commission after the expiry of its listing period if the brokerage introduced a buyer to a seller and such a clause can be stipulated in a listing agreement. III. BUYER’S INSPECTION Residential When purchasing a home or commercial property the seller is required to the disclose some, but not all, physical defects. Patent defects are defects that can be easily detected though reasonable inspection and ordinary vigilance. If a buyer fails to detect a patent defect, ’ caveat emptor' - buyer beware prevails. Conversely, latent defects are defects that are not detectable through reasonable investigation. In Ontario, sellers are only liable for not disclosing latent defect if the property they sold is later found to make (1), the property unfit for habitation or poses future danger and (2) if the repair would be so expensive that it would severally reduce the property value. Failure by the seller to disclose latent defects when the aforementioned criteria are met may constitute fraud. The buyer's lawyer will examine title to the property for items such as mortgages (which are to be paid out by the seller or assumed by the buyer if agreed-upon in the purchase agreement), restrictive covenants and easements. The buyer's lawyer may also determine whether there are government work orders or deficiency notices against the property, confirm if the present use as specified may be lawfully continued and if there are any arrears of realty tax or utilities that may form a lien. The buyer will also confirm if fire insurance can be obtained for the property. Any issues arising from title and off-title searches are called requisitions and are submitted to the seller's lawyer in a requisition letter by the requisition date as stipulated in the purchase agreement.

Most acquisition transactions are financed with a lender. The buyer will typically obtain a loan from a bank or other lender and agree to register a charge or mortgage in favour of the lender against the property on closing. If the purchase agreement contains a condition for the buyer to arrange financing during the due diligence condition period, the buyer will be responsible to ensure all terms of the lender's conditions, such as an adequate appraisal, are met prior to the waiver date. In a heated real estate market, a buyer may submit an unconditional offer to the seller to gain an advantage over other prospective buyers. However, the buyer should be aware of the risks, including potential damages if the buyer cannot complete the transaction on closing, of such an offer as the offer becomes a binding contract if accepted by the seller. Commercial A buyer of a commercial property will conduct searches regarding the physical integrity of the building and soil, legal searches relating to title, executions, zoning and work orders, property tax and utility arrears, reviews of surveys (if available), similar to residential transactions. The buyer will evaluate the pertinent due diligence materials provided by the seller as aforementioned. The commercial buyer should assess all leases and related tenant files, and do off-title searches which may comprise of assessing zoning and work orders, development and cost sharing agreements, Phase 1 and 2 environmental reports, and fire and health department documents, etc. In other words, a buyer has the additional responsibility of ensuring the commercial feasibility of the property. For a leased property, a tenant acknowledgment, also known as an estoppel certificate, is routinely obtained from the commercial tenants prior to closing. These are

ILN Real Estate Group – Buying and Selling Real Estate Series

Made with FlippingBook Online newsletter