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The Purchase And Sale Agreement

The Purchase and Sale Agreement

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. 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?

What is the Purchase and Sale Agreement?

If you hope to purchase a house, you must submit a written offer to the seller. In British Columbia, you do this with a document called the purchase and sale agreement. The document is a contract through which the buyer offers to purchase the property at a certain price. If accepted, the seller promises to give them the house by a certain date. 

A purchase and sale agreement 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. Usually, the BC Real Estate Association and the BC branch of the Canadian Bar Association jointly publish this document as a standardized purchase and sale contract. Standardizing the document benefits both parties. It ensures everyone can easily understand the contract and that it includes all necessary information.

What is in the Agreement?

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 purchase price 
  • The completion date 
  • Subjects to the purchase, and dates that those subjects will be removed

Most residential sales in British Columbia use the standard agreement, but you can use an altered or different document instead. For instance, a developer will likely use a standard pre-sale contract in the sale of a home that isn’t built yet. 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. Usually, a developer promises the other party the right to purchase a unit at a certain price upon completion of their development in a presale contract.

After both the buyer and seller sign it, a purchase and sale agreement becomes legally binding.

Responsibilities After Signing

Once signed, the terms of the agreement dictate the responsibilities of the parties. Offers on property often have subjects – stipulations from the buyer that the seller must fulfil 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. As soon as the seller accepts the offer in writing, the contract becomes legally binding. This means both the buyer and the seller owe legal obligations to each other. For offers that include subjects, the buyer promises to purchase the property as long as the subjects are met by the closing date. If the subjects are not met, the contract allows the buyer to walk away.

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.

What Happens if the Agreement is Broken?

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 Role of Your Lawyer

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.

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