Buyer’s Last Visit to Property Before Closing

Inspection Clauses

What happens on the Buyer’s last visit prior to closing? Frequently, not very much. It seems that everyone has their own ideas as to what might or should take place.

This situation is very well-handled in several other jurisdictions, particularly where Title Insurance companies handle the transfer. Someone from the insurance company comes out, completes a final inspection in the presence of both the Seller and the Buyer, tests everything to see that it’s working as provided and the Agreement and gets the parties to sign off on the condition of the premises. If there is a problem, a holdback will be agreed upon and the deal will be closed.

A similar arrangement exists in Ontario with respect to new home sales.

However, when it comes to resale residential properties, we are back to the same rules that we have had for several hundred years:

• There is a right to attend and inspect for damage that occurred since the APS
• That right does not involve testing the appliances etc.
• There is no right to take pictures
• There is no right to bring others
• The time period is limited in duration
• There is no right to holdback funds

The difficulty is that this present arrangement is somewhat insufficient to protect the Buyer.

Inspection of appliances is not covered under many educational programs offered to real estate agents. This is the expertise of a home inspector.

So, clearly if you as a real estate agent would like to inspect, test, photograph, bring others, stay all day or holdback funds, then it would be best to set this out in the agreement, otherwise you are simply testing the goodwill of the Seller.

If there is a major difficulty, a Court has authority to decide upon a suitable holdback.

In order to deal with this type of an issue in the Agreement, consider the following clauses.

Clause 1

The parties agree that the Buyer and his authorized representatives shall have an opportunity to inspect the premises within the 48 hour period prior to completion in order to ensure that the property has not been subject to damage (save and except reasonable wear and tear) from the date of the Agreement; and to ensure that the equipment, appliances, chattels and fixtures are all in good working order as provided herein. The Buyer may conduct such tests as may be reasonably necessary in order to confirm their condition and take photographs and videos of such demonstrations. In the event that any one or more items of such equipment, appliances, chattels and fixtures are not in good working order as determined in the sole discretion of the Buyer, then, the Buyer shall be entitled to holdback the sum of $1,000.00, which shall be held in trust by the Buyer’s solicitor for a period of 90 days following completion of the transaction. The Buyer’s solicitor subject only to the direction of the Buyer shall 1) pay any invoices for repair or replacement, and 2) remit the balance to the Seller. Provided further, that the Seller shall be obligated to fulfill his obligations under the Agreement notwithstanding such holdback and shall pay the amount of any deficiency to the Buyer within 30 days following any such demand.

Clause 2

The parties agree that the Buyer and his authorized representatives:

1. Inspection: shall have an opportunity to inspect the premises within the 48 hour period prior to completion in order to ensure that the property has not been subject to damage (save and except reasonable wear and tear) from the date of the Agreement.
2. Good Working Order: to ensure that the equipment, appliances, chattels and fixtures are all in good working order as provided herein.
3. Authorization: The Buyer may conduct such tests as may be reasonably necessary in order to confirm their condition and take photographs and videos of such demonstrations.
4. Holdback: In the event that any one or more items of such equipment, appliances, chattels and fixtures are not in good working order as determined in the sole discretion of the Buyer, then, the Buyer shall be entitled to holdback the sum of $1,000.00, which shall be held in trust by the Buyer’s solicitor for a period of 90 days following completion of the transaction.
5. Release from Holdback: The Buyer’s solicitor subject only to the direction of the Buyer shall 1) pay any invoices for repair or replacement, and 2) remit the balance to the Seller.
6. Continued Liability: Provided further, that the Seller shall be obligated to fulfill his obligations under the Agreement notwithstanding such holdback and shall pay the amount of any deficiency to the Buyer within 30 days following  any such demand.

Clause 2 is exactly the same as Clause 1, except that it is broken up into paragraphs, includes some headings and is easier to read.

Clause 3

The Buyer shall have an opportunity to inspect the premises prior to closing to check for damage and to test, photograph and operate the equipment, appliances, chattels and fixtures. If there are deficiencies, the Buyer shall be entitled to an appropriate holdback.

Clause 3 is not quite as detailed and fails to specify an actual holdback amount. It’s still better than nothing and given the fact that it may appear to be innocuous, might be more easily accepted by the Seller

Clause 4

The Buyer shall have an opportunity to inspect the premises prior to closing to check for damage and to test, photograph and operate the equipment, appliances, chattels and fixtures.

Clause 4 is more likely to be signed by a Seller.

Brian Madigan LL.B., Broker

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