In the present Buyer’s market, it can make good sense to include a clause to protect the Buyer.
Assume that the Seller updated the house professionally a year ago, but has now chosen to sell. The Seller wants a premium associated with the updated and now compliant property.
In a Seller’s market, there were a number of clauses shifting the risks over to the Buyer saying: “The Seller does not warrant the retrofit status etc……”.
Now, with the present market, the Buyer has a chance to include a clause for their own protection.
Legalizing Basement Apartments in Ontario
In Ontario, a “retrofit” of a basement apartment refers to upgrading the unit to meet fire code requirements, including fire-rated materials, proper exits, alarms, and electrical safety. However, this alone does not make a basement apartment legal.
To be fully legal, a basement apartment must also:
- Comply with the Ontario Building Code (especially for newly built units)
- Follow local zoning bylaws allowing secondary suites in the area
- Pass Electrical Safety Authority (ESA) inspections
- Be registered with the municipality (in some municipalities)
- Provide adequate parking, if required by the municipality
Consequences of an illegal unit include fines, insurance or mortgage issues, and reduced property value or saleability.
Basement Apartment Compliance Clause (Buyer Protection)
Here is a clause that you might consider, if you are acting for a Buyer, with a Seller who wishes to achieve the “legalized basement premium”.
“The Seller represents and warrants that the basement apartment located at the subject property is a legal unit that complies with all applicable municipal, provincial, and other governmental laws, bylaws, and regulations, including but not limited to the Ontario Building Code, Fire Code, Electrical Safety Authority (ESA) standards, and municipal zoning bylaws. The Seller further represents that any required permits were obtained and inspections passed, and that the unit is properly registered or licensed with the municipality, if applicable.
The Seller agrees to provide to the Buyer, no later than five (5) days after the date of acceptance, copies of all documentation confirming such compliance, including:
- Fire retrofit inspection certificate
- ESA inspection approval
- Building permit(s) and final inspection report(s)
- Proof of municipal registration or licensing of the basement unit
- Any zoning clearance, if required
If the Seller fails to provide such documentation or if the basement apartment is found to be non-compliant, the Buyer shall have the option to:
- Terminate this Agreement and receive a full return of all deposits paid, or
- Proceed with the transaction and receive a credit on closing of $______, representing the estimated cost of bringing the unit into compliance.
This clause shall survive and not merge on completion.”
Comment
This clause is provided to assist you in considering the inclusion. It is best to consult a lawyer practising real estate for assistance when drafting clauses.
Brian Madigan LL.B., Broker