It is 5:00 p.m. on June 30 and the home 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 doing nothing to pack or move.
Unfortunately, this is a true story, posted on a Facebook group of real estate lawyers by Navnit Dhillon Minhas, the buyers’ lawyer:
“I had a purchase today, we closed on time. Just after 5 p.m. my client tells me that she went to the house and the seller still lives there. He needs about two 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 liable for the buyer’s moving costs, storage, accommodation and other damages.
The second, which affects the entire industry, is the problematic wording of the Ontario Real Estate Association’s standard form of purchase and sale agreement. In describing the closing of the transaction, this document uses the word “closing” four times and the word “completion” 28 times, often in the same paragraph.
The contract stipulates that the transaction will be completed by 6 p.m. on the specified date. But due to the confusing and contradictory wording, it implies that closing occurs when the money changes hands and the deed is recorded, but completion occurs when the vacant possession is delivered.
A poorly worded paragraph in the agreement, for example, talks about closing arrangements and closing funds, but the contract itself only provides for a period of performance and 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 released. Unfortunately, this is not how the contract is written since it uses both “closure” and “completion”.
In Cooper v. Mysak of 1986, the seller’s tenant had not finished moving out when the land registry office closed and the buyer refused to close the deal. But the 1980s contract had no written deadline, and the seller was awarded damages for breach of contract.
But in the 1992 decision in Foord v. Smith, the home buyers received $1,791 for hotel bills and additional moving costs 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 out was dismissed by the judge.
Minhas, the lawyer who wrote the Facebook post, said she arranged for the seller’s attorney 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 purchase price.
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