Closing the Deal for Common Element Condominiums (POTL’s)

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We have experienced problems recently with agents not using the proper form for the condominium POTL sales and purchasing nor using the proper terms. The Agreement does not mention the condominium corporation at all.  Some Agreements refer to monthly fees without stating what they are for, while some agents do not think that they need to refer to the review of the Status Certificate and make the transaction conditional on lawyer review.  All of the above can prove fatal to the transactions and to the agent.

Purchasers have refused to close transactions because it was not disclosed that they were buying into a condominium corporation. The monthly fee can be very small, as little as $15.00 a month, but if not disclosed as a condominium, the purchaser can walk because even though the fee is small, there is always the potential liability of the condominium corporation which is unknown.

A few closings were delayed because the purchaser refused to close unless the seller paid the condominium fees for 5 years due to the failure to disclose there was a condominium corporation fee. Therefore, it is imperative that there be full disclosure of the status of the property and any condo fees, to ensure that agents are not having to reach into their own pockets.  The deal only closed when the agents agreed to pay the condominium fees for the next 5 years.

Purchaser’s agents must provide for the review of the status certificate on these condos as well.  Failure to do so could result in the purchaser being saddled with unpaid condominium fees, pending special assessments, or possible lawsuit costs pending against the corporation.  The agent would be negligent for not making the offer conditional on review by the Purchaser’s lawyer – obviously a lawyer not obtaining the Status Certificate would also be negligent.

So be sure you get all the facts on the property you are selling and buying, because many properties are now being developed as Common Element Condominiums (POTL) and sellers do not always appreciate what they are selling. The sellers naturally blame their agents when these problems arise.

Knowledge is Power, which results in more business!

If you have any questions or concerns, please feel free to contact us at your convenience.  If you have any suggestions for future topics please let us know.

Prepared by Don Travers, Solicitor with Paquette & Travers.

Contact toll free: 1-877-744-2281                                                      Online: www.paquettetravers.com

Watch for more Travers Tidbits to follow each month!

Buyer Beware! How to Avoid Being Trapped by Misrepresentation

house in mousetrap. Isolated 3D image

Remedies for Misrepresentation before Closing

Rescission (termination) is available where a material misrepresentation in the Agreement of Purchase and Sale was an inducement to the Purchaser to enter into the Agreement is established. This misrepresentation must be material and must have served as an inducement to enter into the Agreement of Purchase and Sale.

A representation which amounts to a statement of opinion, probability, expectation or exaggeration goes for nothing and although the statement may not be true, a Purchaser is not justified in placing reliance on it. Such statements have no legal significance and would not enable the Purchaser to terminate the Agreement.

Representation can be classified as an innocent misrepresentation, a negligent misrepresentation, or a fraudulent misrepresentation. A Purchaser is entitled to terminate the Agreement if the representation is material and in the Agreement, whether it is innocent, negligent, or a fraudulent misrepresentation. A misrepresentation is fraudulent when the Seller makes a false statement of fact knowing it is false, or recklessly, without caring whether it is true or false, intends to induce the Purchaser to enter into the Agreement and the Purchaser relies on it.

The “entire Agreement clause,” paragraph 26 in the standard form, will protect the Seller from an innocent misrepresentation made outside the Agreement. However, that clause will not protect a Seller for a fraudulent misrepresentation made by the Seller or the real estate agent outside the contract.

Whether the clause excludes negligent misrepresentation made by a Seller or agent and not included in the Agreement is unclear. In the case of Hayward v Mellick, a statement by the Seller’s agent described a farm contacting 65 workable acreage when in fact it was only 51. The Court of Appeal said that a negligent misrepresentation not included in the Agreement could not be relied upon by the Purchaser because it was excluded by the entire Agreement clause. However, in a subsequent case, Bear v Townsgate 1 United, casts doubt on whether the clause excludes pre-Agreement negligent misrepresentations.

Faced with a decision to close or not close, the lawyer must depend on how a court classifies the misrepresentation made by the Seller. Unfortunately, the distinctions between each class of misrepresentation is often tenuous.

If the statement in the Agreement is labelled a warranty and that statement is not true, even if discovered before closing, it does not give the Purchaser the right to terminate the Agreement. It only gives the Purchaser the right to sue for damages after closing.

If the misrepresentation is an innocent misrepresentation, and the Purchaser decides to close, the Purchaser must be made aware that they will not be able to sue for damages after closing.

Unfortunately, there is not always certainty in the law.

Knowledge is Power, which results in more business!

If you have any questions or concerns, please feel free to contact us at your convenience.  If you have any suggestions for future topics please let us know.

Prepared by Don Travers, Solicitor with Paquette & Travers Professional Corporation

Contact toll free: 1-877-744-2281                                                             Online:www.paquettetravers.com

Watch for more Travers Tidbits to follow!