You've found the house of your dreams and want to submit an offer to purchase as soon as possible? Be careful, because if it's badly drafted, this legal document could hold many unpleasant surprises in store for you. Here's what you need to know.
The offer or promise to purchase, also known as the avant-contrat, is the basis for the future deed of sale. If it is imprecise or incomplete, it could cause a great deal of inconvenience for both buyer and seller. Here's what an offer to purchase should contain, and the key elements to watch out for.
The names of all selling owners must appear on the offer to purchase, as well as those of all those wishing to purchase the property. Their respective signatures must be affixed to the document, as well as that of the spouse in the case of sellers. For married couples, the spouse's signature is essential. For de facto spouses, it is required only if the spouse is also the owner.
The property's civic address must be mentioned, as well as the description of any land, whether adjacent or not, that forms a whole. For condos, you must also indicate the designation of parking spaces on the common or private portion.
The agreed sales price, including or excluding GST and QST, if applicable, must be clearly indicated.
Generally, the offer is conditional on obtaining a letter of commitment to lend, issued by a financial institution. However, the pandemic has caused delays, so it's wise to indicate a longer lead time than that set out in a standard offer to purchase.
We can also mention that the offer is conditional on a test for pyrite, radon or even drinking water meeting standards, and provide for who will pay for it. If applicable, the offer could also be conditional on confirmation of compliance with sanitary installation standards (septic tank, drain field, etc.).
The offer is usually conditional on a building inspection. If you are not satisfied with the deadlines set out in a standard offer, you can modify them by mutual agreement. The buyer's failure to meet these deadlines is tantamount to an outright acceptance of the building's condition.
Arrange for the buyer to review the documents to his or her satisfaction. In the case of a condo sale, this includes several documents: declaration of co-ownership, adopted by-laws, minutes of co-owners' meetings from previous years, financial statements, statement of contingency fund, special assessments to come or those due.
If there is a syndicate fee, for example for building repairs or maintenance, it's important to establish whether the buyer or seller will pay it, or whether it will be shared. Failure to agree on this point in advance can cause irritation at the time of the transaction.
The legal warranty is the recourse a buyer may have against a seller or its legal representatives, following the discovery of a hidden defect. This is a major defect existing at the time of sale, unknown to the buyer and seller, and which a prudent and diligent buyer could not have discovered. It is also a defect of such importance that the good cannot be used for the purpose for which it was purchased. It is also an element that so diminishes the value of the good that, had the buyer known about it, he would not have bought it, or would have negotiated a lower sale price.
The legal warranty is mandatory and applies in all cases, unless the seller has specifically excluded it, from the moment the property is put on the market, in particular during the brokerage mandate, the offer to purchase and finally the sale.
The seller must provide the buyer with a form on the condition of the building (plumbing, electricity, roofing, water infiltration, etc.). A false declaration has serious consequences for the seller, as he is liable for it.
The date of sale must not be imprecise or random, as this would create a gap in the seller's or buyer's commitment that a court might have to decide.
What's more, when a seller sells and buys back another property, it's important to allow sufficient time between the two transactions, as the seller won't get the funds from the sale until it's registered. This can take up to a week.
It is equally important to specify the occupancy date. If the seller wishes to sell and remain occupant of the premises for a certain period, a rent from the seller to the buyer should preferably be established in the offer. This usually corresponds to the costs that the buyer will incur during this occupancy period: insurance, taxes and condo fees, mortgage interest payments, etc.
There's a presumption that built-ins are part of the building, which is why it's important to exclude them where appropriate. Examples include custom-made furniture integrated into the property, such as pantries, light fixtures, dishwashers, etc. Rental contracts for water heaters and furnaces, or maintenance contracts (for ventilation systems, air conditioning, etc.) must also be declared in the offer to purchase.
Set a deadline for the seller to accept the offer to purchase, so as not to create a vacuum that could have unfortunate consequences.
Every situation is unique, so don't hesitate to consult your notaire, who will be able to give you advice tailored to your situation. As a real estate specialist, your notary will be your best guide.
