The Homeowner is in arrears. The Banks sells the property and the new Buyer wants to close. However, after a struggle, the homeowner raises the money.
Why have a “Redemption Clause”?
There are two simple reasons for an “out” clause:
- it allows the mortgagee to look for more money from the mortgagor if the property was initially sold for less than the mortgage debt.
- it ensures that if the mortgagor somehow is allowed to redeem, the mortgagee is not liable to the purchaser.
The problem with the clause in Logozzo case was poorly worded.
Consider a better clause like this:
“Purchaser agrees that Vendor, at its sole option, has the right to terminate this agreement, if this sale has been restrained by an interlocutory or final court order, regardless whether the court order is under appeal by any party to the court proceedings. If this Agreement is so terminated, the deposit shall be returned to Purchaser without interest or penalty. In no event shall Vendor be responsible for any costs, loss or damages incurred by Purchaser due to the termination of this agreement.”
Brian Madigan LL.B., Broker