It is not uncommon for there to be disputes about the condition of a property on Completion Day. It sometimes happens that there has been damage to the property since the offer was made, an appliance is missing or not working, or a hidden problem is discovered.
These disputes are easier to resolve if potential problems are identified prior to possession.
What to Expect on Closing: In the standard AREA contract in Alberta, the seller promises that “when the buyer obtains possession, the Property will be in substantially the same condition as it was in when this Contract was accepted” (4.2). Buyers cannot complain about normal “wear and tear” in an older home. The seller also warrants that the attached and included unattached goods “are in normal working order” and that the seller “is not aware of any defects that are not visible” (6.1). Sellers (and their realtor) cannot conceal or mislead buyers about the condition of the property. Normally buyers are entitled to possession at 12 noon on the Completion Day, if the Purchase Price is “fully paid” (4.1). A buyer is obligated to close unless there is major damage to the property that constitutes a “material” breach of the Contract.
What happens if there is a dispute about the condition of the property?
Normally, a buyer is not entitled to access between acceptance of the Contract and Completion Day. Buyers would be wise to negotiate terms in the Contract that allow them pre-possession walk‑throughs, and/or the insertion of hold-back clauses.
- Hold-backs: Clients are often disappointed to discover that the buyers’ lawyer is unable to unilaterally withhold part of the purchase price, until certain matters are resolved. A hold-back will only be possible where it is an additional term to the contract, or where a hold-back can be negotiated between the respective lawyers. For example, a term could be added to the contract that there is a hold-back of $1,000.00, until “the carpets are cleaned” or “the condition of the property is found to be satisfactory”.
A pre-possession walk-through provides the buyers’ lawyer more leverage in negotiating a hold-back. If a problem can be documented and brought to the attention of the sellers’ lawyer before payment of the full Purchase Price, most lawyers are reasonable in recommending a hold-back to their clients, when there is clear evidence of a problem.
2. Walk-throughs: Some damage will occur when the sellers’ move out of the property, so a pre‑possession walk‑through may not discover new problems that will exist on the Completion Day. A walk‑through the night before, or the morning of possession, can be quite helpful. Some buyers will take photographs of the property before the Completion Day, so it will be easier to demonstrate a change in the condition of the property. If a hold-back cannot be negotiated, the sellers are still protected by the warranties contained in the Contract, and would be able to pursue legal remedies to enforce their rights. Gathering evidence before possession will be useful if litigation becomes necessary.