Another cautionary tale from Mark and Moneyville
There is a reason why real estate deals have to be in writing. Things said, but not written down, are open to interpretation and misunderstanding later as a decade old case in Brampton illustrates.
In this instance, the discussions meant the end of a real estate contract and eight years of court battles.
In August 2000, a buyer put in an offer on a 32-acre farm in Brampton. He offered the owners $1.7 million based on a price of $52,000 per acre. The owners rejected the offer, signing it back for $65,000 per acre for a total price of 2.1 million, plus the right to remain living there rent-free for three years after closing.
The buyer was satisfied with the price, but didn’t like the three-year rent-free period. He asked his agent to see whether the sellers would agree to either six months or a year instead. The agent spoke to the owners and later testified that they told him that one year rent-free would be fine. The owner later told a court he did not agree to this. .
Later that day, the buyer accepted the counter offer, agreeing to the price as well as the three year rent free period. However, he still wanted to try and change the deal to a one year rent-free period so he asked his lawyer to prepare an additional amendment to the contract, making that change. He did it this way because he was afraid that if he changed the three year period to one year, then it would be considered a counter offer. So he tried to first accept the offer but then negotiate the amendment separately.
The agent left all the papers at the owners with a covering letter that said, “Enclosed please find the accepted Agreement of Purchase and Sale. As discussed and agreed to yesterday, the period that you would be staying on the property would be for one year after closing. Accordingly, please find amendment to agreement for your signature.”
The owners refused to sign the amendment. They said all the documents were really a new offer and when she refused to sign the amendment, the deal was dead. The agent argued that even though the owner refused to sign the amendment, they still had a deal, with the three-year rent free period.
The agent sued and won at trial in 2007. But the original owners appealed. In an Ontario Court of Appeal decision dated June 3, 2008, the judges reversed the decision, saying that based on all the evidence, the parties did not come to any final agreement, so there was no deal.
It took eight years from the date of the agreement until the final court decision.
Many times real estate contracts are conditional on home inspections being done and buyers having 4-5 days to waive the condition if they are satisfied with the home. Buyers then find something wrong during the period and try to negotiate a reduction to the purchase price, using an amendment. If this is not approached carefully, sellers might also take the position that if they refuse the amendment, the deal is over, and the buyers no longer have the right to waive their original condition. The lesson is to make sure that any price reduction is agreed to by both sides, in writing, before the date when any waiver is to be sent.
So, whether you’re a seller or a buyer, when you receive an offer, my advice is to do one of three things; accept it, reject it or make a counter offer. Do not play games with amendments and be careful about any verbal negotiations. You will avoid long and costly lawsuits where only the lawyers win. If it is important to you, put it in writing and leave it that way.
Mark Weisleder is a Toronto real estate lawyer. Contact him at firstname.lastname@example.org
By Robert Hof
Mark Weisleder has some serious words of warning. Robert
When you buy a condominium from plans and it won’t be built for a few years, the developer has to give you a list of important documents when you sign the sale agreement. These include the rules that will govern the condominium and a budget for the first year, so you can figure out in advance what you will pay for common expenses.
You have 10 days from the date the developer gives you that information to change your mind. If you do not cancel, then it is a firm deal.
The lawsuits surrounding the new Trump Tower in Toronto illustrate what can happen. Some buyers of the luxury hotel-condo units are trying to get out of deals in some cases signed seven years ago.
They are claiming that maintenance fees, property taxes and other incidentals on the project’s 276 hotel-condo units have skyrocketed from earlier projections. The developer is countersuing, claiming it is a case of buyers’ remorse.
The situation demonstrates the need to scrutinize condominium agreements before signing, because trying to get out of deals later can prove extremely expensive. Although the Trump hotel/complex is different than most residential condominiums, there are still many buildings that have business units on the main floor, so proper inquiries need to be made in advance.
Here are the questions you need answered during that ten day period.
What additional charges will I pay on closing?
Tarion Warranty Corp. which offers consumers warranties on new homes, requires developers to indicate in the purchase agreement, all additional charges you may have to pay on closing. These are either dollar amounts, such as the Tarion enrolment fee, or things like development charges, which may not be known before the condo is built.
In my experience, these charges can add between 1 and 2 per cent over and above your purchase price. The best way for buyers to protect themselves is to negotiate a cap on these expenses right away, so that there is a maximum that can be charged on closing.
What are the rules regarding pets and visitor parking?
Some buildings may provide parking for visitors or charge them for it, others may not. Some allow pets up to a certain weight; others forbid all pets. There will probably be restrictions on attaching anything to or trying to enclose your balcony or patio. You probably will not be able to change the flooring, remove a wall, change the plumbing fixtures or install appliances without the permission of the Board.
Can the developer decide not to build?
Most agreements contain something called an economic viability date. This means that if the developer does not pre-sell enough units, they can just decide to cancel the project and refund your deposit. Buyers are not entitled to any damages. Check this date immediately, and ask whether the developer has the right to extend it.
What is included in common expenses?
Many buyers believe all expenses will be covered by a common payment each month. This is not true. Some buildings may require buyers to pay for and maintain their own HVAC or hydro. Cable will also be extra. Other condos may even require you to maintain your exterior garden or patio as well. This is typically found in “freehold” townhouse projects.
What if there are business units on the main floor?
Make sure that any commercial unit pays utilities separately, since businesses typically use more water and hydro than a regular unit. Imagine if you have a Tim Hortons on your ground level. Very convenient, but it could mean you are subsidizing their utility costs.
Is the common expense payment guaranteed?
The developer’s budget should indicate what you should expect to pay in the first year. However, if construction is delayed, there is usually a clause that the budget will increase by, on average, an additional 4 per cent per year. This means your expenses also will rise. In addition, the developer only guarantees your common expenses in your first year of ownership. If there is any increase after the first year, you are on your own.
Based on what I have heard from condominium specialists, it is not uncommon for the common expenses to rise almost 30 per cent in the first three years of ownership in a new condo building. This could include leasing contracts for building equipment or systems that do not take effect until the second year, for example when the furnace is not owned. This also includes the fact that, while the law requires a 10 per cent reserve fund from day one, this is usually not enough.
If you can just barely afford this condo based on payments that you are being promised today, you may have serious affordability problems later.
Ask the right questions before you buy a new condominium, so that you do not have issues later.
Mark Weisleder is a Toronto real estate lawyer. Contact him at email@example.com
Reproduced from www.moneyville.ca