Pandemic won’t cancel deals
Glacier Media - Apr 01, 2020 - Biz Releases

Photo: Contributed

If you’re in the process of buying a home but have lost income due to COVID-19, don’t assume that you’ll be able to get out of your signed purchase contract, a leading real estate lawyer has warned.

Home buyers who have paid their deposit and signed a purchase contract, who may now want to get out of the purchase since the pandemic hit, do not have a standard “Force majeure” or “Act of God” clause that will let them walk away, said Richard Bell of Bell Alliance in Vancouver. Such a clause would need to have been specifically written into the purchase contract to be applicable, which is unlikely, he said.

What’s more, if the buyer walks away from a purchase contract, even if they have lost their job and can no longer afford the home, they could be liable for much more than simply losing their deposit.

“If a buyer loses their job, well, that could happen any time,” Bell said. “If they can’t complete the deal, they become liable for at least the deposit. But there could be a further, knock-on liability, if the seller then resells for less than the original amount. The buyer who caused the original deal to collapse could also be liable for the difference.”

Bell added, “Then the question becomes, if the collapse of the original deal causes a series of deals in a chain to collapse, how remote is the original buyer’s liability? How many links in that chain is the buyer liable for? That’s when you get into a legal battle.”

A purchase contract can, however, be rendered void under the doctrine of “frustration” whereby the deal can’t go ahead and collapses under extraordinary circumstances, through no fault of either party. However, this requires the explicit agreement of both parties to the contract, explained Bell.

For example, a buyer may not want to go ahead with a home purchase due to lost income, and the vendor may equally not want to sell anymore because they can no longer afford to upsize, also due to lost income. Under such circumstances, the buyer and seller can come to an agreement whereby the contract is cancelled and the buyer’s deposit returned.

Cold feet a symptom of COVID-19

Vancouver Realtor Kevin Skipworth of Dexter Realty is seeing a lot of nervousness among buyers who have signed purchase contracts. He said he had one buyer with cold feet because of the COVID-19 pandemic and associated concerns about the economy, but after discussion with their conveyancing lawyers, the deal finally went ahead.

“There’s really nothing in the contract that allows for a buyer to walk away from a transaction because of the virus pandemic, but that doesn’t stop anybody from trying. For us as Realtors, it’s not our place to try to negotiate out of a contract. That’s where legal advice is the first place to go.

He agrees with Bell that there can be much pricier ramifications than merely a lost deposit. “Everybody seems to think you can walk away and just lose your deposit and that will be fine, but that’s not the case. Sellers can go after you for damages and more.”

Bell said he is seeing some collapsed home purchases at his law firm, but this is not currently his key concern in terms of real estate conveyancing. He pointed to rules of social distancing and quarantining making it virtually impossible to comply with legal requirements that home buyers and mortgage consumers be present in person to sign contracts, along with their government ID.

“It’s a major roadblock to closing home purchases right now,” said Bell. “Different lenders require different things. But some are literally requiring that we go round to quarantined clients’ homes and have them show their ID to us through the window. It’s ridiculous. Hopefully it will change before long, so we can do it by video. We’re trying to get this up the chain of command.”


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