By Bob Aaron

The organization representing Ontario’s 70,000 Realtors has published four confusing and dangerous COVID-19 clauses for members to consider using in purchase agreements.

The Ontario Real Estate Association (OREA) is an advocacy group for Ontario’s Realtors. It publishes the standard forms used by all real estate agents in the province and has a committee that regularly updates them.



This time, however, OREA has missed the mark.

OREA’s four new “state of emergency” clauses are posted on its members-only website to “assist” parties to real estate contracts in coping with the ongoing pandemic.

Katarina Markovinovic-Praljak, OREA’s media relations chief, emailed me to confirm that its state of emergency clauses were created and vetted by the organization’s legal counsel and staff.

The OREA clauses are similar to the ones distributed by some law firms and real estate brokerages and which I wrote about last month. In an e-bulletin last month, Sidney Troister, a partner at Toronto’s Torkin Manes LLP, cautioned against their use. Troister is a director of the Law Society of Ontario and is widely respected as being one of Ontario’s leading real estate lawyers.

I fully endorse Troister’s criticism of the clauses.

The main clause on OREA’s website states that if the buyer or seller is unable to complete the transaction because the bank or institutional lender of either party or the land registry office has temporarily ceased operations, then the closing is extended to two working days after restoration of services. And if the delay exceeds a stated number of days, then either party may terminate the transaction.

In many years of practising real estate law, I can honestly state that this OREA clause is the worst real estate clause I have ever seen.

The clause is vague as to the meaning of “temporarily cease operations.” As well, it is certain that neither the banks nor the land registry offices nor any institutional lenders will be closing during the pandemic.

Even if that were to happen, trying to revive a postponed transaction within two days in the COVID-19 environment is highly unrealistic.

But the real kicker in that clause is the option it gives to either side to terminate the transaction. This would probably be the exact opposite of what one or more of the parties want. It would frustrate their expectations of closing the transaction, deprive the agents of their commission and inevitably lead to litigation.

In my view, for OREA to publish and appear to endorse a confusing clause allowing termination of a binding agreement is irresponsible in the extreme.

Two more clauses on the OREA website allow for electronic signatures on “any other documents” and “any closing documents” respecting the transaction.

For agreements of purchase and sale, this is unnecessary because it is already provided for by statute, but closing documents including deeds, mortgages and affidavits cannot be signed by electronic signatures. So-called “wet” or ink signatures are still required by banks, real estate lawyers and the Law Society, even if they are scanned or faxed.

In response to my request for comment, all Markovinovic-Praljak would say to me was that OREA’s standard forms team would be reviewing my feedback, that the clauses are template tools to assist members, and that they are encouraged to seek brokerage and legal advice prior to using them.

I’m not the only real estate lawyer who believes that the use of these OREA clauses or similar ones is extremely dangerous and could eventually lead to litigation among the contracting parties and the agents who drafted the agreements.

The COVID clauses do not inspire confidence in OREA’s reputation.

24 COMMENTS

  1. In a “FIRM” transaction there are NO escape clauses. In this CORONA VIRUS atmosphere obviously the Buyer and the Seller are aware of potential delays, so close the deal in “ESCROW” and any signing – ‘wet or dry’ can take place anytime later.

  2. I certainly have not and would not use these clauses, not because Aaron says so, simply because, in my opinion, they are not well thought out clauses.

  3. Orea is trying desperately to remain relevant since losing the ability to educate. We do not need Orea anymore. This crazy clause is just another in a long line of stupid things that Orea does.

  4. Largely real estate brokerage offices are not law firms but there are many lawyers who do practice as real estate sales reps and would be automatically privy to the insider OREA site information guidance procedures.

    Copied from today’s REM article:
    “The main clause on OREA’s website states that if the buyer or seller is unable to complete the transaction because the bank or institutional lender of either party or the land registry office has temporarily ceased operations, then the closing is extended to two working days after restoration of services. And if the delay exceeds a stated number of days, then either party may terminate the transaction.”
    ===

    Would any agent (having used the recommended clauses even so they are not mandatory) be putting OREA in danger of being added to a pending lawsuit? Including the board of directors personally?

    It could be that agents who have already used these clauses might want to revisit (even so it’s after the fact now a transaction agreed to by all parties…), and maybe have buyers and sellers visit the opinion of their chosen closing law offices, to see if the agreed to in-offer clauses can be amended pronto? A make-work project for lawyers then able to charge by the hour for extenuating circumstances. By using such clauses in offer preparation agents could be jeopardizing their clients’ positions. There are often strings of transactions tied to one another involving many participants including investors and estate sales, and out of country tied to transactions, thus providing an exponential curve of anticipated legal issues to be dealt with in short order.

    When new clauses are proffered by associations such as OREA as being acceptable for sales reps to use in compiling offers for clients, it is aways wise to run the wording by your brokerage law firm or head office legal representation before automatically endorsing such use. Your licence/ registration could be at risk if you are found culpable and didn’t do your own (office) due diligence. Where is your broker? Did he/she know offers being prepared are using such clauses?

    Client law offices mostly don’t interfere after the fact when a brokerage simply forwards the signed, sealed and delivered paperwork that arrives, or is presented by the client to the law firm after the fact.

    Most real estate brokerages don’t have in-house staff (especially skilled in legal procedures) who read offers, either. Not when written up, or even after the fact. (Recall the recent post I made about commission-billing procedures not having been addressed by the listing office because no one read the offer.) It is presumed the agents who assumed responsibility by using the clauses subject of this discussion were capable of drafting offers. Time being of the essence most buyers are not encouraged to have their legal advisor review the offer construction before being presented.

    WOW! This is interesting. Should OREA not be required to produce to the membership from where the “concept” was derived; thus the actual wording? The theory might be worthwhile, but if not supported by vetted legal jargon, even the broker of record thinking he has better things to do with his time, likely isn’t interested in babysitting OREA. It is taken for granted OREA skills are at powerful work.

    Were the OREA people thinking theoretically force majeure? in theory? even so the concept doesn’t fit the definition. The OREA forms committee itself has how many lawyers per se on-board? Surely the forms committee would have had the actual clause wordings vetted by the OREA legal team, perhaps itself victim of electronic communicating in a rush to facilitate anticipated needs of its membership, tied to Covid.

    Once again this is territorial information addressing issues at Ontario only. REM is read across Canada and around the world, and a disclaimer should perhaps accompany the article because the public, not just people in the innards of the real estate industry, around the world also reads REM. Even expats looking to return home at some point, maybe to reside in a different province not knowing OREA is local only to Ontario.

    Carolyne L 🍁

  5. These clauses were not designed to remediate today’s issues with Covid 19. All offices are working but in different scenarios. All work is being done and taken care but just may take a bit longer. This does not establish by law a right to terminate the deal but rather IF NECESSARY just extend for a few days IF NECESSARY!! Lawyers who do their due diligence should be well aware if the deals will be closing on time we’ll prior to the title search due date so as to make arrangements with ample time to take care of what is necessary to close on time. They should not be looking at the contracts a few days B4 closing then finding out something is wrong. Hence these clauses are so wrong and unnecessary with literally giving people the chance to opt out of the deal .. what if you have 5 deals closing and one decides to back out in a domino effect…these clauses are going to make a lot of people suffer and there will be many lawsuits. COVID 19 is not an excuse to get out of a deal!!!!

  6. Bravo Mr. Aaron,
    Too many sales people and brokers follow OREA and CREA suggested clauses blindly and even insists they must be used. Bunkum. Or as they say in the business, think for yourself or sink.
    I applaud your independent thinking, attitude.

  7. I’m not a lawyer, but as soon as I read those clauses, I decided to ignore them. Why would I put in a clause allowing the other party to back out of a deal? That’s not in the best interest of my client! My lawyer suggested to put in no COVID-19 clause and if there is such a problem, the lawyers could work out a closing in escrow if necessary.

  8. I also agree that the closing clause where says both party can terminate the transaction is very irresponsible and will cause a mess for all parties involved.

  9. Requiring wet signatures when there is no pandemic is illogical, considering that Ontario passed the Electronic Commerce Act in 2000, 20 years ago. Requiring wet signatures during a pandemic is irresponsible, scientifically unsafe and antiquated thinking that should be criticized and condemned. Bob, try digital signatures, I promise, not so complicated, your clients will love it and will be safer, its not all about you. OREA at least took some action to accommodate the unprecedented times we are all operating in, what have you done? Nothing, except criticize other’s attempts at solutions, while you offer none. I look forward to learning of your perfect solutions.

    • Problem often is not only the lawyer but also the lenders that rely on the lawyers to backstop any potential mortgage frauds. If everything is done electronically, how can the lawyer or the lender be sure that the actual purchaser signed the documents? Anyone with access to the purchaser’s email can access the electronic signing request emails.

      • Dear Stephen, are you suggesting disregarding both provincial and federal physical distancing guidelines? Further, lawyers are not forensic examiners. Frauds happen even when the lawyer physically meets with the client. I have not seen any actual statistical data demonstrating that wet signatures have less fraud then digital signatures. Even the CRA accepts HST Rebate Forms digitally signed. I think it is time for people to understand that wet signatures do not constitute some kind of fraud force field, there is no data to support that. In fact, digital signatures contain meta data, that wet signatures do not, that actually make it harder to commit a fraud. The future is coming, digital signatures are here to stay. We should not act like horse and buggy sales people trying to prevent cars.

    • You are way out of line. Bob did not make up the Wet signature requirement, here is the quote: ” “wet” or ink signatures are still required by banks, real estate lawyers and the Law Society, even if they are scanned or faxed.”
      It further stipulates that they can be scanned or faxed, so there no risk.

      I’m not sure if you understood the article given your response.

      • Dear Rick, I understood the article perfectly, seems you did not. Real estate lawyers have no capacity to require wet signatures, nor does the LSO, neither are law making bodies. Even attempting to require such is unreasonable and I was opining that who in their right mind would insist on a wet signature during a pandemic? I guess the answer to such is you, you would. Congratulations on doing your part to eliminate unnecessary physical contact during a pandemic.

        • Really…

          We instituted an in house physical distancing strategy that allows humans to sign documents and allow sales reps to fully comply with the plethora of legislation they are required by law to follow that ( unless legislation changes ) keeps Canada the safest place in the world to trade real estate. I mean who is going to sign a Fintrac ID form in 2020 without a face to face in person signature during a deal.

          BTW a couple of sheets of poly, sanitizer, gloves, masks and long board table work wonders.

          This hilarious straw man of “wet signatures” comes clearly from one of two sources
          1) Someone connected to an electronic doc startup
          or
          2) a Mere Posting or ibuyer or iGotANewBrokerageConcept startup

          Attempting to discredit the ethics of those presenting a contrarian opinion to your view by
          choosing the term “wet” in the context of the time of Covid19 and racial slurs that some sales reps have experienced because of their ethic heritage should not tolerated here or anywhere else.

          We have called it signing on the dotted line for decades never once used the term “wet”….disgusting!

          • I have seen some lawyers still insisting and using the term “wet.” I only saw the term in recent times, oddly enough.

            And of course everyone (not) knows that Witness signatures are no longer required, and the related background; and very rarely Corp seals are used. Do you know exactly where that guideline is stated specifically and explained in print, because there are those who apparently do not know.

            Carolyne L 🍁

  10. OREA might as well wind itself down – or make membership voluntary. Let’s sell the building & distribute the proceeds and OREA’s hefty Reserve Fund to all members past the Articling Phase.

    Oh yes, Standard Forms are necessary and approved-for-use standard clauses are a big help (let’s just say SARS-CoV-2 caught OREA off-guard because they were too busy trying to devise 5 BOLD ideas to justify staying in Business) BUT UNLESS OREA starts representing members on the ground – they are done!

    How about a Legal Defense Insurance Fund to provide Lawyers for members at RECO?

  11. Our team sought legal advice immediately upon reviewing these clauses and were advised not to use them. I did leave the lockbox clause in an offer that was presented to me for my seller but otherwise did not use any of the Covid-19 clauses.

  12. I’m afraid as soon as I read them, I tossed the suggested clauses in file G13. As a rule, I leave lock boxes on my properties in the event a transfer of key goes awry. They are coded specific to the closing day. As the OREA suggested clauses were drawn up by legal counsel, I’d say there’s more than just clauses to be re-evaluated perhaps?

  13. Great information Mr. Aaron, I fully agree. But as OREA will tell you none of their forms or pre-printed clauses are mandatory and to the disbelief of many Realtor’s do not have to be used to draw up any Agreement of Purchase and Sale.

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