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Peter Borszcz is a lawyer with Pihl & Company, specializing in Real Estate Law. This his Real Estate Law Blog is useful and interesting reading.
The Contract of Purchase and Sale
Whether buying or selling a house or condominium, the contract of purchase and sale is the most important document in the transaction. Since most parties sign this document prior to consulting a lawyer, there are a number of points to keep in mind when entering into a contract:
1. An offer is made when the potential purchaser presents a purchase contract to the seller. Usually the seller is given a set period of time to accept the offer. If the seller does not sign within that set period of time, the offer lapses and a binding contract is not formed. If the seller does sign the contract within the set period of time, without alteration, and communicates his or her acceptance to the purchaser, the offer is accepted.
2. A counter-offer, made by the seller, if made before acceptance of any prior offers, “kills” or terminates the original offer made by the purchaser. Likewise, if the purchaser counters the counter-offer made by the seller, the sellerô original counter-offer is terminated. Both parties must be aware of these potential problems that may arise by making counter-offers.
3. Most standard form contracts provide that there will be a binding contract of purchase and sale upon acceptance of the offer or counter-offer, and notification to the other party of the acceptance. Remember that a contract concerning real estate must be in writing.
4. A contract of purchase and sale must be written in such a way that the essential terms are certain. Traditionally, the essential terms have concerned the “three Pô”: parties, property and price. This trio of terms should be as precise as possible. Other essential terms, such as completion date or the particulars of a vendor take-back mortgage, should be clear enough that the terms are enforceable without further amendment. If an amendment has to be made, it must be done very carefully. A request by a party to clarify essential terms may cause a transaction to collapse, as it may, in some cases, be seen as a counter-offer. Depending on the situation, rather than amending the purchase contract, it may be better for one partyô lawyer to send a confirming letter to the other partyô lawyer. Another option may be for the one party to approach the other party directly (possibly with the assistance of a REALTOR®).
5. It is now common in most residential real estate transactions for the seller to complete a property disclosure statement. This statement provides the purchaser with more information concerning the condition of the property being purchased than one could gain simply by doing a “walk through” the property. The property disclosure statement is mandatory for multiple listing transactions; however, if the seller does not wish to complete the statement, the seller can simply “cross out” the form and sign it at the bottom. As a prospective purchaser, be careful purchasing a property from a seller that does not want to complete a property disclosure statement. Also, when writing the offer to purchase, the purchaser must make sure that the property disclosure statement is incorporated into the actual contract of purchase and sale by reference, as representations and warranties for the benefit of the purchaser. Remember, the questions and answers found it the property disclosure statement only become a part of the contract if both parties agree in writing. When so agreed, the seller must be very careful in completing the disclosure statement. The answers must be completely true. False answers may lead to legal action against the seller by the purchaser.
If you are at all in doubt about the wording or accuracy of a contract, either the buyer or seller may make it a condition of the contract that it be subject to the approval of a lawyer, before it becomes a binding agreement. This may afford both you and your REALTOR® extra peace of mind. Most lawyers will review your contract of purchase and sale without charge if they will later be involved in the conveyance process.
- Don Wilkinson is a lawyer with Wilkinson & Company in Kelowna, BC, where he practices extensively in the area of Real Estate law.
* The above article, while making every effort to make sure accuracy is maintained, is of a general nature and should not be relied upon without the reader obtaining their own legal advice. Individual circumstances vary from person to person. The author expressly disclaims liability for any loss, whether direct or consequential, flowing from the use of the above material.
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(Links are courtesy of Spagnuolo and Company at www.bcrealestatelawyers.com. Please note that legal information is not legal advice: Any information obtained through these pages should be verified independently by consultation with a lawyer. Real Estate transactions are often complicated and we recommend that a qualified lawyer be hired for any Real Estate transaction you are involved in)