5 Frequently Asked Questions About Real Estate Agreements During COVID-19*
*This article was written by Mark Weisleder of RealEstateLawyers.ca LLP
In the wake of COVID-19 there has been a lot of uncertainty—this fragility has extended to the housing market as many were either mid-deal, planning on buying or selling, or had a project underway. As real estate professionals, we have received a lot of questions regarding the pandemic and the housing market, frequently around real estate agreements and how COVID-19 has impacted such agreements. In this blog, we will answer our most frequently asked questions from both clients and Realtors, about how the pandemic has affected real estate agreements:
1. Can a buyer cancel an agreement due to COVID-19?
The simple answer is no. If a buyer cannot obtain a mortgage, goes into quarantine or the value of the property decreases, these are not acceptable excuses to cancel a real estate agreement. Either terms of an extension are agreed to, or the buyer can be sued for any deficiency the seller suffers on a resale.
2. Can a seller refuse a pre-closing visit due to being afraid of COVID-19?
If the visit is provided for in the agreement, a safe compromise should be worked out, with perhaps only one buyer visiting the home. Such buyer would be expected to wear a mask and gloves, and only enter the home for a short time (maximum 20 minutes). During such a visit, a buyer should also be required not to touch anything in the home to ensure maximum safety. Another option is for the buyer and seller to agree to a Zoom meeting where the seller goes around the entire house showing the buyer all areas of concern. A final option we have seen is when the seller arranges to vacate the property early on the closing date and have the buyer enter the property for a final inspection. This option provides both parties with a fair final inspection of the home while also leaving enough time to close.
3. Can the Government Land Registry System close down?
While this is theoretically possible, we have been assured by the Director of Titles that this will not occur since the system is being operated by staff who are working remotely. In the unlikely event that this did occur, most real estate closings could still proceed as long as the buyer had title insurance which provides gap coverage, meaning that the agreements can close as scheduled, money can be paid to sellers, keys released to buyer and registrations occurring once the system is up and running again. Gap coverage means that in the unlikely event, a lien or judgment arises in the intervening period, which could affect the title. The buyer’s title insurance policy will remove it.
4. Can a buyer or seller complete a real estate closing without visiting a lawyer in person?
The answer is yes, but not all law firms offer this service. Technically speaking there is no requirement to meet any buyer or seller in person. All document signings can be done by video conference. If a law firm is registered as a bill payee at major banks, buyers can transfer the closing down payment directly to its trust account online, so that they do not have to line up at a bank branch with a mask for an extended period of time to obtain a bank draft. For sellers, this would mean signing all documents by video conference and automatically transferring closing funds by Electronic Funds Transfer directly to the seller’s bank account after closing, the same way real estate commissions are paid after closing.
5. Do you need special clauses to protect buyers and sellers during the pandemic?
Here are three practical clauses to include in any agreement during the pandemic:
The Buyer shall pay the balance of the purchase price, subject to the usual adjustments by wire transfer.
The parties acknowledge and agree that all closing documentation can be signed electronically and forwarded by email or fax in accordance with the Electronic Commerce Act, 2000, S.O.2000,c.17
The parties agree that the keys to the property shall be left in a lock box at the property and the code to the same is to be provided to the Buyer’s lawyer in escrow pending closing of this transaction.
Otherwise, no further clauses should be added, as they do more harm than good, especially when they give buyers or sellers the right to terminate an agreement. As stated earlier, even in the remote situation that the government registration system goes down, real estate agreements can still close if there is gap coverage in place through the title insurance. Legal advice should always be obtained before any additional clauses are introduced into any real estate agreement of purchase and sale.
This article was supplied by RealEstateLaywers.ca LLP. It is being posted on the blog for information purposes only and does not constitute legal advice nor an endorsement of the author or his firm. Consumers are advised to reach out to and engage their own legal counsel regarding their specific situation. In Ontario you can find a lawyer by accessing the Law Society of Ontario’s Lawyer Referral Service.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
