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The most essential part of any real estate deal is the purchase and sale agreement: it is the contract which legally binds both the purchaser and the seller of property to completing the sale. Most often, your real estate agent will fill out the standardized form for the purchase and sale agreement, but should you still have a lawyer read over the document before signing?
People who hope to purchase a house must submit an offer to purchase in writing to the seller. In British Columbia, this is done with a document called the purchase and sale agreement. The document is essentially a contract through which the buyer offers to purchase the property at a certain price, and if accepted, the seller promises to give them the house by a certain date.
The document is very important in any sale or purchase of a home, as it sets out the rights of both the buyer and seller, and their responsibilities to each other. The document is usually a standardized purchase and sale contract which is published by the BC Real Estate Association and the BC branch of the Canadian Bar Association together. The standardization of the document is beneficial to both parties, as it ensures the contract is easy to understand and that no necessary information is left out.
The standard purchase and sale agreement will outline the key responsibilities of both parties for the sale of the property. This will always include important information like:
The standard agreement is used for most residential sales in British Columbia, however, an altered or different document may be used in its place. For example, in the sale of a home that is not built yet a pre-sale contract is likely to be used by a developer. For new-build custom houses, builders will use a construction contract. These agreements differ from the standard purchase and sale agreement because the purchase itself is quite different from that of a standard residential home sale. Rather than making a promise to transfer the land title to the purchaser, a builder is making a promise to construct a house on a specific plot. With a presale contract, a developer is usually promising the other party the right to purchase a unit at a certain price when their development is completed.
After signing, the responsibilities of the parties will be dictated by the terms of the agreement. It is not uncommon for offers on property to have subjects- things the buyer stipulates must be done before the completion date. This can include a professional inspection of the house, carrying out specific repairs to the house, or even the removal of fixtures such as a hot tub. However, as soon as the offer is accepted in writing, the contract becomes legally binding, meaning both the buyer and the seller have legal obligations to one another. This means, for offers including subjects, that the buyer has promised to purchase the property so long as the subjects are met by the closing date. If the subjects are not met, the buyer is allowed to walk away from the contract.
After signing but before the completion date, the seller of the home is liable for damages to the property. However, at midnight on the completion date the buyer becomes legally responsible for the home, meaning they should purchase home insurance which begins on the closing date rather than the date they plan to move in.
If, after the agreement becomes legally binding, the buyer decides to walk away from the deal they will face legal consequences. If a buyer tries to walk out on a sale, the seller can keep their deposit and sue them for damages, such as a loss in value of the property due to market conditions. The seller can also sue the buyer, forcing them to ‘perform’ the promise they made in the purchase and sale agreement. In this scenario, a court would force the buyer to go through with the sale and the buyer could potentially claim damages for the complications caused by the buyer’s breach of contract.
The process of buying, selling, or moving homes comes with extensive responsibilities and it’s easy for things to fall through the cracks. Signing a purchase and sale agreement is the same as signing any other type of contract, and it’s important to always get a professional opinion. Particularly for the sale of land, there are many restrictions that may be on the property, such as the type of structures allowed on it, which the seller might not even be aware of. Buying a home is likely the biggest purchase of your life, and your lawyer will make sure everything goes to plan. If you’d like a professional opinion on a purchase and sale agreement, contact an experienced lawyer today.