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Seller refusing final visit before closing due to COVID-19: Now what?

Tuesday, June 02, 2020 @ 11:27 AM | By Mark Weisleder

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Mark Weisleder %>
Mark Weisleder
Real estate closings are stressful even in normal times. Add in a worldwide pandemic just adds to the stress levels. Lawyers are being asked to give guidance to clients and real estate agents on issues ranging from clauses to include in real estate agreements and issues that arise during the closing process. Over the next few columns I hope to discuss some of the issues I am facing myself in my daily practice. The goal is not to become a professor of law. It is to provide practical solutions so that real estate lawyers can also work together to find ways to satisfy our legal responsibilities to our clients while also trying to make sure that agreements can close in a safe manner.

Here is one issue. An agreement is signed in February of 2020 and the closing in May 2020. The sellers are elderly. The agreement provides for a buyer visit before closing. The sellers are terrified of anyone coming into their home and refuse the visit. Now what?

Without getting into a legal discussion as to whether this is a matter of contract or a matter going to the root of title which would permit a buyer to cancel an agreement, let’s try to find a practical solution.

There was an old case called Harkness v. Cooney Harkness v. Cooney [1979] O.J. No. 4605 which most lawyers do not accept as good law which provided that even if there was no right to a pre-closing inspection, this was implied by the language of the real estate agreement itself. Virtually all printed form real estate agreements state that a buyer can only cancel an agreement if there has been substantial damage prior to closing and the reasoning behind the case was that how could a buyer know there was substantial damage unless they had a final visit?

Regardless whether this case is followed or not, the principle is important. When suggesting a compromise to my sellers, I advised that they should conduct a Zoom recording and go through the entire home and also film the outside of the home to demonstrate that in fact, no substantial damage had occurred and send this to the buyer. They also could offer the buyer the opportunity to participate in the Zoom meeting and they would go through any room the buyer wanted. If the buyer refused this as a compromise, in my opinion the buyer would be required to close.

Other lawyers have suggested a sum of money be held back on closing pending the final inspection after closing. I challenge anyone reading this article to draft a holdback clause that would work and not end up being litigated in court. How are you going to determine what damage gets paid out of the holdback? Does it include the normal scratches, dents and holes in the wall that invariably occur on any move? Who decides, the buyer lawyer, seller lawyer or third-party arbitrator? Practically speaking, this will just not work either.

What I have also advised was to have one buyer visit, with mask and gloves, for 10 to 15 minutes only, not touching anything. Really, how long should it take to determine whether there has been substantial damage to a home?

In another situation, I found a compromise where the sellers agreed to vacate the home on the day of closing by noon, the buyers were given access for a 30-minute inspection in the early afternoon and we were still able to wire the closing proceeds and close before 5 p.m.

I remember once speaking to the Victoria Island real estate board about FINTRAC issues and was told that they did not have final inspections in British Columbia at all before closing. Wouldn’t that just be a good way to solve these issues once and for all? Buyers could still sue sellers after closing if any damages were done that were not there when the contract was signed in the first place.

The key for me was working with the other lawyer to find a compromise that worked for everyone and not threatening litigation and tendering and arguing over whether someone had rights or not.

We are trying to practise law at a time when we are mindful to do everything to keep ourselves, our staff and our clients safe. Let’s follow the motto of working together as lawyers as well in finding reasonable solutions to all COVID-19 related issues.

Mark Weisleder is a senior partner with the law firm Real Estate LLP and is also an author, newspaper columnist and keynote speaker. He has practised real estate law for over 30 years and has written best-selling industry books for homebuyers and sellers, residential landlords and real estate salespeople. 

Photo credit / AndreyPopov ISTOCKPHOTO.COM

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