What Is An Agreement Of Purchase And Sale?
A Purchase and Sale agreement is a written contract between the buyer and seller of a particular property. This agreement allows the buyer to establish a purchasing price, as long as terms and conditions of the agreement are met.
The agreement process begins when a buyer makes an offer on a property, this offer cannot be retracted for a certain period of time. If there are no counter offers made, and the offer is accepted by the seller, then the agreement becomes legally binding within a time-period established by the buyer. When this agreement is made, the written contract cannot be terminated unless both parties agree.
Ultimately, any agreement has to be in writing for it to be legally enforceable. To help establish a template for a purchase and sale agreement, the Ontario Real Estate Association (OREA) has created guidelines to follow. While these guidelines may provide a solid foundation, clauses of the agreement are always subject to change if both parties agree on the addition or deletion of certain aspects.
What is included in an Agreement Of Purchase and Sale
In most cases, each agreement should follow a similar structure. There is information on both parties, the buyer and seller, as well as the property that is being sold. There needs to be a section highlighting many conditions that establish any and all arrangements being agreed upon by both parties.
Furthermore, there also has to be an area in which the purchase price that the buyer is offering is clearly listed. Finally, there has to be a section that highlights the dates and time that the offer is open for. This includes when it can be revoked, and when it will become void if no action is taken.
If the sale of the property is moving forward, then there also needs to be the inclusion of the requisition and completion dates.
The requisition date grants the buyer a period to examine the property title and look into any other searches concerning the sale property. Often, these searches are completed by the buyer’s lawyer and can include:
- Searching registered ownership with Land Registry
- Ensuring the property complies with zoning regulations
- Searching for outstanding municipal orders
The completion date is an agreed upon date by both parties in which every relevant document is to be exchanged by the parties’ lawyers, and ultimately when the sale is finalized. With this date, the seller is also required to give vacant possession of the property to the buyer.
There are conditions that are included in the agreement as well. They serve as a written reminder of what has been agreed upon already, or what special arrangements may be made. Outlined by OREA, there are several common conditions. As an example, they can include:
- The buyer’s offered purchase price is fully conditional on the seller being the legal and registered owner of the property
- The buyer has the option to agree to take over the seller’s existing mortgage; as opposed to arranging their own financing options
- The seller must provide a property survey
- The buyer has the right to void the agreement if problems arise during a home inspection
- If issues arise during searches within the requisition period, a letter must be sent from the buyer to the seller’s lawyer explaining the issue (before the deadline). If the issue(s) cannot be resolved then the agreement can become void.
Things to keep in mind
Buying a property is often a long, and sometimes stressful, process. However, a purchase and sale agreement can be used to alleviate some of the headaches around real estate transactions. They secure an agreed upon price, and provide tangible deadlines that need to be met. This allows both the buyer and the seller to be clear and committed on what is expected of them going into the sale.
Legal counsel is one of the most important aspects of the real estate process. This can allow both parties to obtain legal advice in creating their purchase and sale agreement, and ensure that their opinions and terms are included. Also, it can help the buyer search into the property during the requisition period, while also allowing the seller to produce the documents needed for the closing day.
The Real Estate lawyer team at Hummingbird Lawyers LLP can sit down with you, and ease your stresses as you prepare to buy or sell your next property. Contact Hummingbird today to arrange a consultation and become one step closer to becoming a property owner.