You already know a 10-day cooling off period applies automatically to new build condos in Ontario, but what is buyer’s right to cancel for resale condos or homes? That cooling off period is not the only option buyers have.
Realtors and sellers can write a cooling off clause into any Ontario agreement of purchase and sale. New build homes and resale properties are not exempt — the buyer and seller can negotiate any agreement they mutually consent to, including the right to cancel.
Axess Law advises real estate brokers and home purchasers on amending agreements of purchase and sale to suit your own terms. Ask us if you encounter these common legal problems for Ontario realtors around your right to cancel.
Common Legal Dilemmas for Realtors
Buying a resale condo or home of any kind is a serious undertaking. Naturally, you’re concerned. Axess Law’s real estate lawyers get pretty typical questions from first time home buyers and veteran property buyers alike:
- do I have a right to cancel?
- what are my rights to cancel a contract?
- what is the 14-day cooling-off period? (Hint: It’s not what you think.)
What you need to know about the right to cancel real estate contracts:
Buyer Withdraws Offer
Offers to purchase that aren’t accepted by the time limit (irrevocable date) can naturally be withdrawn. As long as no consideration is given, a contract is not legal until accepted in writing and properly witnessed. Axess Law’s Greater Toronto Area real estate attorneys can answer your questions about buyer’s right to cancel.
Seller Changes Mind
A seller’s right to cancel a sale of property after acceptance is limited. Pre-acceptance, sellers can reject offers, make counter offers or take no action. Receiving a better offer after signing an agreement of purchase and sale is not legally valid grounds for sellers to cancel.
Violating home buyers’ rights to good faith dealing is certain cause to refund a buyer’s deposit in full. It could lead to legal action if the buyer pursues breach of contract remedies. Courts can require sellers to restore buyers to the monetary position they would be in if a contract had been performed. Your lesson as their real estate representative: sellers may have to pay expenses a buyer incurred thinking a home sale was set in stone.
Offer Expires Without Acceptance
Real estate sales are not necessarily concluded when the agreement of purchase and sale expires. Home sellers and real estate buyers who miss expiration dates can renegotiate the timing and conditions. While home buyers are legally bound by irrevocable periods, they are free to withdraw offers with no penalty or pursue deals on similar or new terms if no acceptance occurs.
Subject-to Conditions Not Met
Home buyers mean well. When they are trying to buy more house than they can afford, they could withdraw the offer because their mortgage loan application is rejected. To prevent buyer rejection (and seller dejection), realtors are advised not to write condition-free offers.
Buyers are legally required to follow through on a signed agreement of purchase and sale. They could lose their deposit as penalty or pay thousands or more if the next buyer fails to match their offer. Agreeing to refund buyer deposits if subjects-to are not met, or extend the time available to meet conditions, prevents expensive legal action. It may just keep buyers on your call back list.
Rent-to-Own Buyer Defaults
Although less common, rent-to-own home sales appeal to sellers who don’t mind long payoffs. When defaults occur, breach of contract applies. Typically, the buyer loses the option fee they paid for the right to rent to buy, plus any rent premiums already paid. As always, what happens in event of default depends on the contract conditions. For maximum protection, consult with Axess Law’s Ontario real estate lawyers before you prepare a contract for a rent to own purchase.
New Condo Buyer Changes Mind
Back to that “what is the 14-day cooling off period?” question. New condo buyers have 10 calendar days, not 14, to back out of an agreement of purchase and sale. You may be thinking of other consumer protection legislation when you say 14 days. Section 73 of the Ontario Condominium Act is your guide for new build or pre-construction condos.
Property is Damaged Before Possession
A carefully written agreement of purchase and sale includes everything the buyer is purchasing, right down to wired-in light fixtures, and what condition the home is in. Sellers and disgruntled tenants have been known to take anything, including the kitchen sink, or damage newly purchased property they are forced to vacate. Worst-case scenario: the home seller suffers a fire or arson before your sale closes.
Unless damages are in the thousands, going to court for compensation is not usually worth the hassle. The buyer could conclude the sale and collect from the seller’s property insurance or request repairs at the seller’s expense. They could also take back their deposit and move on.
Save yourself the trouble of explaining what happened to an aggrieved buyer by ensuring sales are for a home’s “as is condition” and confirming sellers have valid, all risks property insurance before concluding an offer to purchase.
Legal Recourse for Buyers and Sellers
A few final words on your clients’ legal options:
- Sellers who pursue an offer withdrawn before a legal contract was created are unlikely to be successful proving they were seriously inconvenienced. Withdrawing an offer after the seller signs exposes the buyer to financial liability for breach of contract. Provided the seller proves they took steps to mitigate losses, such as relisting the property and selling for fair market value, courts are agreeable to damages. Court awards generally include the difference between the offer and selling price, plus legal costs.
- Buyers who request deposits back face a similar fate. Ontario courts tend to side with sellers that time is of the essence. Sellers may agree to return a deposit if the buyer violates the agreement of purchase and sale, but most don’t. Realtors can reduce buyers’ surprise by writing what happens to the deposit into the standard agreement of purchase and sale form.
- Technically, buyers and sellers are bound by valid offers to purchase. Specific performance remedies in Ontario real estate law require buyers to complete a purchase unless they can show cause (such as coercion or forgery) not to. Practically speaking, Ontario courts typically don’t force a buyer to purchase a home they don’t want. More usually, the buyer is sued for compensation to offset a seller’s opportunity loss (tying up a home that could have been sold), loss of a deposit on a home they planned to purchase or storage and moving expenses from delayed sales.
- Latent defects the seller knew about and failed to disclose that made a home for sale uninhabitable or “inherently dangerous” can be grounds for financial compensation. Ask us before advising a buyer on their options.
- Our Ontario real estate lawyers can review your situation and advise on buyers’ rights when buying a house.
Making Realtor Referrals to Axess Law
Axess Law’s licensed real estate lawyers accept referrals from realtors anywhere in Ontario. We make online video calls with real estate purchasers or sellers 7 days a week, at your clients’ convenience. Our Greater Toronto Area real estate law professionals can meet in person and deliver documents to clients’ homes or offices. Booking appointments is as easy as using our online booking form or calling the Axess Law 647-479-0118 lawyer line, toll free to 877-552-9377.