Question: What happens if a Seller passes away prior to close?
Only one person on title, no spouse; can it close? Does it need to go through probate first? The property is in Ontario and first dealings exemption does not apply.
Answer:
This is very unfortunate, but it occurs quite frequently. The Seller (estate) still has an obligation to close, but they cannot. There is no one available to sign. The Buyer does not have to close, they can walk away if the choose, or sue for damages etc. In fact, this is like a lotto ticket for the Buyer. If this was a substantial risk at the outset, it could be the agent’s fault for not adding the right clauses into the Agreement of Purchase and Sale or getting the legal documents signed upfront. Also, there are simple steps to avoid this problem even in the course of the deal or even a day ahead. In addition, suddenly there’s $15,000.00 in probate fees payable on a $1 million house, which would not have been incurred had the right steps been taken.
For the Buyer (APS)
Include an extension of closing clause at the Buyer’s discretion
Include a clause to permit occupancy pending completion
Include a good faith obligation to proceed with the application for Probate as soon as possible
For the Seller (APS)
Include an extension of closing clause at the Buyer’s discretion
For the Seller (with immediate expectation of death prior to closing date)
Sign closing documents asap
Sign a Power of Attorney for assets
Sign a Will
Sign a Transfer/Deed in favour of a Joint Tenant
Sign a Trust Document where the Trustee holds title in trust for the beneficiaries
Sign a Transfer/Deed in favour of a Corporation (new)
Comment
On the assumption that the above steps are taken, then probate fees can be avoided and the transaction will close on time. It’s a very simple approach.
If the Seller’s death is a straightforward unexpected occurrence and a surprise to everyone, then, there’s nothing that can be done.
On the other hand, if someone is ill and in deteriorating health, these steps need to be taken. An Estates lawyer will attend at the hospital if need be.
Brian Madigan LL.B., Broker