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Archive for November, 2020

The pandemic has dramatically changed how home buyers and sellers close their property deals

Anyone who has bought or sold a property since the COVID-19 state of emergency was declared in Ontario last March will have experienced a sea change in how these deals are legally closed.

Prior to the pandemic, buyers and sellers of houses and condominiums would go to their lawyer’s office to sign hard copies of the necessary documents to prepare their deals for closing. Personal visits were necessary because some closing documents — such as affidavits or statutory declarations concerning HST and residency — had to be sworn in the presence of a lawyer or paralegal authorized to administer an oath.

When COVID-19 hit Ontario, it suddenly became risky if not impossible for lawyers to administer the necessary oaths in person. The Law Society of Ontario immediately issued a statement interpreting the legislation to mean that the lawyer, or paralegal, could use videoconferencing and did not have to be in the physical presence of the client. The government subsequently amended the legislation to the same effect.

And with that, 200 years of precedent changed overnight and clients no longer had to meet their lawyers in person to swear affidavits or declarations.

Buyers, sellers and lawyers had to quickly learn how to do videoconference-signing meetings using Zoom, WhatsApp, FaceTime, LawyerDoneDeal, Microsoft Teams and other platforms. After closing documents are signed remotely, buyers and sellers have to scan and return them by email, fax, courier or personal delivery.

This presents challenges for some clients who are not computer literate. For instance, one client of mine was in a nursing home without a computer and with a no-visitor policy.

In another transaction, I had nine family members selling a piece of land to a municipality which refused to accept anything but ink signatures. We all met in my driveway, everyone wearing masks and socially distanced, and signed one at a time on a TV tray.

The exchange of house keys, done by courier before COVID, is now done using lock boxes at the properties.

In the pre-COVID days, buyers would deliver closing funds to their lawyers in person by certified cheques or bank drafts. Sellers would receive funds the same way, or by direct bank deposits. With some exceptions, bank wires have become commonplace. This has created its own set of problems since the wiring of funds can be problematic. It turns out that wiring funds is not instantaneous, and some transactions have had to be postponed due to delays when funds go missing in cyberspace.

In one case, I wired closing proceeds to a seller client. After a week when the funds failed to arrive, I asked the bank to return the money to me. Within a couple of days, the funds appeared in my trust account and the client’s account at the same time. It took another week to straighten that one out.

While it’s certainly more convenient to meet electronically, many of my clients tell me they miss the personal touch. So do I.

Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.


Homebuyers should get clear details about fixtures and appliances — including HVAC — in their property deals

When homeowners agree to sell but neglect to note the property’s heating and cooling system is rented, chances are they will eventually have to buy out the rental contract.

That’s what happened in October, 2016, when Mr Y. agreed to buy a house in Richmond Hill, from Mr and Mrs B., for $2,175,000. Some appliances were listed as being included in the purchase. No fixtures were excluded in the contract.

The buyer only discovered that the sellers did not own the HVAC equipment after the agreement was signed and his lawyer did a title search.

A warranty clause in the purchase agreement stated that any contractual rights survived the closing of the transaction, and were binding on all parties. The sale contract was never amended to say the HVAC system was subject to a registered lien in favour of Enercare — the owner of the equipment.

On closing, the Mr and Mrs B. delivered to Mr Y. a standard bill of sale transferring ownership of the appliances and the fixtures. But it contained the handwritten words “except HVAC.” The bill of sale did not match the terms of the purchase and sale agreement.

When sellers refused to close unless the notification was withdrawn, he reluctantly withdrew the notice.

After closing, Y. sued the Bs. for the cost of buying out the HVAC rental from Enercare. The case was heard in Small Claims Court in December, 2018, and the court’s decision was released in March last year.

In an extremely detailed ruling of more than 9,300 words and 28 pages, deputy judge Davis ruled in favour of the buyer.

Davis noted that the sellers were fully aware that the HVAC system was subject to a rental agreement.

The judge awarded Y. damages of $17,488.27 for the HVAC system buyout, as well as five chandeliers the sellers had removed — contrary to the terms of the agreement.

Unhappy with the decision, the Bs. appealed to the Ontario Superior Court. Justice Mulligan dismissed their appeal this past February, and awarded the buyer costs of $3,500.

Both sides had to pay lawyers for two court appearances, but clearly a matter of principle was at stake for Y. Nevertheless, the case does provide a number of lessons to future buyers and sellers:

  • When sellers list their properties for sale, whether it’s a house or a condominium, the listing agreement should be very clear about what appliances and fixtures are included and which ones are rentals.
  • Sellers who remove attached fixtures, such as chandeliers, which are not excluded from a sale agreement are at risk of having to compensate the buyers for their value.
  • Particular care should be taken to clarify whether the hot water tank and HVAC systems are rentals or included in the purchase price without extra payment.
  • A buyer who is faced with having to pay for a rental appliance in similar circumstances cannot refuse to close but can sue the seller afterwards for damages.

 

Bob Aaron is a Toronto real estate lawyer. He can be reached at bob@aaron.ca