Material Changes to Purchase and Sale Agreements, Explained
What is Material Change to an Agreement of Purchase and Sale?
Now and then we yank out a few bucks for just about everything—from basic survival needs to the most indulgent luxuries—for value. But, just as not everyone thinks raspberries on barbecue Pringles is divine (please don't judge us), ‘significant value’ is subjective.
As the old cliché goes, “different strokes for different folks,” and the same can be said of ‘material change.’ Think of ‘material changes’ as contractual twists and turns that may alter your position as a buyer, or as a seller, in an agreement of purchase and sale.
But first. The basics:
What is an agreement of purchase and sale?
An agreement of purchase and sale is a binding legal contract between a seller and a buyer relating to the sale and purchase of a property. Typically, t’s the agreement that a buyer and seller enter into after they have concluded negotiations on the sale and purchase of a property. For an agreement for purchase and sale of land to be legally enforceable, it has to be in writing (of course!).
The agreement for the purchase and sale provides a general breakdown addressing all the major issues.
Terms Contained in the Agreement of Purchase and Sale
Though most real estate local boards have a generally accepted standard form for Agreement of Purchase and Sale, the parties to the contract (that is, the seller and the buyer) may agree to make certain qualifications(subtractions or additions) to the contract. This is where you need a kick-a** real estate lawyer.
Unlike in the turbo-charged, digital environment we live in these days, you will actually want to read the terms and conditions of your soon-to-be-purchased product or you run the risk of selling your soul. Literally. While websites may sometimes have unnecessarily lengthy terms and conditions that may not necessarily affect your position as a one-and-done visitor, the implications of overlooking the T&C of your agreement of purchase and sale may prove quite costly when you’re looking to seal a deal.
Some must-have terms that exist in an agreement of purchase and sale are:
This one does right what it says on the label. The purchase price is a vital part of the contract as this particular consideration is what ensures that there is a title transfer between the seller and the buyer. The purchase price normally includes the taxes.
Besides the purchase price, the deposit amount to be paid by the buyer post negotiations also has to be stated in the contract.
Terms and Conditions of the Sale as outlined by the Buyer:
These are the terms under which the buyer made the offer and as they have been accepted by the seller. They form the basis of the contract.
Fixtures and Chattels:
Fixtures are those improvements that have been made to the property that are either attached or cannot be easily removed without causing some form of damage to the property. Chattels, on the other hand, are personal property present on the property that can be moved. Some examples of fixtures are chandeliers, built-in shelving, and cabinets, while some examples of chattels are refrigerators and furniture.
Fixtures are generally assumed to be part of the sale of the property unless they are excluded in the agreement for sale, but chattels must be specifically listed within the agreement if they are to be part of the sale of the property.
Title Inspection, Closing Arrangement, and Completion Date:
The inspection of title and title documents, amongst other searches, are expected to be provided for within the contract. When negotiations are complete and all necessary documents have been exchanged by the parties, the sale is considered to be finalized, after which time there is a title transfer from the seller to the buyer and possession is transferred.
So, what is a ‘Material Change’ to an Agreement of Purchase and Sale?
(Hint: It could be a Deal-breaker!)
A material change is an alteration or change that a reasonable purchaser considers significant enough to affect his decision to enter into the agreement or not. The Condominium Act, 1998, (the Condo Act) defines material change under Section74(2).
The Condo Act provides that:
“’Material change’ means a change or a series of changes that a reasonable purchaser, on an objective basis, would have regarded collectively as sufficiently important to the decision to purchase a unit or proposed unit in the corporation that it is likely that the purchaser would not have entered into an agreement of purchase and sale for the unit or the proposed unit or would have exercised the right to rescind such an agreement of purchase and sale under section 73…..”
Typically, a ‘material change’ influences the decision of the purchaser significantly, so much so that he can decide to rescind the contract upon being given notice of the act that constitutes the significant change.
This principle was addressed in the case of Lin v. Brookfield Homes (Ontario) Ltd, where the court stressed the importance of purchasers exercising caution when seeking to rescind an agreement of purchase and sale, especially when choosing to rely on the principle of ‘material change’ or considering the option of not closing on the agreed date.
What constitutes ‘material change’ depends on a ton of variables, and when things go south, the legal action that follows could dig deep financial holes in purchasers’ pockets. This is why, in all agreements of purchase and sale but especially in the case of a ‘material change’, you will want to seek the legal assistance of a seasoned Real Estate lawyer to review the options available to you.
How Does This Affect You?
It affects you if you’re looking to get involved in real estate, whether as a buyer or as a seller. You need to make certain that you’re adequately informed on the nuances that surround your agreement of purchase and sale.
Our lawyers are always ready to help you navigate the murky waters of real estate matters under Real Estate Laws. Or you can contact us directly. We are always on hand to show you the way around accessing the best professional legal services.