The journey to homeownership is often seen as a thrilling adventure – from saving for a downpayment to meticulously monitoring credit scores. Looking at homes for weeks or months. Submitting an offer to purchase and successfully negotiating the best terms. Satisfying all your conditions and “firming up” your next home. Finally, the day arrives when the keys to your dream home are handed over. However, imagine the shock when you discover that the property isn’t vacant. In this blog post, we’ll delve into real-life scenarios where buyers face the unexpected challenge of a not-so-empty house and explore possible solutions.
Understanding the Contract: Before we dive into scenarios, let’s understand what the standard Agreement of Purchase and Sale (APS) contract specifies regarding vacant possession. Typically, the contract states that “upon completion, vacant possession of the property shall be given to the Buyer unless otherwise provided for in this Agreement.”
It is quite common for agents to insert an additional term in the Schedule A of the contract that states that the sellers will “leave the premises with vacuumed carpets and broom cleaned flooring. Further, any exterior landscaping, including but not limited to, weeding of gardens and lawn cutting to be maintained prior to completion date.”
Sometimes a homeowner might have left over building supplies that the buyer may benefit from keeping with the house. Examples would include left over flooring materials or touch up paint. These items should be specifically listed in the APS.
Scenario 1: Seller Left a Mess:
In some instances, sellers may leave behind garbage or unwanted items, violating the terms of vacant possession. This of course is very inconsiderate and burdens the buyer will additional work and costs. While legally actionable, it’s often more practical to communicate through real estate agents to resolve the issue amicably. In certain cases, our team has even volunteered to help buyers clean up the mess, minimizing additional costs and stress.
Scenario 2: Seller Fails to Remove Belongings:
Sellers may underestimate the time required to pack or face weather-related obstacles, leading to incomplete removal of personal items. It’s crucial to address this issue before closing, negotiating terms in the contract allowing the seller to return at an agreed-upon time. Without such an agreement, buyers can refuse, potentially charging the seller for any associated disposal costs.
Scenario 3: Tenant Occupied Property:
Purchasing a home that is tenant occupied comes with a whole different set of risks and considerations. Firstly, it is important to understand the rights of both the tenants and the landlords under the Residential Tenancies Act, 2006. Of relevance in this scenario, is understanding how a Tenancy Agreement can be terminated by the Landlord. It should be stated that a Landlord can not evict a Tenant simply because they wish to sell the property. The only relevant acceptable method for a Landlord to end a Tenancy is if the Landlord (or immediate family member) wishes to personally occupy the property. This is obviously not the case when the Landlord wishes to sell the property. In such a situation the Seller has the right to market the property for sale and the Tenant must cooperate, for example they must allow entry of the property to prospective buyers provided that 24 hours written notice is provided. It is only after an Agreement of Purchase and Sale has been established between the seller and buyer, and provided that the buyers (or immediate family) intends to personally occupy the home, may the Landlord, under the direction of the buyers, issue a N12 Notice to end tenancy. It should be further noted in these situations that the Landlord is responsible to compensate the Tenant an amount equal to one month’s rent and provide a termination date greater than 60 days and be on the last day of the rental billing cycle.
Even when the above measures are adhered to, we have experienced situations where the Tenant has simply refused to vacate the house and they are still in the home on the day of closing. This can be a nightmare situation for a buyer, with the buyers inheriting unwanted tenants and having no home of their own to live. It can even have a negative impact on their ability to secure financing on day of closing. In Canada the minimum deposit amount is 5% for a purchase that is a buyers personal residence. For investment properties however the minimum deposit jumps to 20%. If on day of closing the Tenant hasn’t vacated, then the buyer’s lender is likely to refuse advancing the funding on closing and now all of a sudden the Buyer may be liable for breach of contract for failing to close, all due to a stubborn Tenant who refused to leave.
To mitigate risks associated with tenant-occupied properties, it’s crucial to include protective terms in the APS. This may involve specifying the issuance of an N12 Notice to the Tenant and outlining procedures in case the tenants haven’t vacated by the scheduled completion date. These terms could include postponing the sale or rendering the transaction null and void.
A piece of advice for all prospective homebuyers is to conduct a final walkthrough a day or two prior to the transaction completion date. This proactive step ensures that the property is indeed vacant, allowing buyers to address any last-minute issues before the closing day. By personally inspecting the premises, buyers can avoid unexpected surprises and ensure a seamless transition into their new home. This simple precautionary measure adds an extra layer of confidence and peace of mind to the already exhilarating process of becoming a homeowner.
The excitement of closing day can quickly turn into a nightmare if the property isn’t vacant. By understanding the contractual terms and negotiating protective clauses, buyers can navigate these unexpected situations with greater ease. It’s essential to communicate openly with all parties involved and seek amicable solutions to ensure a smooth transition into your new home.