It’s after 5 p.m. on June 30 and the home purchase transaction is complete. The new owner shows up with the keys and deed, only to be utterly shocked that the seller is still in the house — and doing nothing to pack or move.
Sadly, this is a true story, posted on a Facebook group for real estate lawyers by Navnit Dhillon Minhas, the lawyer for the buyers:
“I had a purchase today, we closed on time. Just after 5 p.m., my client tells me she went to the house and the seller is still living there. He needs another two weeks or so to move out. He has not packed at all. Anyone dealt with a situation like this before?”
There are two answers to the purchaser’s dilemma. The first is that the seller can be sued for breach of contract, and will be responsible for the buyer’s moving costs, storage, accommodation and other damages.
The second, which is an industry-wide issue, is the problematic wording of the standard form Ontario Real Estate Association agreement of purchase and sale. In describing the conclusion of the transaction, that document uses the word “closing” four times, and the word “completion” 28 times, often in the same paragraph.
The contract says that the transaction will be completed by 6 p.m. on the specified date. But due to the confusing and contradictory wording, it implies that closing takes place when the money changes hands and the deed is registered, yet completion occurs when vacant possession is delivered.
One badly-worded paragraph in the agreement, for example, talks about closing arrangements and closing funds, but the contract itself only provides for a time for completion and not for closing.
That is not, of course, how most lawyers and real estate agents believe the transaction works. The general understanding is that when the seller has the money and the buyer has the keys, the deal is done and the house is vacated. Unfortunately, that’s not the way the contract is written since it uses both “closing” and “completion.”
In the 1986 case of Cooper v. Mysak, the seller’s tenant had not finished moving out when the Land Registry office closed, and the buyer refused to close the deal. But the contract in the 1980s did not have a time deadline written into it and the seller was awarded damages for breach of contract.
But in the 1992 decision in Foord v. Smith, the home buyers were awarded $1,791 for hotel bills and extra movers’ charges after money, keys and deed had been exchanged but the sellers were still in the house. The sellers’ argument that they had until midnight to move out was rejected by the judge.
Minhas, the lawyer who wrote the Facebook post, said that she’d arranged for the seller’s lawyer to freeze the closing money until the seller moved out. In addition, since the buyer was going to demolish the house, she generously allowed the seller to remain in the property without charge for another two weeks.
I recommend buyers insert a clause in purchase agreements requiring vacant possession at the moment the deed is registered and the seller has the purchase money.