Question:
I have a firm offer on tenanted property. The closing date as stated is slightly over two months from now. No other clause mentions vacant possession in Schedule A since it already has the standard clause on the first page of the Agreement of Purchase and Sale.
The Listing agent reached out and indicated that the Tenant has refused to move. He mentioned Seller’s paralegal advised to move the closing date for 1 month or longer, due to waiting for the Court Order or Buyer can walk away.
I understand it couldn’t be fast at the Landlord and Tenant Board at this time. The Seller is not considering “cash for keys”.
As I understand, the Seller will be in breach of contract if they can’t provide vacant possession.
Should I talk to Buyer at this time and advise them to execute a mutual release or wait until the closing?
What compensation do the Buyers get if they sue the Seller for not providing vacant possession on closing?
Answer:
If you are a real estate agent you should be aware of the basic remedies:
- Declare the APS null and void and have your deposit returned,
- Terminate the APS and seek the return of the deposit and damages, or
- Seek to enforce the APS, through Specific Performance and damages.
The best remedy and usually most expensive remedy is Specific Performance but you will have to prove that the property was “unique” in some way. So, do your homework now!
With Specific Performance, you must leave your deposit in place, but the Trial will likely be 3 years from now. That means that your client will get the property in 2027 for the 2024 price.
You do need to know your client’s options since you have a role in their success. Nevertheless, don’t start practicing law, have your client engage a commercial litigation lawyer at the present time.
Don’t have your client sign a mutual release. Not only would that be foolhardy, it’s likely negligence.
Just when is the LTB hearing? Usually, the wait period is about 7 months.
If the Landlord cannot close because the Tenant is still there, then, this is a clear breach of contract. That’s why the Seller/Landlord should never have agreed. The Seller/Landlord should have written some options into the Agreement for their own protection:
- The Seller can terminate the APS, if the Tenant has not vacated,
- The Buyer must complete the transaction and take over the tenancy,
- The closing will be extended for so many months until the LTB evicts the Tenant, etc.
All in all, both agents need to be very careful when transacting a tenanted property.
Brian Madigan LL.B., Broker