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Real Estate Contracts

A contract for purchase and sale is the basic contract used in the sale of property. It defines the rights and obligations of both the seller, who is sometimes called the vendor, and the buyer.

Valid Real Estate Contracts

There are certain requirements for a real estate contract to be valid. It must:

  • be in writing
  • name the seller and buyer
  • be signed by the seller and buyer
  • include the sale price
  • specify the property being sold

The parties must have legal and mental capacity to create a contract. This means they must be of sound mind when they sign the contract. They should also be at least 18 years old.

A real estate contract is formed when there is an offer by one party and acceptance of the offer by the other. An offer can also be a counteroffer made by a party in response to a previous offer. Once the buyer and the seller both sign the agreement, it cannot be changed by one party without the other party’s written consent.

Making an Offer

When a buyer decides that they want to purchase a particular property, they can make a formal offer to purchase. It is important that buyers not be pressured into making an offer as it cannot be taken back once it is accepted. Offers to purchase are usually only open for acceptance for a specified period of time.

Standard Form Offer to Purchase

The Law Society of Saskatchewan has a standard form offer to purchase that is often used by lawyers. Real estate agents may also have a standard form that they use. This does not mean that changes cannot be made to the standard form. Clauses can be added, removed or varied.

Purchase Price

An offer must include a purchase price. It should set out how and when the amount will be paid. This includes the portion that is a deposit and amounts paid by mortgage. There are often small adjustments to the price for things like utilities and taxes depending on the possession date.

Possession Date

The possession date is when the buyer will take physical possession of the property. Everything that must be done before the property can be transferred to the buyer must be done by the possession date.

Property Included in the Offer

The offer should clearly identify the property being sold. By law, sellers are entitled to take all moveable property but must leave everything that has been attached and can no longer be easily moved. If moveable property is included in the offer, it should be noted. Whether an item will be considered permanently attached is not always clear. In order to avoid future disputes, an offer to purchase should clearly state what will be left behind.

The fact that something is screwed, nailed or bolted down may not be enough to have it classified as permanently attached. Things like the following should be specifically mentioned in the offer if they are included:

  • blinds
  • awnings
  • screen doors
  • Windows
  • attached floor coverings
  • drapery tracks, curtain rods and brackets
  • electrical, plumbing and heating fixtures and attachments
  • water softeners
  • trees and shrubs
  • garden sheds and storage sheds
  • major appliances

If there is a current surveyor's real property report and the buyer wants it included, it should also be mentioned.

Terms & Conditions of the Offer

Time Is of the Essence

A phrase like "time is of the essence in this contract" means that any dates or times in the offer must be met. These may be dates or times for accepting the offer or paying the deposit. These dates, like other provisions in the contract, may be changed with the written agreement of both parties.

There are usually many conditions included in an offer to purchase. Common ones include:

  • subject to obtaining suitable financing
  • subject to approval by a third party (for example, a parent or spouse)
  • subject to the sale of a current residence
  • subject to a satisfactory building or wiring inspection

A conditional offer gives the party imposing the condition a possible way out of the contract. A reasonable attempt must be made to meet the conditions. If the conditions cannot be met, the contract will end. This is especially important when some other event needs to occur, such as the sale of an existing home or a mortgage approval.

The offer also lists other terms applicable to the purchase of the property. If the buyer wants to inspect the home before the possession date to take measurements, for example, this should be included. If the seller has leased part of the home to a tenant and the buyer will allow the tenant to stay, this should also be stated in the offer.

Deposit

Sellers usually require a deposit for the sale of their property that is applied to the purchase price. If they have a real estate agent or lawyer, they hold the deposit in trust until the sale is completed. Real estate agents and lawyers have obligations to treat trust funds properly. The deposit shows that the buyer is committed to entering into the contract. It is returned if the offer is not accepted or if any conditions stated in the offer cannot be met. Once the conditions are met, a binding contract exists. If the buyer then decides to back out, the deposit will be lost and the buyer may be sued for breach of contract.

Accepting an Offer

When an offer to purchase is delivered, the seller should read it over carefully to ensure that all the terms and conditions are agreeable. On most standard offer to purchase forms, the acceptance is on the same form as the offer. When the offer has been signed by the buyer and accepted by the seller, a binding agreement for the sale of the property has been entered into. A seller may want to have a lawyer check an offer before accepting it.

Counteroffers

If a seller is unable or unwilling to accept all the terms of the offer, the seller can make a counteroffer. The counteroffer is usually made on a separate form from the original offer. The seller's counteroffer is an offer to sell the property on other terms. It may include some of the same terms that were in the original offer.

The counteroffer may keep everything the same except for the price. It may set out different terms, such as a later or earlier possession date or exclusion of appliances. The buyer can accept those terms or make yet another counteroffer to purchase.

It is important for both the buyer and seller to realize that the previous offer ends when a counteroffer is made. This is because it is considered a rejection of the previous offer by the party making the counteroffer.

For example, Robin places a house up for sale at a list price of $290,000. Pat puts in an offer of $280,000 and wants all the appliances included. Robin reads the offer carefully and decides that the offer is too low. Robin makes a counteroffer to sell the house for $285,000 without the appliances. Robin's counteroffer terminates Pat's original offer. Pat can accept the counteroffer, meaning the terms and conditions it contains will govern the sale. Pat can also choose to make a new counteroffer, even if it is the same as the previous offer, or walk away from the deal.

What if I Change My Mind?

An offer or counteroffer can be withdrawn at any time before the other party accepts. Offers and counteroffers come to an end when:

  • the time limit specified for acceptance has passed, if there is one
  • the offer has been rejected
  • a counteroffer is made
  • one of the parties dies before the offer is accepted

If the terms of the agreement, through no fault of either party, become impossible to perform, the contract is frustrated. Frustration ends the contract and both parties are released from their obligations. An example of what might constitute frustration is where the property is destroyed in a flood or a fire before the buyer has taken possession.

Once the offer has been accepted, there is a valid contract for sale and both the buyer and seller are legally bound by its terms. If either the buyer or the seller refuses to comply with the terms of the contract, a lawyer should be consulted. There may be legal remedies available to the injured party.

The Homesteads Act

Buyers and sellers of property in Saskatchewan must comply with The Homesteads Act. This law serves to protect a non-owning spouse's interest in their homestead. It provides that no homestead can be sold, mortgaged or leased without the consent of the spouse who is not a registered owner.

A homestead is any house that either spouse owned, where the couple lived during their relationship. Couples are considered spouses if they are married or have lived together for two years or more. There can be more than one homestead. Even if the property is not currently a family residence, compliance with the Act may still be necessary. The Act applies until the spouses are divorced or have stopped living together for a period of two years.

If the seller has no spouse, they must sign an affidavit swearing that they have no spouse. Failure to comply with the requirements of the Act may mean that the purchase agreement cannot be enforced. The owning spouse may also be liable to the non-owning spouse for damages.

How Lawyers Can Help

Read our Finding a Lawyer page for more information.

An agreement to purchase property is a contract in which both buyers and sellers accept legal obligations. Consequently, both parties should consider having a lawyer advise them in the transaction.

Lawyers can assist in interpreting the legal and financial documents involved. They can help to make the transfer of property a smooth and easy one. A lawyer can provide services such as:

  • searching the title
  • searching property records
  • making sure the buyer is getting clear title
  • registering a new mortgage
  • making sure that the mortgage money is available
  • making sure the proceeds of the sale are available to the seller

Lawyers protect the interests of the buyer or the seller of real estate. It is also possible to have the same lawyer represent both the buyer and the seller in the case of a residential real estate deal. There is a disadvantage to this type of arrangement if a conflict arises. If that happens, the buyer and seller would each have to get their own lawyer. The lawyer who earlier acted for both of them would no longer be able to act for either of them.

In Saskatchewan, lawyers are not allowed to act for both a builder or developer and a buyer in a new home transaction. This is the case even if both parties consent.

Sometimes, a real estate agent is associated with a particular law firm and may refer clients to them.

It is particularly important to seek legal advice if you are purchasing or selling property:

  • in another province
  • privately
  • on a rent-to-own or lease-to-own basis
  • that will be financed by the seller

Legal advice is also important if you are buying land to build on or buying property that you plan to do major renovations to.

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