition to the commission payable to a real estate agent.
6. Cancel any Pre-authorized Payment Plan with the property tax department, mortgage company, utility companies, etc. Contact utility companies yourself to arrange moving in/moving out.
7. Avoid scheduling your closings on the first and last day of the month. These are the busiest days in terms of real estate closings, and lawyers, real estate agents, lenders, mortgage brokers, etc., are strained to provide services you deserve.

Do not hesitate to contact Elmira Chimirova, a lawyer with Mullun, if you would like to know more on this topic. Elmira can be reached at or (800) 878-1630 ext. 102.

Remedies for Breach of Contract.

There are three main remedies available for breach of contract, such as damages, specific performance and rescission.

1.Damages – The common law remedy whereby the money is used to compensate a civil wrong to an innocent party. There are three categories of damages that may be awarded if a breach of contract claim is proved. They are: (1) compensatory or expectation damages, which put an innocent party in the position she/he would have been in had the contract been performed; (2) reliance damages, which restore an innocent party to the position they were in before they were harmed or/and injured; (3) restitutionary damages, which prevent unjust enrichment of one party. Unjust enrichment may occur any time one party gains profits at the expense of another party. Therefore, the compensation is based not on what an innocent party has suffered but what a guilty party has gained (unjust enrichment).

2.Specific Performance is an equitable remedy that compels a party found in breach of his/her contractual obligations to perform a specific act according to the precise terms agreed upon, meaning to perform exactly what they had agreed to. This remedy is available for some breaches of contract. It is used to be awarded as a matter of course for contracts for the sale of land because of the land’s uniqueness.

3.Rescission is also an equitable remedy that brings a contract to an end and restores an innocent party to his/her pre-contractual position. Note: Please do not confuse with a decision to rescind (i.e. terminate) a contract for breach of a condition and to sue for damages.

Do not hesitate to contact Elmira Chimirova, a lawyer with Mullun, if you would like to know more on this topic. Elmira can be reached at or (800) 878-1630 ext. 102.

Disclosure – What Advice Can We Give Our Clients?

1. What to disclose when selling your property - Based on the recent case law development in Canada, below are some defects that should always be disclosed:

  • Plumbing and sewage issues
  • Termites or other insect infestations
  • Roof defects
  • Water leakage, including in basements
  • Heating or air conditioning system issues
  • Property drainage problems
  • Foundation instabilities or cracks
  • Problems with title to the property (e.g. local improvements)

2. Inspections – In order to avoid being stuck with a house that may need extensive repairs it is recommended that a prospective purchaser insist on the Agreement of Purchase and Sale being contingent on a satisfactory house inspection. A professional inspector usually inspects all major house systems, including the roof, plumbing, electrical and heating systems, and drainage. If you are purchasing a home in most cases, an inspection is not a waste of time and money.

3. Title Insurance – Title insurance has become increasingly common in Ontario and is now a standard feature in residential purchases. It is marketed as covering both title defects and “off title” searches traditionally completed by lawyers on a real estate purchase. By purchasing title insurance it may be possible to avoid the cost of a survey or various searches and to in effect “paper over” certain defects. However, such coverage is subject to any specific exceptions and affirmative assurances that may be noted on your policy.

4. Where a defect is alleged – At Mullun, lawyers can identify whether this defect is a defect of title or a defect in the quality of the property/land. We can further determine what the Agreement of Purchase and Sale says about that type of defect. If there is a title defect and the vendor promises a particular standard of title, then as a purchaser, you are entitled to require compliance with the contract promise. If there is a defect of quality of the property/land, we will consider whether it is covered by a statutory warranty, by the common law warranty or by the class of cases where the vendor has a duty to disclose a latent defect of quality.

Please note that the area of disclosure is a complex area of law so consult lawyers at Mullun for up-to-date information on the law that applies to you and ask lawyers at Mullun for guidance in answering your questions.

Do not hesitate to contact Elmira Chimirova, a lawyer with Mullun, if you have any legal questions. Elmira can be reached at or (800) 878-1630 ext. 102.

Avoiding Fraud in Real Estate Transactions

Avoiding Fraud in Real Estate Transactions

With the implementation of electronic processes to complete real estate transactions, technology has changed how real estate deals are conducted. Titles can be searched and mortgages registered and discharged from our desktops. While technology has made lawyers’ work more efficient, it has left the door for abuse wide open as it is now easier for a fraudster to operate in the impersonal electronic environment. Further, real estate transactions are often “one-off”, where the lawyer has no pre-existing relationship with the client.

The two most common types of fraud lawyers may encounter are value fraud and identity fraud. Both are prevalent in real estate transactions, and so lawyers must be astute when dealing with either buyers or sellers so that they can prevent its occurrence. The former occurs when the value of a property is inflated, resulting in a third party advancing funds for a bogus purchase. The latter occurs when a fraudster facilitates the hoax by assuming the identity of another.

Several warning signs of a fraudulent transaction exist which can alert the lawyer and any innocent purchasers to a possible scam. The presence of these indicators does not necessarily mean a fraud is occurring, nor does the absence of these factors suggest a clean transaction. Professional judgement should always be utilized.

Some of the more popular avenues include:

-          Clients paying with cash only

-          Documents not being available (survey, purchase docs, etc.)

-          Not using the same lawyer(s) for the purchase and mortgage

-          Title searches revealing recent transfers of the property at much higher prices

-          The Agreement of Purchase and Sale containing no amendments

-          The deposit paid to the vendor (not the lawyer)

-          No real estate agent is being used

-          The client has not obtained fire insurance

-          Clients willing to pay higher legal fees (even offers more $$$)

-          Scheduling a closing for the Friday before a long weekend

These factors should be a red light to all property lawyers. Certain tips to prevent such fraud from occurring are:

-          Obtain photo ID of borrowers and retain ID of the client in your file (professional requirement anyway)

-          Obtain title insurance

-          Question any unusual instructions

-          Safeguard Personal Security Packages/Teraview passwords to ensure lawyers do not share them

As with most legal scenarios, ethical issues arise where a lawyer suspects his or her client of engaging in a fraud. The Rules of Professional Conduct clearly state that, in such circumstances, lawyers should discuss their concerns with their client. If unsatisfied with the explanation, the lawyer should withdraw from representation, citing a serious loss of confidence between the lawyer and client as the reason for doing so. Further, lawyers must only disclose the details of such fraud if such disclosure is permitted or justified under the Rules. In the unfortunate circumstance where a lawyer is duped by a borrower in a mortgage transaction, he has an obligation to notify any insurer or other indemnitor so that the lender’s protection is not prejudiced.

If you have any questions regarding this post, feel free to contact Mullun. You can learn more about Mullun at