The Current Real Estate Covid-19 Legal Situation
Residential real estate purchases and sales involve many people in Alberta each year. Given the number of transactions under way at any given time when the Covid-19 virus hit, many people started to worry. Residential Real Estate Covid-19 Corona Virus Legal Issues include potential new transactions, people negotiating contracts on new transactions, transactions currently conditional and lastly, transactions with binding contracts yet to close. While the law and situation remains in a state of flux during these times, the real estate lawyers and litigation lawyers at Kahane Law Office in Calgary Alberta remain able to help navigate your specific situation.
Please Note: The Covid-19 Corona Virus and its implications on residential real estate remains in a state of flux. Updates to this page shall occur frequently with the emergence of new information. Further, all legal issues remain situation specific. This is legal information only. For a legal opinion, please schedule an appointment with a lawyer to review the details specific to your exact situation.
Potential New Real Estate Covid-19 Transactions
While the Covid-19 virus causes concern for some people, as related to residential real estate, several people see it as an opportunity to buy property. Other people need a place to live and must buy. In addition, many people want to sell for financial or practical reasons. The following includes recent developments with respect to residential real estate and the Covid-19 Corona Virus.
Buyer Waiver Of Liability
We expect the emergence of one or two waivers of liability. First, buyers walking through a home may face a waiver of liability. For example, the waiver states that the buyer understands the government’s recommendations to limit exposure and potential transmission of the Covid-19 virus and agrees to hold the real estate agents and their brokerage harmless if the potential buyer contracts Covid-19 when viewing a home.
Seller Waiver Of Liability
Alternatively, sellers may be asked to sign a waiver of liability when they allow potential buyers to come view their home. The waiver releases the real estate agents and their brokerages harmless if the seller contracts Covid-19 from a potential buyer in their home.
Negotiating Contracts On New Transactions
Clients and potential clients ask about the following types of real estate Covid-19 clauses. As we address more questions, our intention is to regularly update this list.
Delays Due To Quarantine
In the event of a quarantine of buyer or seller, this term sets out provisions for the closing of a real estate transaction. Buyers and sellers decide if and how they wish to delay closing, the ability to grant possession or not, and any other delay related to the completion day.
Real Estate Covid-19 Extensions
Most residential real estate contracts contain provisions where time is of the essence. When contemplating potential delays, parties may include a term as above, or deal with issues as they arise. For instance, if a buyer requires additional time for completing a home inspection or securing a mortgage, the buyer and seller may agree by amendment to the contract to extend the condition day. Note, the necessity to amend the condition date prior to the passing of the original date.
Real Estate Covid-19 Postponement Of Closing
If the Alberta Land Titles Office closes, processes already in place allow for the closing to occur on time using title insurance. However, if there is a mandatory closing of banks and / or law firms, then closing cannot occur. Buyers and sellers may include a term in the contract to deal with this situation, to allow for closing once these businesses reopen.
Termination of Contract Due To Employment Issues
While buyers want the protection of such a term, sellers prefer to have security in the transaction. A real estate Covid-19 term allowing the termination of the entire contract if the buyer is laid off or terminated from their job is possible. Both buyer and seller must agree to this term for its inclusion.
Employment Termination Condition
In the alternative to the above term, this condition allows a buyer to walk away from the transaction in the event that they lose their job or are laid off (as set out in the condition).
Seller Hospitalization Term
If a seller faces hospitalization due to the Covid-19 Corona Virus, they may lack the ability to grant vacant possession to the buyer. A term, if agreed to by the buyer and seller, allows for the delay of possession, if a seller is unable to give such possession due to medical reasons. The term, if agreed to, sets out which medical conditions trigger the term.
Seller To Clean & Sanitize Home Term
People wanting possession of a new home with less risk now try to negotiate a term where the sellers pay for, have the home clean / sanitized and then provide a receipt proving the completion of the sanitizing. A term, such as this, requires a hold back clause, where funds remain with the buyer until the buyer’s lawyer receives proof of the sanitizing. If the proof is not provided, then the buyer receives those funds to pay for the work themselves.
Condition For Buyer Viewing
If people cannot go to see a home, but use virtual tours to pick a home, an option is to use a condition for the viewing of the home. This gives time to see the home, and keeps the transaction moving forward.
Transactions Currently Conditional On A Waiver
If you or a client are currently under contract but that contract is conditional, please use caution when advising non-waiver. The Alberta Real Estate Association form of contract contains clauses to protect both parties. This is the contract that real estate agents use in Alberta. For instance, a contractual requirement exists for the parties to both act in good faith. With the current situation, a potential buyer may wish to get out of the contract for fear of decreased property values, ability to close, health concerns, etc. Please consider the contractual obligations below before making real estate Covid-19 decisions.
Home Inspection Conditions
A home inspection condition allows a buyer to end obligations under the contract if they discover an issue with the home. The contract leaves this obligation to the buyer’s satisfaction. However, the contract also states that the buyer must use a licensed home inspector. As such, in order to satisfy the contractual obligations a buyer needs to hire an inspector and then decide to not waive the condition based on information in that report. Simply not waiving the condition based on the buyer changing their mind includes potential consequences. Examples of these consequences include:
- Loss of the deposit;
- Facing a lawsuit for breach of contract; and
- Responsibility for the seller’s damages.
Financing Conditions
Financing conditions also include good faith clauses for the buyer to attempt to get financing. This includes making a good faith effort to secure financing. Failing to apply for a mortgage brings the same potential damages as above.
Transactions With Binding Contracts Yet To Close Facing Real Estate Covid-19
Termination of Contract Do To Potential Value Change
Under real estate law, the change (or potential change) of the value of a property does not constitute the right of a party to terminate the agreement, unless the contract contained a specific term addressing that. The expectation remains that parties close on existing contracts. As above, closing remains possible if the Alberta Land Titles Office closes. Delays in closing for contracts, without specific terms for the forced closing of banks and / or law firms, need to occur by agreement between buyer and seller. If the parties cannot agree to a delayed possession date and / or completion day, the Alberta courts remain the venue for disputing these types of issues. In the past, parties most often come to an agreement on these issues.
Failing To Close Amidst real estate Covid-19 Concerns
People need to know that if they decide to breach a real estate contract as a buyer, the downside is not just losing their deposit. The potential damages created by a buyer’s breach include, for example:
- Loss of home value in depreciating markets;
- cost of storage;
- Seller’s actual legal fees to sue;
- Cost of insurance;
- Interest charges from mortgage lenders; and lastly
- Cost of property management, and more.
Getting Help With Real Estate Covid-19 Corona Virus Legal Issues
Need help during these trying times? Please feel free to reach us in Calgary, Alberta. It is best to email us as we currently encourage lawyers and our support team to work from home where we can. It is fast to get connected via email. Email us directly here. If you want to speak to someone, please call us at 403-225-8810 or toll-free at 1-877-225-8817.