Homebuyers should be very careful when reading property purchase agreements


thestar.com
Bob Aaron
Bob Aaron bob@aaron.ca

Posted On: Friday, November 23, 2018
What happens when there is a significant discrepancy between the way a home is described on an MLS listing, and the details in the Agreement of Purchase and Sale?

That was the issue in a court case decided earlier this year regarding a March 2015 home purchase. The buyer, Shripragas Sivasubramaniam, signed an agreement to purchase a home on Cragg Cres., in Ajax, from Yar Mohammad and Jamila Khudabakhsh for $525,000.

The Agreement of Purchase and Sale contained the standard printed clause which reads: “Upon completion, vacant possession of the property shall be given to the buyer unless otherwise provided for in this agreement.”

There were no other terms in the agreement relevant to the issue of vacant possession.

Paragraph 26 of the agreement contained the standard “entire agreement clause” which is used in virtually every purchase contract in Ontario. It reads, “This agreement … shall constitute the entire agreement between the buyer and the seller. There is no representation, warranty, collateral agreement or condition, which affects this agreement other than as expressed herein.”

Sivasubramaniam was buying the home to live in with his wife, two children and his mother. Since he was vacating his condominium, it was an important term of the contract that he would receive vacant possession.

The MLS listing for the property, however, stated: “AAA tenant.”

When the buyer’s agent presented the contract to the sellers’ agent, he was told that the tenant would be vacating on or before closing. But, during an inspection of the property by the buyer, the tenant was surprised to find out that vacant possession would be required.

At this point, the lawyers for buyer and sellers began a heated and threatening exchange of correspondence — the buyer’s lawyer insisting that the property be vacant on closing, and the sellers’ lawyer responding that the tenant would remain in possession and the buyer had to accept the tenant because of the notation in the MLS listing.

The sale did not close as scheduled on April 29, 2015, with each side accusing the other of breaching the contract. When the tenant ultimately moved out in December, the seller moved into the house with his family. On May 10, 2016, the property was re-listed for sale at $649,900, but the listing was cancelled after Sivasubramaniam registered a caution on title to prevent the resale.

Eventually Sivasubramaniam brought an application in Superior Court to determine which party breached the contract, and to force the sellers to close the transaction.

The matter came before Justice Robert Charney this past April. In his judgment, Charney noted that the fact the MLS listing stated that there was a tenant in possession was “entirely irrelevant.

“The terms with respect to vacant possession,” he wrote, “are clear and unequivocal … I have concluded that the vendors were in breach” of the contract.

The judge ordered specific performance of the agreement and that the buyers were entitled to a conveyance of the property within 60 days — or the buyer could register his own deed without the consent of the sellers.

When I did a title search last week, the sellers were still shown as the registered owners.

This case provides two valuable lessons to buyers, sellers and agents:

  • If a provision is not specifically written into the contract, it doesn’t exist.
  • The wording of the purchase agreement overrides the MLS listing or any oral promises.

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Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.

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