Most provinces agree in general about real estate law when it comes to rescinding offers. Stock photo from iStock/Getty Images.
You have found your dream house! Except that you found out there were issues with either the house, or the house costs more than you have budgeted for.
Now you’ve put in an offer or you have signed the Agreement of Purchase and Sale. Can you now get out of it?
As with most regulations, real estate law is regulated by the province. Each province has its own real estate board and each province has its own rules and regulations when it comes to the purchase and sale of homes or condominiums.
However, most provinces agree in general about real estate law when it comes to rescinding offers or cancelling an agreement to purchase a home or condominium.
Offer to purchase a home or condominium
An offer to purchase is a legal document (usually called an Agreement of Purchase and Sale in most provinces) that contains a monetary offer, and conditions for you to purchase the home.
An offer must be accepted before it is binding on the all the parties. If the seller rejects the offer, then either the offeror can make a counter-offer or the offeror just leaves the deal.
If you have offered and the seller agreed, then as the offer is not yet signed, it can be rescinded. Be cautioned: it’s only as long as there is no formal acceptance, which in essence is a signature. However, once the offer has been signed, it’s a binding agreement to purchase the house or condominium.
Signed purchase agreement for a home or condominium
Once the agreement has been signed it’s binding, meaning that it’s legally enforceable.
There is usually an exception for buyers of newly built condominiums. Often there will be a clause in the agreement that will give you a “cooling-off” period, usually 10 days, but you need to check your individual contract to make sure how many days you have - if any.
There can also be an exception for condominium status certificates, also called “Condominium Estoppel Certificates” or “Information Certificates”. Such certificates give you a lot of financial and status information about the condominium building and your individual unit.
Many provinces, such as Alberta, Ontario and British Columbia have such certificates. Usually a clause would be inserted in the purchase agreement that would make the sale conditional on a satisfactory review of this certificate by a lawyer. Always check with your realtor about such a clause.
There is normally no such thing as a cooling-off period for purchases of houses – unless they’re condominium houses. If you sign the Agreement of Purchase and Sale ,and the seller has signed it as well, and all the clauses in the contract have been fulfilled, then it’s legally binding, meaning you cannot get out of it.
There are a few exceptions:
- The conditions haven’t been performed – there are usually conditions placed on the buyer and seller of the home. An example is a financing agreement that the buyer has to qualify for a mortgage before the agreement can be binding.
- Note there are many more conditions that can be placed on the purchase of a home. For example: home inspection, review of status certificate (this applies to condominiums and condominium-townhouses), etc.
- No consideration has been made – that often means the deposit hasn’t been paid to the seller. However, potential buyers are cautioned: you signed a contract, so there is a possibility the seller can sue you for consideration if both of you have signed the contract and you failed to perform.
- Inability to perform the contract – that means due to an “act of God”, say a flood or fire, the house was destroyed – through no fault of either party. Obviously, if there is no house, you can’t take possession of it. This is an extreme case scenario that rarely happens.
Note that if you are a buyer and you walked away, despite having paid a deposit, have signed the paperwork where all conditions were fulfilled, you will likely lose your deposit. Not only that, but if the seller suffers financial loss due to you pulling out of the binding contract, you could be sued.
The best thing to do when you are trying to cancel a real estate purchase agreement, or if a deal is in danger of falling through, is to consult with a real estate lawyer. Especially, because each case is different where home purchases are considered.
Canada Mortgage and Housing Corporation
Buying a Condominium Provincial/Territorial Fact Sheets