Buying a home in Ontario involves several important considerations. When potential buyers or sellers opt to proceed with a real estate deal, they are required to sign a contract – the Agreement of Purchase and Sale (the “APS”). It’s crucial for all parties involved to grasp the contents of the APS, including its terms and the ramifications of failing to fulfill their obligations. By preparing adequately and seeking assistance from experienced lawyers, you can ensure a smoother transaction.
This blog post will highlight the key aspects of the APS in Ontario in order to demonstrate how these agreements may impact your legal rights.
What is a Standard Contract in Ontario Real Estate?
In Ontario, realtors typically utilize the Ontario Real Estate Association (OREA) Form 100 for an APS for the majority of real estate transactions. This standardized contract is usually drafted by the buyer and then presented to the seller as an offer for purchasing the specified property. While the terms of the APS can be subject to negotiation and may undergo changes, the core topics addressed in the contract typically remain consistent.
Standard Clauses in Ontario Real Estate Contracts
Introductory Information
In every Ontario real estate contract, there are several pieces of essential information, including:
-
-
- the date the offer was made;
- the name (or names) of the buyer(s) and seller(s); and
- the address and legal description of the property that is the subject of the offer.
-
The Deposit
Typically, when an offer is accepted, a deposit is provided by the buyer. The deposit amount may vary by agreement, but it is typically 5% of the purchase price of the property. The APS will include a clause outlining the following details pertaining to the deposit:
-
-
- Deposit amount;
- The method of payment;
- Who will receive the deposit (broker, lawyer);
- How soon the deposit must be paid.
-
Irrevocability
Irrevocability refers to the circumstances under which the buyer can revoke their offer.
The APS will feature a clause stipulating the duration within which the seller must assess and accept the buyer’s offer. Throughout this period, the buyer is typically unable to retract their offer. However, if the clause specifies that the offer is irrevocable until a designated date, and the seller fails to accept the offer by that time, the deposit will be refunded to the buyer, rendering the offer null and void.
The Completion Date
The “completion date” is the date that title to the property will be transferred from the seller to the buyer. The APS will include a clause stating the date that the transaction will be completed.
Inspection
Buyers can choose to include a condition in the offer stating that it is contingent upon them obtaining a satisfactory home inspection report. Should any significant issues arise such as a water leak or mold, the buyer retains the option to withdraw from the agreement if they are unwilling to bear the expense of addressing these issues. On occasion, sellers may opt to cover the cost of rectifying the deficiencies themselves to deter the buyer from backing out of the transaction.
Financing
A financing condition in the offer renders it contingent upon the buyer(s) ability to secure financing. Typically, this provides the buyer(s) with a designated window to secure financing. This condition is important as many buyers depend on a mortgage to facilitate the property purchase. At DBS LLP, we always advise buyers to keep this condition in the APS despite having a preapproval for a mortgage as the appraisal value of the property could influence the amount of mortgage funds the lender is willing to advance ultimately affecting the ability of the buyer to close.
Rental Items
“Rental items” are items on the property that are rented from a third party and do not represent a part of the purchase price. For example, a seller may be under contract for a lease of a hot water tank.
If applicable, the APS will identify items or equipment that are not included in the purchase price and how they will be dealt with. For instance, the buyer may agree to assume the rental contract for the hot water heater, or it may be returned to the rental company.
HST
In some cases, such as when a buyer purchases a new build home, a property purchase may be subject to HST.
The APS will typically outline whether HST is payable, along with the amount of tax payable. If HST is payable, the amount of tax owing will be added to the Purchase Price, and if HST is not payable, the seller will typically certify that it is not payable on or before the completion date.
Conclusion
Contact DBS LLP’s Real Estate Group for comprehensive guidance on buying and selling residential and commercial Real Estate