As the weather is getting warmer, more people are looking at houses and putting down offers. The first step of buying a house is signing the Agreement of Purchase & Sale (APS). Unfortunately, most people do not read the APS before signing it. This often result in them agreeing to fees, deadlines, and damages of which they are not aware. Understanding the “agreement for purchase and sale of real estate” is crucial to avoid unintended commitments. It’s also difficult to get out of a signed APS – the quitting party usually need to pay for the innocent party’s entire damages – which could be the entire value of the house.
So, if I’ve convinced you to read and understand the APS before signing it, then I’ve done my job and likely saved you from a lot of future pain and losses. But just how do you read an APS with so many legal jargons? I’ll walk you through step by step.
The Parties on Title/Deed
Let’s imagine Anna wants to buy a house with her mother, Tracy. Both Anna & Tracy’s names must be listed as buyers when signing the agreement for the purchase and sale of real estate (APS) and when getting a mortgage. Although the seller usually doesn’t mind who’s on title and will agree to future changes (but may charge you additional fees for changes), the mortgage lender is typicallypicky. This usually has to do with the personal credits and other mortgage qualifications of the house owners. Mortgage lenders will often make an entire new mortgage (with a new set of fees) if the people on title were to change afterwards.
For those who find themselves puzzled by the legal terminology in the APS, seeking professional guidance is a wise step. An associate lawyer specializing in real estate transactions can offer invaluable assistance, ensuring you fully understand the document you’re signing.
There are also other personal, tax, and inheritance considerations for choosing who to put on title. Those will be addressed in a future blog.
The identification of real property
Of course, it’s essential to get the address and the size of the house correctly. What’s not so obvious is that all parts of the house must be listed. Let’s say Anna & Tracy are buying a condo that comes with a locker and a parking spot. However, on the agreement for the purchase and sale of real estate (APS), only the locker is listed. According to this alone, the seller is free to sell the parking spot to another party.
Completion Date and Title Search
Completion date is the closing date of when the property will be transferred to Anna & Tracy. They should be looking for a real estate lawyer well in advance of the closing date, and definitely at least one week before. There are many legal aspects that must be completed before the closing date, and if they look for a lawyer too late, then they are at the risk of not closing on time. The seller will usually fine the buyer a daily amount if this happens.
For essential legal strategies and advice on safeguarding future ownership rights, you can learn how to protect real estate ownership.
From the buyers’ perspective, the title search and closing date should be set as close as possible, and from the sellers’ perspective, they should be set as far as possible. The title search date is the deadline for the purchaser’s lawyer to require the seller to fix things before closing. For instance, the lawyer will often require the seller to pay out any existing debts, fix damages to property, and sometimes even correct renovations that were done without a permit in advance. Ensuring that the agreement for the purchase and sale of real estate is thoroughly reviewed and understood is crucial for both parties to protect their interests and ensure a smooth transaction. For a list of Varity Law due diligence searches that the lawyer should be performing, see our blog here.
Chattels Included
Simply put, “chattels” are things that can be removed from the house without damaging the house. They typically include apliances, washer/dryer, lamps, refrigerators, etc. The agreement for purchase and sale of real estate (APS) considers all chattels to be automatically excluded (does not come with the house purchase) unless they are specifically listed in this section.
Thus, if Anna & Tracy wants that brand new refrigerator to be included, they should ensure it’s specifically listed and identified in this section.
Fixtures Excluded
Simply put, “fixtures” are things that cannot be removed from the house without damaging the house. Examples include certain styles of chandeliers, sunroofs, decks, etc. The APS considers all fixtures to be automatically included (comes with the house purchase) unless they are specifically listed in this section.
So, if Anna & Tracy think that chandelier is hideous and use too much electricity, they should ensure it’s specifically listed as an excluded fixture.
Rental Items
Those are things that are not owned by the seller, but are rented on a long term basis. Examples include hot water tank, furnace, and refrigerators. The rent is usually a monthly fee that the house owner must pay.
So if there is an ancient & expensive hot water tank that Anna & Tracy does not want to continue renting, they need to ensure it is not listed in the rental items section. Otherwise, they are obligated to continue renting it.
In most cases, the buyers don’t have much choice if the seller is locked into a 10 or 20 years contract with the rental company. Nevertheless, this could be used as a negotiation item which may result in decreases to the purchase price.
Schedules – Conditional APS
This section, at the end of the agreement for the purchase and sale of real estate (APS), lists additional terms that are not included in a standard APS. It typically include conditions that the buyer or the seller must fulfill before this APS becomes binding.
Some useful conditions include:
- The buyer must have mortgage approval before the APS becomes binding
- The results of due diligence from the purchaser’s lawyer must be satisfactory (e.g. the buyer should not be inheriting any debts or problems with the house that were created by the seller)
- The property must be both empty and clean when given to the buyer
Conclusion
Those are just few important things to watch out for before signing a binding APS. It’s always good to get a real estate lawyer to review the APS first and make necessary changes. At Varity Law, the nominal legal fee paid for reviewing the APS can also be rolled into your future closing legal fee.
Varity Law Pro. Corp. is a business boutique law firm that provides a one stop shop for families in the areas of real estate/mortgage –> wills/estates –> family sponsorship (for foreign families). We also provide a one stop shop for our business clients in the areas of business law –> business immigration –> commercial real estate/mortgage –> corporate wills/estates. To ensure that your commercial dealings are legally sound from the start, consider completing our business law intake form .
This article is only meant to give general legal information. For legal advice on your specific legal situation, please consult a legal professional. We welcome you to book a FREE 30 mins consultation with us here.
Yi Dan (Sabrina) Ding
Principal Lawyer
Varity Law Pro. Corp.
Legal Expertise Crafted for You
Tel: 905-597-9357
Fax: 1888-620-4752
