Inspection Condition and Leverage

Financial Covenants Part II: Maximum Leverage Ratio - Martin LLP

Scenario: Seller accepts buyers offer which is conditional upon an inspection (with right to remedy clause). Buyer agent states to the Listing agent the condition is satisfied but would like to remove it by way of an amendment and add in a clause that would financially impact the Seller.

QUESTION: The original terns of the agreement have been satisfied, can the listing agent refuse this request and force the deal to go forward given the written acknowledgement of satisfaction for the existing clause?

Answer:

The documentation related to an Agreement of Purchase and Sale must be in writing. If the Buyer signed something confirming satisfaction and that document was delivered to the Listing agent, then, the condition is indeed satisfied, fulfilled or waived.

If this is simply a verbal exchange between two agents, then it’s just banter. There would be no contractual change.

There is likely an obligation to complete the transaction. This is the “good faith obligation of performance”. The evidence to that effect generally would be from the Buyer’s agent, who as you can appreciate probably should have said nothing. This would be a breach of contract and the Seller would be able to exercise certain rights in respect to the breach.

So, while I’m not quite sure what you mean when you refer to the “written acknowledgement of satisfaction”, it does sound like the Buyer is stuck with this deal.

The Seller’s remedy would be:

1) terminate the transaction, by reason of the Buyer’s breach of contract,

2) take the deposit (no matter what), and

3) sue for additional provable losses over and above the deposit.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

Leave a Reply

Your email address will not be published.