We are pleased to announce that we have just released a new FREE eBook entitled “Buying and Selling Residential Real Estate in Ontario“.  This eBook is a MUST HAVE for anyone looking to buy or sell their home.

This 42 page eBook will cover topics such as:

- How is the Ontario real estate industry organized?

-Who are the players and what are their roles and responsibilities?

- How can a Realtor help a buyer or seller?

- What are the terms in an Agreement of Purchase and Sale?

- What is a Buyer Representation Agreement?

- What happens to the Deposit?

- What is Title Insurance?

- What happens if I default on my mortgage?

- What happens if I am a victim of real estate fraud?

Grab your copy today!

Remember: the information provided in the eBook is not legal advice and is provided for informational and educational purposes only.   If you need legal advice with respect to your offer or agreement of purchase and sale (or wanting to back out of one) you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you with your offer or agreement of purchase and sale.

written by admin \\ tags: buy and sell real estate in Ontario, buying a home in ontario, free ebook buying and selling residential real estate in Ontario, ontario lawyer, ontario real estate lawyer, ontario real estate salesperson, ontario realtor, purchasing properties in ontario, selling your home in ontario

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice with respect to your offer or agreement of purchase and sale (or wanting to back out of one) you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you with your offer or agreement of purchase and sale.

What is a Vendor Take-Back mortgage (also called a VTB mortgage)?  Well, in simple terms, a vendor take-back mortgage is a situation where the property owner who is selling their property is willing to provide some (or all) of the mortgage financing on the sale of that property.  This typically happens in commercial deals where it may be difficult for a purchaser to be able to get financing (e.g. in the millions of dollars). So a mortgage is taken out with the vendor and payments are made directly by the purchaser to the vendor pursuant to a Vendor Take Back Mortgage Agreement. The title of the real estate property is transferred to the buyer.  Most of these arrangement are neither renewable or transferable to the next home owner.

So a VTB mortgage is a way for the purchaser to be able to purchase the property by having the vendor finance part or all of the deal.  Vendor take-back mortgages are typically used where the vendor knows and trust the purchaser and where the purchaser cannot otherwise secure the full amount of financing.  The great thing for the vendor is that they can sell their property.  Sometimes, they can charge higher than normal interest rates on the mortgage than a traditional bank or financial institution would (this reflects the higher risk level that the vendor is willing to accept).  The great thing for the purchaser is that it will be able to get the financing it needs and the vendor will likely not be as stringent in asking for documentation in order to provide the mortgage: while the vendor is assessing the purchaser’s credit, it may be more flexible and lenient than a traditional bank.

Notwithstanding its advantages, a VTB mortgage should not be entered into lightly.  It is a complicated matter and you should always consult with a real estate lawyer (e.g. by making a post on Dynamic Lawyers).  A real estate lawyer will review all the documentation to ensure that all necessary due diligence for the agreement of purchase and sale and mortgage is in place.  For example, a real estate lawyer could determine whether a VTB mortgage, as a second mortgage on the property, is prohibited by the first mortgage being used by the purchaser to finance the deal.

Finally worth mentioning is that real estate brokerages are exempt from having to have a mortgage brokerage licence when arranging a vendor take-back mortgage, or attempting to do so, in the course of a trade in real estate.  This is important because, under the Mortgage Brokerages, Lenders and Administrators Act 2006, a party wishing to deal or negotiate in mortgages must have a mortgage broker’s license.  This would have required a real estate brokerage, which typically deals or negotiates VTB mortgages for its clients, to have  successfully completed a Mortgage Broker Education Program from an approved provider, pay a bi-annual fee of nearly $500 and maintain errors and omissions insurance.  This was just too onerous.  So after some hard lobbying from the Ontario Real Estate Association, the Ontario government put an exemption for real estate brokerages in the Exemptions from the Requirements to be Licensed Regulations made under that Act.  Basically, if the real estate brokerage does not otherwise hold itself out as dealing in mortgages (and does not engage in other activity that requires a license under the Act), then it can deal in VTB mortgages in the course of a trade in real estate.

written by admin \\ tags: toronto real estate lawyer, vendor take back, vendor take back mortgage, vtb mortgage

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice with respect to your offer or agreement of purchase and sale (or wanting to back out of one) you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you with your offer or agreement of purchase and sale.

In this blog, I’ll be discussing what happens if you change your mind after singing an offer or purchase agreement?

Once an offer or counteroffer has been made, it cannot be withdrawn unless there is a time limit on the offer or counteroffer which passes without being accepted.

An Agreement of Purchase and Sale may also be terminated if it becomes impossible to perform through no fault of either party (lawyers say such a contract is “frustrated”).  An example is property destroyed in a flood or a fire before the buyer has taken possession.

If there is no relevant termination clause in the Agreement of Purchase and Sale, a party cannot claim frustration if the supervening event resulted from a voluntary act of the buyer or seller.  Furthermore, frustration is not available if the parties contemplated the possibility of the supervening event arising during the term of the agreement and provided for in the agreement. In Dinicola v. Huang & Danczkay Properties, 2 R.P.R. (3d) 267, a condominium developer failed to develop 3 buildings and returned all deposits and down payments. The condominium unit purchasers, however, sued for breach of contract. In its defence, the developer argued that the municipal council’s refusal to approve the site plan for the development of the buildings frustrated its agreements with the purchasers. The Ontario Court of Justice (General Division) rejected that defence and found the developer liable to pay damages assessed at $4.9-million.  The court reasoned that frustration was not available as a defence because the developer and the purchasers had contemplated the possibility of the municipal council’s refusal at the time the purchase and sale agreements were entered into. That possibility was also provided for in the agreements.  Frustration was also not available because the developer relied on its own refusal to negotiate terms of the approval with the municipality to excuse itself from liability under the agreements.

Purchasers of new condominium units in Ontario have a cooling-off period of 10 days to back out of their purchase agreements.

Once the offer or counteroffer has been formally accepted, the buyer and seller are bound legally by its terms. If you walk away from a deal you may not only lose your deposit, but may also be liable for any damages suffered by the other party, such as the lost opportunity to sell to someone else, expenses arising from a delayed move, or the seller’s loss of deposit on another home intended for purchase. The legal remedy, called “specific performance” (making you complete the purchase), is an unlikely event, but a court could still hold you responsible for the entire purchase price, plus expenses and court costs.

written by admin \\ tags: brampton, breach of contract, condominium unit, counteroffer, court of justice, dinicola, down payments, educational purposes, legal advice, mississauga, ontario court of justice, ontario lawyers, party lawyers, professional assistance, termination clause, time limit, voluntary act

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice on your agreement of purchase and sale or on the deposit specifically, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to review your agreement of purchase and sale or the deposit and advise accordingly.

Generally, the deposit a buyer puts down in respect of an agreement of purchase and sale is only released by the listing brokerage in very limited circumstances, including:

• performance and completion of the Agreement of Purchase and Sale;
• a term or condition concerning the deposit in the Agreement of Purchase and Sale;
• a mutual release signed by all the parties; or
• court action concerning the deposit leading to a judgment.

If the Agreement of Purchase and Sale is silent on specifically what happens to the deposit on termination, courts will generally take the view that, if the buyer defaults, then the deposit is forfeited to the seller. If the seller defaults under the agreement, however, the deposit is returned to the purchaser (unless the agreement says otherwise). Finally, if the agreement is frustrated because of some event or condition that arises beyond the control of the buyer or seller, then the purchaser is entitled to the return of his or her deposit (unless the agreement says otherwise).

Where the purchaser defaults, there is no requirement for the seller to prove damages. This means that, even in the case where the seller resells at a purchase price that is high enough to compensate for any loss from the first sale, the seller may nevertheless retain the deposit.

Whether a Court will return a deposit to a defaulting purchaser depends on a three-part test – all of which must be satisfied in favour of the purchaser for the deposit to be returned:

• Was the conduct of the purchaser reasonable in the circumstances?
• Was the purpose of the deposit to secure the payment of the purchase price?
• Was there a substantial disparity between the value of the property forfeited and the damage caused to the seller by the breach?

In Gajasinghe v. Dewar, 2007 CarswellOnt 5738, the Ontario Superior Court of Justice applied this three part test and refused to return a $20,000 deposit to the defaulting purchaser. Although the Court found that the purpose of that deposit was to secure the purchase price and that there was a substantial disparity between the amount of the deposit and the amount of damages suffered by the seller, the purchaser’s conduct was not reasonable.  Specifically, the Court found that the purchaser’s actions were “indicative not of a purchaser who was ready and willing to close but rather of one who was searching for an excuse not to close”.

Generally, the deposit is only released by the listing brokerage in very limited circumstances, including:

• performance and completion of the Agreement of Purchase and Sale;
• a term or condition concerning the deposit in the Agreement of Purchase and Sale;
• a mutual release signed by all the parties; or
• court action concerning the deposit leading to a judgment.

If the Agreement of Purchase and Sale is silent on specifically what happens to the deposit on termination, courts will generally take the view that, if the buyer defaults, then the deposit is forfeited to the seller. If the seller defaults under the agreement, however, the deposit is returned to the purchaser (unless the agreement says otherwise). Finally, if the agreement is frustrated because of some event or condition that arises beyond the control of the buyer or seller, then the purchaser is entitled to the return of his or her deposit (unless the agreement says otherwise).

Where the purchaser defaults, there is no requirement for the seller to prove damages. This means that, even in the case where the seller resells at a purchase price that is high enough to compensate for any loss from the first sale, the seller may nevertheless retain the deposit.

Whether a Court will return a deposit to a defaulting purchaser depends on a three-part test – all of which must be satisfied in favour of the purchaser for the deposit to be returned:

• Was the conduct of the purchaser reasonable in the circumstances?
• Was the purpose of the deposit to secure the payment of the purchase price?
• Was there a substantial disparity between the value of the property forfeited and the damage caused to the seller by the breach?

In Gajasinghe v. Dewar, 2007 CarswellOnt 5738, the Ontario Superior Court of Justice applied this three part test and refused to return a $20,000 deposit to the defaulting purchaser. Although the Court found that the purpose of that deposit was to secure the purchase price and that there was a substantial disparity between the amount of the deposit and the amount of damages suffered by the seller, the purchaser’s conduct was not reasonable.  Specifically, the Court found that the purchaser’s actions were “indicative not of a purchaser who was ready and willing to close but rather of one who was searching for an excuse not to close”.

written by admin \\ tags: agreement of purchase, breach, brokerage, circumstances, court of justice, damages, disparity, favour, judgment, ontario superior court, ontario superior court of justice, purchaser, subs, superior court of justice

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice on your Agreement of Purchase and Sale, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to review your agreement of purchase and sale and advise accordingly.

Brace yourself…this is a long blog!

Here are some of the common terms in OREA’s a standard form Agreement of Purchase and Sale (remember: there are many more terms which can be included and you should speak with a lawyer about your particular situation!):

• Parties

For an Agreement of Purchase and Sale to be enforceable, it must comply with the Statute of Frauds, which requires that the parties be identified. The Ontario Real Estate Association’s standard form Agreement of Purchase and Sale begin with some basic information about the buyer and seller.

Worth noting is that, even after the Agreement of Purchase and Sale has been signed, additional buyers can be added (e.g. so as to be on title) through a direction provided to the sellers.  No amendment is necessary.

The buyer can be a trustee who purchases in trust on behalf of a beneficiary.

The seller is referred to as the “vendor”.  It is extremely important that the proper legal names of all of the registered property owners be stated in the Agreement of Purchase and Sale. For example, absent a marriage contract to the contrary, a married spouse not registered on title has a proprietary interest in a matrimonial home.  If that spouse does not sign the Agreement of Purchase and Sale, the buyer may only be acquiring the interest of the other spouse.

In some situations, the legal capacity of the seller will need to be included in the Agreement of Purchase and Sale where they are not the registered owner of the property.  This may be the case, for example, where the bank is selling the property pursuant to a power of sale or where a sheriff is selling the property to satisfy an outstanding judgment.

A party can represent a corporation in the purchase and sale of property. In these situations, directors and officers of the corporation generally have the power to bind it. A buyer or seller dealing with a corporate party on the opposite side should:

• Require the agreement to be signed by an officer or director;
• Include a representation and warranty in the agreement stating that the person executing the agreement has the authority to bind the corporation and that all necessary steps to authorize the purchase have been completed;
• Include a statement under the signature of the person signing the agreement on behalf of the corporation saying “I have authority to bind the Corporation”; and
• Require immediate delivery of a resolution of the corporation’s Board of Directors approving the agreement.

A party can also act as agent for a corporation that does not exist (i.e. that has yet to be incorporated). Here, the Agreement of Purchase and Sale should clearly state that the buyer has the right to transfer the agreement to the corporation. Within a reasonable time after coming into existence, the corporation must adopt that agreement. Failure by the corporation to do so will make the buyer liable for the obligations set forth in the agreement (unless the agreement says otherwise) as per section 21(1) of the Ontario Business Corporations Act, R.S.O. 1990, c. B. 16 or section 14 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44.

If a party is a partnership, it is prudent to have all the partners sign the agreement if the purchase or sale is outside the normal course of the partnership’s business.

• Property

For the Agreement of Purchase and Sale to be enforceable, it must comply with the Statute of Frauds, which requires that the property be adequately identified. The description of the property that is being bought and sold using OREA’s standard form Agreement of Purchase and Sale includes:

• The municipal address (street number, street, city);
• The side of the street upon which the property is located;
• The dimensions of the frontage and depth; and
• The legal description of the land (i.e. lot and plan or concession number).

Using a survey can help ensure the proper location and dimensions of the property.

• Purchase Price

For the Agreement of Purchase and Sale to be enforceable, it must comply with the Statute of Frauds, which requires that the purchase price be included or ascertainable. Whatever price is ultimately written in this section, be sure that the words and numbers coincide.  Confusion may arise where multiple amendments to the purchase price are made using the same Agreement of Purchase and Sale.  Remember that the amount of money indicated in this section is not the actual amount that the buyer must pay.  The purchase price is the starting point for which there will be adjustments (as per the statement of adjustments).  It is the adjusted amount which the buyer must ultimately pay.

• Deposit

There will also be an area to record the deposit paid by the buyer to the seller’s brokerage, which will hold it “in trust” until the terms of the agreement are met.  Once the agreement is completed, the deposit will be applied to and credited against the purchase price (as determined by the statement of adjustments).

Sometimes, the buyer will include a provision requiring that the deposit be placed in an interest-bearing account and that interest be credited or paid to the buyer on or after closing.

• Schedules

The next section is a blank area for the purchaser to identify any attached Schedules to the Agreement of Purchase and Sale which detail any special arrangements. For example, the buyer may agree to assume the seller’s existing mortgage rather than getting separate financing through a bank. The buyer may also make the sale conditional until a specified date on the happening of various events such as the sale of the purchaser’s current house, the purchaser arranging adequate financing, a home inspection being conducted to the satisfaction of the buyer, or municipal approval being obtained.

• Fixtures & Chattels

The next section typically deals with “fixtures” and “chattels”.  Fixtures are improvements made to a property that are attached or cannot be removed easily without causing damage to the property. Hot water heaters, built-in cabinets, interior doors, a dining room chandelier, and lights are examples of fixtures. Fixtures are assumed to be included in the sale of the home, unless they are specifi­cally excluded in the agreement.  While the rules for determining whether a certain item is a fixture are very confusing, some of the factors that will be used in making this determination include:

• the nature of the thing;
• the mode of attachment;
• the circumstances under which the item was attached;
• the purpose to be served by the item;
• the position of the rival parties;
• the degree of attachment to the land or building; and
• the ability to remove the item without causing serious damage to it or the land or building to which it is attached.

Chattels are moveable items of personal property contained on the property and must specifically be listed in the agreement if they are to be part of the sale of the home. For example, if the seller agrees to include a refrigerator, stove, or gardening equipment in the sale, these items must be specifically identified in the Agreement. If there is any doubt whether an item is included or excluded, it should be clearly specified in the agreement.

• Rental Items

The buyer will be asked to agree to assume rental contracts (if assignable) in respect of the property being purchased.  Classic examples of rental items include: hot water tanks, furnaces, and security monitoring systems. The price for the rental items is not included in the purchase price, but will be accounted for in the statement of adjustments.

• Dates, Searches & Requisition Date

Next, are a series of clauses dealing with relevant dates. The first of these is usually a clause establishing that the buyer’s offer will be void unless the seller accepts it before a certain date. It is not unusual for sellers to have only a few hours to consider the offer.

A deadline is also set in the Agreement for all searches to be done on the property. This is commonly referred to as the “requisition date”, which is the earliest of 3 dates:

• 30 days after a specified requisition date;
• 30 days after the date on which the conditions in the agreement are fulfilled or otherwise waived; or
• 5 days prior to completion.

Before this date, it is the buyer’s responsibility to do a number of searches to ensure there are no problems with the property. These include search­ing the registered ownership of the property through the land registry office, checking that the property complies with zoning regulations, and searching for outstanding municipal work orders, encumbrances, or builders’ liens. It is typical to see that the title search is conducted a number of days prior to closing so that, if an issue arises concerning title, there will be time to address that issue and/or extend the closing date (through mutual agreement).

The buyer and the seller also must identify a date for the closing of the transaction. This is the very important date when the sale is finalized and the buyer takes physical possession of the property.

• Conditions

Typical Agreements of Purchase and Sale establish so-called “conditions” that must be met before the sale can be completed. The party who is responsible for fulfilling the condition must use his or her best efforts to do so.

First, the buyer’s entire offer to purchase the home is usually condi­tional on the seller being the legal and registered owner of the property.

Second, if the buyer’s lawyer discovers any problems while doing the various document searches, the buyer (or the lawyer) must send a letter explaining the problem to the seller’s lawyer before the requisition dead­line. If the seller is unable to fix the problem, then the entire Agreement may come to an end unless the buyer specifically chooses to take the property with the particular defect.

Finally, the Agreement will state that, unless the buyer makes an objec­tion in writing before the requisition date, the buyer cannot complain later about any defects in the seller’s ownership of the property. For this reason, it is very important for the buyer’s lawyer to perform all the neces­sary searches to ensure there are no hidden problems that may arise at a later date.

Other clauses in the Agreement may deal with technical issues relating to future use of the property, production of documents, insurance, tax arrangements, adjustments, and spousal consent. Your lawyer or Realtor can provide a more detailed explanation of these terms.

Completing an Agreement of Purchase and Sale can be complicated and technical. Before the Agreement is final, it may change several times as the buyer and the seller negotiate its terms, and counteroffers are pre­sented. To be certain you understand all the terms, it is best to have your agreement reviewed by a lawyer before your purchase or sale of land is finalized.

• Agreement in Writing

This paragraph states that there is no agreement – oral or written – concerning the purchase and sale of the property by the parties except as set out in the Agreement of Purchase and Sale.  No representation, warranty, collateral agreement or condition affecting that agreement exists unless it is expressly included therein. Furthermore, if there is a conflict between the printed form and any clauses inserted in the agreement (including those inserted in a Schedule), the inserted clauses will govern to the extent of the inconsistency.

• Execution and Acknowledgment

In the standard form Agreement of Purchase and Sale, the legal representatives (e.g. heirs, executors, administrators, etc.) of the purchaser and seller are bound by the Agreement of Purchase and Sale.  This means that bankruptcy, death, mental incapacitation in some cases, etc. cannot allow a party to avoid their obligations under the Agreement of Purchase and Sale.  If a buyer or a seller, for example, died before closing, their estate trustee would be bound to close the transaction even if the beneficiaries did not want that to happen.

While not a legal requirement in Ontario, it is a good idea to have witnesses sign and date the Agreement of Purchase and Sale in order to establish who the parties are (this helps prevent against fraud).  Having witnesses also helps in case an issue arises concerning the mental capacity of one or more of the parties to enter into the contract.  Finally, witness testimony may become relevant if a party wants to avoid fulfilling their end of the bargain (and closing) based on misrepresentations, undue influence, duress, etc.

To deal with situations where a vendor has a spouse (e.g. common law or married) that has an interest in the property but is not on title, there is a section in the standard Agreement of Purchase and Sale requiring their consent.

When the final version of the Agreement of Purchase and Sale is accepted, whichever party accepted it must sign off. The buyer, for example, could be the last party to accept the seller’s counter-offer and would be required to sign off here. This provision was included to avoid difficulties in determining specifically when the Agreement of Purchase and Sale was finally executed.

Finally, there is an acknowledgment section that states that the parties acknowledge receiving a signed copy of the accepted Agreement of Purchase and Sale and authorize their Realtor to forward a copy to their lawyer.  This is a requirement on the brokerage under section 12 of the Code of Ethics.  This acknowledgment section also identifies the buyer and seller’s address for service of notice as well as their lawyer’s addresses, telephone and fax numbers.

written by admin \\ tags: agreement of purchase, beneficiary, contrary, judgment, legal names, marriage, marriage contract, matrimonial home, necessary steps, ontario real estate, ontario real estate association, property owners, proprietary interest, real estate association, statute of frauds, trustee, warranty

A straightforward but often misunderstood topic when buying and selling real estate is: how do Realtors get paid?  Ontario Realtors earn commissions from the purchase and sale of property. The seller’s Realtor negotiates a commission that will be paid between his or her brokerage and the buyer’s brokerage. As per section 36(1) of the Real Estate Business and Brokers Act, 2002, the commission payable to the brokerages shall either be an agreed amount or a percentage of the sale price, but not both. If a property does not sell, the seller will generally not be liable to pay anything to their and the buyer’s brokerages and Realtors.

There is no legal requirement that governs what percentages are appropriate.  So long as the Realtor fulfills his or her professional, ethical, and fiduciary duty towards his or her client, the negotiated overall commission is what usually governs the deal.

If a real estate salesperson is involved in the purchase and sale (which is the normal course), then the commission payable is further broken down between the respective brokerages and their real estate salespersons.  This may be a 75:25 allocation in favour of the real estate salesperson or a simple transaction fee (e.g. $300) that the salesperson must pay to the brokerage to facilitate the transaction.

While in most cases there is no direct cost to a buyer for their Realtor’s services, a buyer may be liable to pay for some or all of their Realtor’s commissions if they agree to it in a Buyer Representation Agreement (as discussed above).

written by admin \\ tags: brokerage, brokerages, buyer representation agreement, commissions, estate business, favour, fiduciary duty, ontario realtors, percentages, real estate lawyer, real estate salesperson, realtor, toronto real estate, transaction fee

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice on your agreement of purchase and sale or on the deposit specifically, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to review your agreement of purchase and sale or the deposit and advise accordingly.

At any time before a buyer can make an offer to purchaser property, they must sign a “Buyer Representation Agreement” with the brokerage. This is required by s. 14 of the Code of Ethics (Ont. Reg. 580/05) made under the Real Estate Business and Brokers Act, 2002. This agreement gives the brokerage the exclusive and irrevocable authority to act on behalf of the buyer for a set period of time.  At the same time, the buyer represents and warrants that they are not a party to another buyer representation (or similar) agreement. The Buyer Representation Agreement helps protect the brokerage by guaranteeing that they will get paid their commission even if the buyer engages another brokerage during the time period covered in that agreement.

Worth mentioning is that a buyer may be personally liable to pay some or all of their own brokerage’s commissions if agreed to in the Buyer Representation Agreement. This situation could arise, for example, where the buyer’s brokerage wants more in commissions than what the seller’s brokerage has offered to pay. OREA’s standard form Buyer Representation Agreement states:

“The Buyer agrees to pay directly to the Brokerage any deficiency between this amount and the amount, if any, to be paid to the Brokerage by a listing brokerage or by the seller. The Buyer understands that if the Brokerage is not to be paid any commission by a listing brokerage or by the seller, the Buyer will pay the Brokerage the full amount of commission indicated above”.

A buyer’s Realtor will typically explain this clause and accept what the listing brokerage is offering as their full commission in the Buyer Representation Agreement.

Sometimes, a buyer who signs this agreement will breach it by engaging another brokerage and concluding a deal through them. The problem here is that the buyer had an existing Buyer Representation Agreement with another brokerage and may have lied to their present brokerage by indicating that no such deal existed. The next thing the buyer realizes is that they are being sought after and perhaps even sued by the original brokerage for the commissions that should have gone to them.

Problems can arise where a buyer and a brokerage never sign a Buyer Representation Agreement.  Take the case of Stoicevski v. Nelson, 2007 CarswellOnt 8606. In that case, a buyer engaged Realtor “A” to look for properties on his behalf. No Buyer Representation Agreement was ever signed.  Realtor “A” identified numerous suitable properties, arranged inspections for the buyer, and made various offers on behalf of the buyer (which were never accepted). Four of those failed offers were made in respect of one property and all of them were accompanied by a “Confirmation of Co-operating and Representation” agreement, which indicated that Realtor “A” would receive a commission if a deal went through. The buyer, looking to save some money, engaged Realtor “B” (who would accept a lower commission) to make an offer on his behalf for that property. Using Realtor “B”, the buyer submitted an offer which was accepted. Realtor “A” then sued the buyer for lost commissions. The Ontario Superior Court of Justice found that, even though no Buyer Representation Agreement had been entered into between the buyer and Realtor “A”, the buyer was still liable to pay Realtor “A” the commission owed. The Court reasoned that the buyer’s expectation to pay Realtor “A” commissions if a deal had gone through, coupled with the buyer’s actions – namely, working with Realtor “A” (both generally and specifically with respect to the property that was ultimately purchased) and then engaging Realtor “B” to save money – constituted an unjust enrichment. This case demonstrates that, in these circumstances, the absence of a Buyer Representation Agreement may nevertheless make a buyer who engages multiple Realtors liable for commissions owed.

Overall, if a buyer is looking to get out a buyer representation agreement without the headache of litigation, they should get a written release of liability from the Realtor. Assuming this release is obtained and entered into properly, it should prove to be a good defence in case litigation arises thereafter.

written by admin \\ tags: agreement states, brokerage, buyer representation agreement, code of ethics, commissions, estate business, irrevocable authority, period of time, purchaser, Real Estate, realtor, time period

So what are the legal obligations of Realtors?  In a nutshell, they include professional, ethical, fiduciary and contractual obligations, each of which will be briefly discussed in turn.

Realtors must follow certain professional and ethical standards under the Real Estate Business and Brokers Act, 2002 and the Code of Ethics made thereunder.  Among other things, Realtors are required to:

• not disclose confidential information;
• act fairly, honestly and with integrity;
• promote and protect their clients’ best interests;
• demonstrate reasonable knowledge, skill, judgment and competence;
• not knowingly make inaccurate representations;
• use best efforts to prevent error, misrepresentation, fraud or other unethical practice;
• disclose any property interest they may have in their client’s property; and
• convey any written offer they receive to their client at the earliest practical opportunity.

Realtors, as necessary members of CREA, must also abide by CREA’s Code of Ethics.  Among other things, that Code of Ethics requires Realtors to be committed to professional and competent service, absolute honesty and integrity in business dealings, cooperating with and being fair to all, and complying with CREA’s Standards of Business Practice. Discipline proceedings and penalties for violation of the Code of Ethics are established by local real estate boards.

Realtors also have a fiduciary (special trust) relationship with their clients. This relationship imposes common-law obligations on Realtors which are separate and apart from any obligations arising under the Act or any Code of Ethics. Among other things, Realtors must maintain proper records, not disclose confidential information, act competently and in good faith, and be loyal and obedient to their clients.  Acting in good faith requires Realtors to be honest, promote their client’s best interests, and disclose conflicts of interest – either real or perceived – to their clients.  Many of these fiduciary obligations are contained in the Act, the Code of Ethics made thereunder, and CREA’s Code of Ethics.

In addition to their professional, ethical, and fiduciary obligations, Realtors have contractual obligations.  They must, for example, perform their obligations in a Listing Agreement which includes listing properties on MLS or exclusively within the brokerage and presenting all offers from potential buyers to the seller.

Individuals with complaints against Realtors may be able to take civil or criminal action against them (depending on the nature of the complaint) and can also launch a complaint under the Real Estate Business and Brokers Act, 2002 with RECO.  Part V of that Act deals with complaints, investigations, and disciplinary measures which can be taken by RECO.  If you believe you have been wronged by a Realtor, contact a lawyer to discuss your legal options.

written by admin \\ tags: legal obligations, ontario realtors, real estate lawyer, toronto real estate

As an Ontario homeowner wishing to sell your property, you will likely ask your Realtor to list it (among other things). Much of the discussion of listing the property revolves around the appropriate listing price.  Here, the Realtor will generally conduct a comparative market analysis. He or she will look up comparable homes in the nearby neighbourhood that sold recently. Based on that data, the Realtor will recommend a listing price. This is a cursory valuation and, for a formal valuation, a professional appraiser may be engaged. That being said, it is relatively rare to see professional appraisal for residential homes given the cost, time and effort involved.

From here, the seller and the listing brokerage enter into a Listing Agreement.  This is a written contract between the seller and the listing brokerage that sets out most of the duties and obligations of the relationship. It includes how the listing brokerage will market the property and how much they will be paid for their services.

The Listing Agreement will either be a Multiple Listing Service Agreement or an Exclusive Listing Agreement. Most people enter a Multiple Listing Service Agreement, since all member Realtors of the local real estate board receive information about the listing and are entitled to share the commission if they bring a purchaser to buy the property. This is often the most effective way to sell a home.

An Exclusive Listing Agreement means your home will only be offered to prospective purchasers through the brokerage that you list the property with. Other Realtors are not automatically entitled to a commission if they bring a buyer, unless your brokerage agrees to co-operate with them. This approach may take longer to find an interested purchaser.

Note that the Listing Agreement will generally include a clause requiring the seller to provide the listing brokerage with an exclusive and irrevocable right to act as the seller’s agent for a set period of time called the “Listing Period”. If that period of time exceeds 6 months, the listing brokerage must obtain the seller’s initials for the agreement to be effective during that period. The seller is required to pay the brokerage a commission (either a percentage of the sale price or a fixed fee, but not both) for any valid offer to purchase the property from any source whatsoever obtained during the Listing Period. The seller is also liable to pay the listing brokerage full commissions after the expiration of the Listing Period and within a certain negotiated time. This period is called a “Holdover Period” and typically ranges from 60 to 120 days. If an Agreement of Purchase and Sale is entered into during this Holdover Period between the seller and a purchaser introduced to the property from any source whatsoever during the listing period or shown the property during the Listing Period, then the seller is liable to pay full commissions to the listing brokerage.

After the Listing Agreement is signed, the Realtor will list the property, engage in other marketing initiatives to sell the property, and host open houses. Be sure to discuss various other forms of advertising your property – such as placing ads in newspapers and magazines, posting online classifieds, and designing and distributing brochures, flyers, and greeting cards – (and who bears the cost) with your Realtor as soon as practical.

Once a written offer has been made, the Realtor presents it to the seller and explains the terms and conditions therein. The Realtor will generally discuss negotiation strategy and proceed to negotiate the terms and conditions on the seller’s behalf.

After the property has been sold conditionally or if a firm sale has been reached (i.e. if there are no conditions), the seller’s Realtor will retrieve the deposit from the purchaser’s Realtor (if applicable) and try to ensure that that all conditions are satisfied and waived.

This generally concludes the Realtor’s involvement in helping a seller.  From here, the Realtor will forward a copy of the Agreement of Purchase and Sale to the seller’s lawyer, who gets involved to close the deal.

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A Realtor is initially engaged by a buyer to help find the right type of home at the right price.  Once a suitable home has been found, the buyer will ask their Realtor to prepare an offer, which it typically done using the Ontario Real Estate Association’s (“OREA“) standard form Agreement of Purchase and Sale. The Realtor will advise on the comparative market value of the home and discuss negotiation strategy, the responsibilities of the buyer, and various standard and non-standard terms and conditions in the agreement.

As discussed in another blog post, a Buyer Representation Agreement must be entered into at any time prior to an offer being made by the buyer’ Realtor. Also provided with the offer is OREA’s standard form Confirmation of Co-Operation and Representation. This document identifies the buyer, seller, their respective brokerages and Realtors, and the relationship between those parties. It also indicates what and how commissions are to be paid upon closing. Typically, commissions are paid by the listing brokerage to the buyer’s brokerage, and from there to the buyer’s Realtor.

When the offer is finalized and signed by the buyer, the Realtor will call the listing brokerage and verbally register an offer. From here, the Realtor will get in touch with the broker or salesperson who listed the property on MLS. Arrangements will be made between the buyer and seller’s Realtors to deliver or present the offer. Negotiations and counter-offers take place until an agreement is reached or the deal falls through.

More than likely, an offer will be agreed upon with conditions that must be satisfied for the deal to close. At this point, the property is commonly known as being “Sold Conditionally”.  Buyers will often offer to purchase provided they are able to sell their current home or arrange suitable mortgage financing. A buyer may also include a condition to buy the home subject to a satisfactory home inspection, or subject to a zoning change or other municipal approval. To be legally binding, the condition must be specifically written into the offer to purchase.

Conditional offers can effectively reduce risks for the purchaser. They are less attractive to sellers, however, and may not be accepted. For example, in “hot” real estate markets, sellers may not accept conditional offers because they don’t want to wait in uncertainty.

Once the property has been “Sold Conditionally”, the buyer may be required to provide a deposit to the listing brokerage (which is held in trust) as per the terms of the Agreement of Purchase and Sale. Although the deposit may be made by personal cheque, sellers generally request that the funds be certified or be provided a bank draft.

If the conditions are not satisfied within the timelines provided, the parties may mutually agree to extend the timeline by making a written amendment to the Agreement of Purchase and Sale. Alternatively, the buyer may waive their right to these conditions by signing a standard waiver; at this point, the parties have reached what is commonly referred to as a “Firm Deal” because there are no more conditions that must be met.

Assuming the conditions are worded properly to protect the buyer, if the conditions are not met to the buyer’s satisfaction, the offer expires and the deposit is returned in full to the buyer without deduction. In order for the deposit to be released, the buyer, seller, and their respective brokerages must sign a mutual release of liability. This releases all parties from all liabilities and claims arising from the Agreement of Purchase and Sale and directs the listing brokerage to disburse the deposit to the buyer. It may take up to 2 weeks for the buyer to receive their deposit back.

If all of the conditions are met, the buyer must sign a standard waiver indicating that they waive their rights to the conditions; once again, at this stage, the parties have reached a “Firm Deal” because there are no more conditions that must be met.

This generally concludes the Realtor’s involvement in helping a buyer purchase a home.  From here, the Realtor forwards a copy of the Agreement of Purchase and Sale to the buyer’s lawyer, who gets involved to help close the deal.

written by admin \\ tags: buyer representation agreement, buyer seller, commissions, comparative market value, confirmation, negotiation strategy, Negotiations, ontario real estate, ontario real estate association, real estate association, salesperson, suitable mortgage