It’s past 5 p.m. on June 30 and the house purchase transaction is complete. The new owner shows up with the keys and the deed, only to be completely shocked that the seller is still in the house – and not doing anything to pack or move.
Unfortunately, this is a true story, posted on a Facebook group for real estate lawyers by Navnit Dhillon Minhas, the buyers’ lawyer:
“I made a purchase today, we closed on time. Just after 5 p.m. my client tells me that she has been to the house and the seller still lives there. It takes him about two more weeks to move. He didn’t pack at all. Has anyone ever faced a situation like this?
There are two answers to the buyer’s dilemma. The first is that the seller can be sued for breach of contract and will be responsible for the buyer’s moving, storage, accommodation and other damages.
The second, which is industry-wide, is the problematic wording of the Ontario Real Estate Association’s purchase and sale contract. To describe the closing of the transaction, this document uses the word “close” four times and the word “completion” 28 times, often in the same paragraph.
The contract states that the transaction will be completed at 6 p.m. on the date specified. But due to the confusing and contradictory wording, this implies that the closing occurs when the money changes hands and the deed is registered, but the completion occurs when the vacant possession is delivered.
A poorly drafted paragraph in the agreement, for example, talks about closing arrangements and closing funds, but the contract itself only provides for a timeframe for performance, not closing.
This is of course not how most lawyers and real estate agents think the deal works. The general understanding is that when the seller has the money and the buyer has the keys, the deal is done and the house is vacated. Unfortunately, this is not the way the contract is written since it uses both “close” and “completion”.
In Cooper v. Mysak from 1986, the seller’s tenant had not finished moving when the land registry office closed and the buyer refused to close the deal. But the 1980s contract had no time limit and the seller was awarded damages for breach of contract.
But in the 1992 decision in Foord v. Smith, the homebuyers received $ 1,791 for hotel bills and additional moving expenses after the money, keys, and deed were exchanged, but the sellers were still in the house. The sellers’ argument that they had until midnight to move was rejected by the judge.
Minhas, the lawyer who wrote the Facebook post, said she arranged for the seller’s lawyer to freeze the closing money until the seller moved out. Also, since the buyer was going to demolish the house, she generously allowed the seller to stay in the property free of charge for another two weeks.
I recommend that buyers insert a clause in purchase contracts requiring vacant possession at the time the deed is registered and the seller has the money for the purchase.