By Mark Weisleder

During this difficult time of isolation due to COVID-19, everyone must do what they can to make sure buyers and sellers can still successfully enter into and complete their real estate contracts. Here are five questions and answers about real estate deals as they apply in Ontario.



1. Has the government registration system closed down?

The online registration system has not closed down. The government registration system and lawyers have been deemed essential services by the province. However, law firms must be able to complete every part of a transaction remotely. Our law firm operates on our own IT infrastructure and is set up to deal with this ever-evolving situation, including signing clients remotely; digital transfer of funds (so clients do not have to attend the bank); and lockboxes for our sellers to promote social distancing; and paying sellers and real estate brokerages directly through EFT (no cheques to pick up). We can also hold the deposit of a real estate agreement in our trust account through a regular bill payment if any listing brokerage is not set up to do this. Please check to make sure your own law firm is also properly prepared to make sure your deal will close in time.

2. Can buyers or sellers cancel their purchase and sale agreement because of COVID-19?

Some people mistakenly believe that because of the pandemic, anyone can just turn around and cancel their real estate agreement. This is not true. It is similar to the market mini-crash in 2017 when prices fell almost 20 per cent overnight. These events do not give anyone the right to cancel an agreement. The only way a deal cannot close is if the government registration system closes down or lenders cannot fund loans, which is not the case right now.

3. What precautions can I put into an agreement right now to help make sure the deal closes?

See the clauses at the bottom of this story.

The first clause is to pay all money on closing by wire transfer only. This eliminates having to deliver any certified cheque or money order. The second is to permit all documents to be signed and delivered electronically. This will avoid having to deliver any documents by courier.

The third is for sellers to place lockboxes on their home, with the code given to the buyer lawyer at closing. This avoids having to go anywhere to pick up keys.

The final clauses deal with how to handle a delay, specifically if the government registration system goes down, to permit either an extension of the agreement or closing in escrow, which will permit buyers to move in, sellers to receive their money and protection by title insurance.

4. Should these clauses be inserted into agreements that were written in the last month but are closing next month?

Yes. All existing agreements should also be amended with these clauses to ensure that best practices of social distancing in all aspects of real estate closings is maintained, so that the deal will still close as scheduled.

5. What can people do to save deals where there are legitimate delays due to illness?

Buyers, sellers and their agents should work together with their lawyers to try and resolve any issue. Deals can be extended, on terms that are fair to everyone.

If you have any questions about how to deal with your real estate transaction during these times, or wish to schedule a webinar at your brokerage, please contact me.

We suggest the following clauses (of course each transaction is unique and if you have specific questions please contact us directly).

INSERT THE FOLLOWING CLAUSES INTO SCHEDULE A:

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 lockbox 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.

The parties herein acknowledge and agree that they are required to close this transaction notwithstanding any impacts of COVID-19, save and except the closing of the Land Registry Office(s) and all financial institutions. In the event the closing cannot occur due to a shutdown/disruption of the Land Registry System and/or banking system, then the closing date shall be automatically extended to the fifth (5th) business day following the date upon which said systems have returned to operational status and can clear funds accordingly.

5 COMMENTS

  1. Presuming you are about to close on your real estate transaction… is there any sort of test like that involved years ago to check if there was any leftover residual threat of sanctioned and disclosed removed urea formaldehyde? (Evidence that the property was or was not still impacted… ) that applies to the current real estate world to check if there are any live droplets being left behind hidden in carpet or in HVAC systems when a seller who is known to have had corona virus? Any way to “sanitize” the whole house before taking possession? Should offers include that proof of HVAC duct cleaning has been done? If seller hasn’t done, should buyers arrange for such before taking possession?
    This topic opens a whole new can of worms vis a vis the real estate world. Just something to think about.

    Carolyne L

  2. In the news today:

    “Some have wondered whether a pandemic is considered force majeure (unforeseeable circumstances or “acts of God”), which could free them of their obligations in case housing prices were to plummet in the next few weeks. Others may be facing other liquidity issues.”

    What will the mortgage providing banks do if the sale price doesn’t pass muster in required appraisal, often a requirement to update. In a plummeting market, subject to lesser sale prices in overnight crash.

    In the last giant crash the buyers had to find last-minute cash to make up the difference in order to close. This time around raising that cash might not be possible due to layoffs and shutdowns resulting in job losses, even with the newly reduced Bank of Canada rates.

    If memory serves me well going back maybe four decades, even renewing mortgages required a new appraisal and additional owner cash input. If a high ratio mortgage was in place and renewal time was present, again – owners I think it might have been prevalent particularly in Calgary, had to come up with extra cash. It was tough times.

    We might see that again. In our local market owners put the keys on the kitchen counter and moved out, often destroying the place in the process. Government bought up the houses, while blocks at a time, installed brand new appliances, carpet and paint and dumped them for cheap. Investors bought them by the dozens, literally. And agents earned six points on every one. Discounting had never been heard of yet.

    Quoted from:
    https://apple.news/AVwJglUv5TJONcb5j8NkBMQ

    Carolyne L

  3. Valuable information provided. I would encourage registrants to reach out to their Brokers and respective provincial governing bodies for further advice on the creation of relevant clauses. We should also take care to remind our clients that they should seek legal council if they are not comfortable with any part of the transaction.

  4. Generally I appreciate Mark’s comments over the years but not here.

    “Frustration” legislation has been on the books in Ontario since 1990. Ontario has never been in a position where previous non residential case law could be suggested to be applied to a residential real estate deal. I would encourage anyone looking to exit a previously ended into firm and binding agreement to contact their lawyer and discuss your options. The latest data shows around 1567 existing deals in Ontario were entered into mls systems where it is highly likely those deals would potentially be frustrated by covid19.

    The heading itself of this article would embarrass the profession should the public read it. “Protecting your Deal” what about Protecting innocent families from unskilled sales reps who did not include clauses similar to those recommended above from Jan 14th forward?

    Once again Sellers and REALTOR commissions are the only things being protected here. No different than 1990 or 2008.

    Respectfully Mark your better than this and presenting Buyer Recommendations in 2020 should be part of your opinions and suggestions going forward too!

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