"The house is a mess! And the back window is broken! And they left all their garbage and an old used car in the backyard! Do something!"
What can you do when you receive this phonecall? What can we do in this situation? More importantly, is there anything we can do to prevent this situation from occurring?
To answer this question, we need to go back to the basics of real estate law. A contract for the purchase and sale of land has only three conditions: title, possession, and payment. Everything else is a warranty or representation. In other words, when the seller does not deliver title or possession the buyer is entitled to disaffirm or cancel the contract.
When there is a breach of warranty, unless the breach goes to the root of the contract, the buyer must close the deal and sue for damages. The buyer is not entitled to make an assessment of the damages and instruct their lawyer to deduct that amount from the cash-to-close. The buyer cannot unilaterally determine the amount of damages and then not pay that amount. This would in effect put the buyer in the position of judge and jury. Typically, the lawyer for the buyer is under trust conditions to pay all the money on the closing date without exception. The lawyer cannot ignore those trust conditions and unilaterally hold money back.
So, what can be done to prevent this type of problem? Where a property owner shows they are likely to cause problems you may want to include specific wording in the Real Estate Purchase Contract such as "Buyer agrees to remove old cars and garbage from backyard."
It is common practice in Calgary to schedule an inspection for the day before closing. This serves no legal purpose as there is nothing a buyer can legally do upon discovery of damages. However, it can serve a practical effect. It may induce a seller to fix things they promised to fix and generally make sure the property is in a more presentable condition. This provision is rarely seen in contracts around the Edmonton area.
Finally, should a buyer get keys to a house where there are serious problems, an immediate phone call to the lawyer may help. We can often contact the other side and put pressure on before money is released to the seller. However, the seller is still entitled to receive all of their money even if they have left the property in a state of disrepair.
All in all, it is not a happy situation when a buyer finds a property in a mess. Unfortunately, there are few immediate legal remedies available. Whatever can be done to "persuade" the seller to leave the property in great shape is the best hope for a "clean" deal.
Article reprinted with permission from:
Galbraith Law
Making the Law Work for You
Real Estate - Business - Wills & Estates
217 14925 111 Ave NW * Edmonton, AB T5M 2P6
Phone: 780.483.6111 * Fax: 780.483.6411
Toll Free 866.483.6111
Email: stan@galbraith.ab.ca
Web site: http://www.galbraith.ab.ca