Merovitz Potechin LLP
300-1565 Carling Avenue
Ottawa, ON K1Z 8R1
Congratulations! You have just purchased a property and it is conditional on inspection by a home inspector. What happens when you receive your home inspection report and there are one… two… ten… fifty things wrong with the property? What do you do?
If the Agreement is truly not satisfactory, you may simply terminate. The deposit is released, the Agreement of Purchase and Sale is nullified and you can try to find something else. The Seller may ask what was wrong. We have seen, on occasion, Buyers who sell the inspection report to Sellers. The Buyer gets the money back and the Seller gets to know what was so wrong so they can correct those items. It is important to note that you cannot arbitrarily use a condition to get out of the Agreement if the inspection is fine. The Agreement of Purchase and Sale is a legally binding contract and a sale must be completed in good faith. Visit the link below to learn more.
Now that you have a grasp of the quality of the house you may wish to seek a reduction in the purchase price. You exchange the reduction for the waiver/fulfillment of the inspection condition. The amount of the reduction should consider a few major items:
Other than Mandatory Repair Items noted above, there are also items that you want to deal with which are not mandatory for the sale to take place. This is where lawyers and real estate agents can easily part on advice. For the items that are more cosmetic in nature, a real estate agent might suggest that you amend the Agreement to do two things:
The problem with this last one, is that these schedules are rarely drafted clearly. We often see a clause that is virtually meaningless.
Let’s look at a few examples of repair clauses that have not been drafted clearly.
There are many issues with this kind of drafting. The drafter has not clearly set out the problem, or what fix is required. This leaves much room for interpretation, is ambiguous and difficult to enforce. Our power on behalf of the Buyer – the ability to enforce the terms of an Agreement – stems from what is in the Agreement. If the Agreement is not well drafted, our power is diminished, and you may not get exactly what you thought you were getting. Visit the link below to learn why it is important that the agreement be set out in writing.
For these cosmetic items we suggest you simply take an abatement of the purchase price and do the work yourself. The Seller is motivated to cut corners, do the work cheaply, and do the minimum. You will want to ensure that the work is completed correctly, in a good and professional manner. An abatement in the purchase price shifts the work to you, but you get to do it as you please and if you please.
If you are insistent that you want the Seller to do this work, or if the work is a Mandatory Repair Item, your agent should use a formula to draft the amendment such as:
|What is the problem?||The furnace is leaking|
|What do you want done to fix it?||An HVAC specialist is to attend at the property to repair the leak in the furnace|
|When do you want it done?||At least 10 days prior to completion of the transaction|
|How do you want it to be done?||In a good and professional manner; or|
|How do you want notice of it being done to be evidenced?||Seller to provide invoices itemizing work completed, confirmation that the invoice has been paid, any warranty associated with the work to be transferrable|
|Give yourself a right to reinspect||Upon being notified that the work has been completed, the Buyer shall have the right to inspect, at the Buyer’s expense, the work, to ensure it is completed correctly and to the correct standard|
|What is the consequence if it is not done on time?||The Buyer shall not be obligated to complete the transaction unless the work is completed and shall have the right to sue for damages; or |
The Seller shall provide the Buyer a credit on the statement of adjustments for $#### if the work is not completed on or before completion of the transaction
According to the inspection report the furnace is leaking. The Seller covenants and agrees to arrange, at the Sellers’ expense, to have an HVAC specialist attend at the property to repair the leak in the furnace, in a good and professional manner, prior to 10 days before completion of the transaction. The Seller agrees to deliver to the Buyer copies of all paid invoices which itemize the work completed to fix the leak. The Seller shall ensure that warranties granted by the HVAC professional are transferrable and will arrange for the warranty to be transferred to the Buyer on completion of the transaction. If a fee is associated with such transfer, the Seller will be responsible for such cost. The Buyer shall have the right to reinspect, at the Buyer’s expense, that portion of the property in which the work was completed to ensure the work was completed correctly and to the required standard. If the Seller is unable or unwilling to provide the documentation required to complete the repair on the furnace, the Buyer, at his/her/their option, shall be entitled to either, i) extend the completion of the transaction to provide additional time for the Seller to complete the required repairs; ii) receive a credit on the statement of adjustments for $#### as a repair credit; or iii) terminate the transaction and receive the deposits back without deduction of any kind and will be entitled to sue for damages.
Not all Seller’s are going to negotiate with you. It may be a situation of “take it or leave it”. You may request an abatement, or ask the Seller to fix something, and the answer may very well be “no”. At that point, you have two options:
Keep in mind that you should not fulfill your condition if there are Mandatory Repair Items in the report unless your lender provides specific approval. Lenders may not lend in the face of a house full of asbestos or a foundation that needs to be completely repaired, or the lender may give you a much lesser amount. Unless you have cash to pay for the house or a lender who is advised of these issues and is still willing to proceed (get that in writing!) then it may be that this particular house is not the right one for you.
The market today is very difficult from a Buyer’s perspective. Many Buyers are submitting Agreements without an inspection condition. Those Buyers are taking on a risk that they will discover something after closing that is significant. Except in certain circumstances, caveat emptor (let the buyer beware) applies.
While the above suggestions on how to deal with home inspections may be theoretically sound, Buyers need to make a business decision. There is risk when insisting on abatement or repairs, that a deal can be lost. Buyers must assess the risk and determine if/how to proceed.
While this article provides general information, it does not constitute legal advice. The best way to get guidance on your specific legal issue is to contact a lawyer. To schedule a meeting with a lawyer, please call or complete the consultation intake form.