Selling Your Home by Private Sale in Ontario

By Noah Potechin (Of Counsel) of Merovitz Potechin LLP on Monday July 6, 2020.

Occasionally a purchaser and seller will enter into an agreement of purchase and sale directly with one another.  They may exclude all agents in an effort to avoid paying a commission.  However, there are risks associated with this type of agreement.  Your real estate agent or real estate lawyer are important resources for properly drafting agreements and ensuring you are well protected.  Below I will describe some of the issues that may arise, and which I have seen many times before in my practice.

No list of chattels

Some people are not familiar with the difference between a fixture and a chattel.  Occasionally I will be presented with an agreement that has nothing contained in the chattels section.  However, upon investigation, I determine that some things were assumed to have been fixtures, and so were not listed, although it was the intention of the parties that those chattels be included.  Common chattels mistakenly thought to be fixtures are kitchen appliances and portable hot tubs.  

Two key points to remember:

• A chattel is assumed to be excluded from the purchase unless specifically included.
• A fixture is assumed to be included unless specifically excluded from the agreement.  

No conditions (or not enough) for the buyer

If a buyer agrees to purchase a property without inspection, financing and insurance (3 of the standards that should be included on almost every purchase), and there is a problem that is later discovered, the buyer may have agreed to buy that property – even with the issues.  There are some exceptions, which is where a competent real estate lawyer comes in.  Some issues affect the root of title and the ability for a seller to convey good title may be missing, which could result in the deal being terminated in one way or another.

Another aspect of this is drafting the conditions.  Specific language is used by agents and lawyers to ensure the conditions operate in a manner that makes sense.  In a private sale, there is a risk that the correct language will not be used which can be dangerous for the party drafting the conditions. 

In the case of an ambiguity, there is a legal concept that states that the ambiguity will be resolved in favour of the party that did not draft the clause (usually the seller in this situation).  

Your real estate agent or real estate lawyer may be able to think of some conditions that a purchaser buying privately will not consider.  Knowing which conditions to include is an essential part of the process.  Depending on the age, location and quality of the home, various conditions may be necessary, such as:

• septic inspection
• water pressure test
• water potability test
• environmental inspection

No conditions for seller when needed

If a seller is selling for someone who is deceased, and there is not yet a certificate of appointment of estate trustee (with or without a will), the seller may need a condition to ensure it does not enter into an agreement without the legal authority to do so.  

Another situation where this may be necessary is when the seller has countered an offer, and a second offer comes in.  The first offer may have indicated verbally it will not accept the counter, but until the first offer expires, the second offer should not be signed back unless there is a condition that the first offer be terminated first.  This is where the importance of irrevocable dates comes in.

Other sellers may need a condition related to the sale of their own property.  Ensuring this is drafted appropriately is very important.  Drafted incorrectly, this condition may void or bind an agreement when the opposite is intended.

Wrong legal description

The description of what is being purchased is an important aspect of the agreement.  It states plainly what the seller has to sell and what the buyer is agreeing to buy.  If the agreement contains an incorrect legal description, the agreement can be at an end through s. 8 and 10 of the standard OREA form 100.   

I will explain how:  if a seller states they are selling Lot 1 on plan 4M1000, and it is actually Lot 10 on plan 4M1000, unless all parties agree to amend that description, the seller will be unable to convey Lot 1.  Why? The seller does not own Lot 1.  The seller only owns Lot 10.    

Another issue may be improperly describing the property.  In our Lot 10 example above, the legal description is actually Lot 10 on plan 4M1000; Subject to an easement over the westerly 6 meters in favour of Lot 9 on plan 4M1000.  If the legal description only states the Lot number, then the buyer may decide not to close the transaction because the seller cannot deliver what was promised in the agreement.  

The importance of an experienced real estate lawyer

Remember, a contract is a legally binding document, even if it is drafted between individuals privately. Even if the seller and buyer have met personally and talked this all through together, there can still be issues.

The world of real estate is fraught with potential issues of which the average, untrained buyer or seller may be unaware.  These issues are ones that a real estate agent and a real estate lawyer would be able to assist a buyer or seller to navigate.  Any agreement that is drafted without addressing all the possible issues has the potential to become litigious.  If you are considering a purchase or sale of real estate through private agreement, contact the real estate lawyers at Merovitz Potechin LLP for guidance to ensure your interests are protected in the transaction.