There is nothing more frustrating than working extremely hard to negotiate and close a real estate deal, only to have the buyer complain afterwards about missing or broken appliances or onerous terms contained in rental items that were not explained. In order to make sure that your deals close smoothly, here are five things to remember:
1. Holding back money when something is broken or missing
A buyer has no automatic right to hold back money on closing if they find something broken or missing during their final visit to the property. My advice is to quickly obtain an estimate to fix the problem, take a picture and send it to your agent or lawyer. In my experience, lawyers are able to settle these issues, even on the date of closing, when a proper estimate is provided.
2. Be clear about what is staying behind
Be clear about everything that is to remain on the property after closing. Include mirrors, built-in appliances, television brackets and closet organizers. If a seller wants the dining room chandelier, say so but require the seller to replace it with another fixture so the buyer does not enter a dark home on the night of closing.
3. Find out the details of any rental contract
Make sure that as a listing agent, you find out the details of any rental contract to be assumed by the buyer and disclose them, especially if there are large cancellation penalties or if the buyer must continue with, for example, any home monitoring obligations. A good place to check is the gas bill, which typically includes rental charges, that could include not only the hot water tank, but also furnaces, air conditioners and entire HVAC systems that were purchased on payments.
If you are acting for a buyer, it is also important to ask for these details in advance so the buyer is not surprised after closing. I have seen buyers have to pay thousands to cancel a hot water tank rental when they wanted to switch to a tankless water solution. I have seen sellers have to buy out an entire contract when they forgot to include the item as a rental in the contract.
4. Small Claims Court is not a good answer
When buyers and sellers end up going to Small Claims Court to settle claims about appliances or rental contracts, no one wins except the lawyers or the paralegals who represent them. The process can take 18 months and will result in at least two days of missed work to attend a settlement meeting and then a trial. In addition, the decision may be published on the Internet, causing further embarrassment to the unsuccessful party.
5. A helpful clause to use
Here is a clause to assist you in making sure the seller does not remove anything that the buyer is expecting to receive on closing: “The seller represents and warrants that all existing flooring and floor coverings, drapery tracks, ceiling fans and fixtures, built-in appliances, bathroom mirror(s), heating-ventilating-air conditioning equipment, central vac and accessories and all other items secured by means of nails, screws, plumbing, wiring, ducting and related accessories that are now on the property are to be included in the purchase price except items which are leased or rented and those specifically listed herein and all shall be in working order and free from all liens and encumbrances on completion.”
By being clear and prepared before signing any real estate deal, there should be no surprises, unanticipated charges or unnecessary court proceedings after the deal closes.
Mark Weisleder is a senior partner, author and speaker at the law firm RealEstateLawyers.ca LLP. Contact him at mark@realestatelawyers.ca or toll free at 1-888-876-5529.
