When you fall in love with a property, you might be tempted to submit an offer to purchase right away. However, it is better to take your time to understand its legal implications since once the offer to purchase is signed, it cannot be changed.
What is an offer to purchase?
The offer to purchase (or promise to purchase) is a legal document in which the buyer offers a certain amount for the seller’s property or lot. It also sets out the conditions for the transaction. The conditional offer to purchase may include a list of inclusions such as fixtures and movable property. It may also be conditional on the buyer obtaining financing, the sale of an existing home, or the results of a home inspection. The buyer can also set a time limit for the seller to respond. Once the deadline has passed, the offer becomes invalid.
On the other hand, the seller has the right to accept the offer to purchase, refuse it, let it expire or even present a counter-offer with different conditions. The seller is free to receive and analyze all offers to purchase and in any order they are submitted.
The offer to purchase become firm or binding when all conditions have been met. It will then serve as a legal contract and officially precede the signing of the deed of sale.
What should you keep in mind when making a promise to purchase?
An experienced real estate broker is your best ally when it comes to completing the offer to purchase form from OACIQ (Organisme d’autoréglementation du courtage immobilier du Québec). Your broker can help you identify which points require particular attention, such as:
- The seller’s identification information that confirms that they are the legal owner and have the consent of all the other owners. This information can be found in the Quebec Online Land Register.
- The lot number ensuring that you are bidding on the right property. This information can be found on the Quebec Energy and Natural Resources website.
- The legal warranty to avoid unpleasant surprises.
- The terms of payment which include the deposit and financing, as well as any taxes to be added to the selling price, if applicable.
- The conditions of sale, such as the sale of the buyer’s current property, the buyer successfully obtaining financing, or the results of a home inspection.
- Which items should be checked before the promise to purchase becomes firm such as an up-to-date certificate of location, declaration of co-ownership, seller’s declaration or any existing leases.
Can an offer to purchase be cancelled?
To cancel a binding offer, both parties must consent to terminate the contract by signing a “mutual release.” If one party refuses to respect their commitment, the other party may demand that they sign the deed of sale, failing which a judgment can be obtained that transfers the title of ownership.
However, there is an exception: when purchasing a new house from a developer, the buyer has up to ten days to withdraw the offer but could be required to pay an indemnity up to 0.5% of the selling price.
What are the remedies in the case of a hidden defect?
A hidden (or latent) defect is a problem that existed before the new owner took possession of the house and which was unapparent at the time of purchase. The problem must be serious enough to decrease the value of the property and prevent the new owner from fully enjoying it. A pre-purchase inspection is an excellent way to avoid finding yourself in this type of situation.
If a hidden defect is found, the buyer must notify the former owner in writing as soon as possible. The Civil Code of Quebec does not mention any specific time limit to do this, but suggests, “a reasonable time limit.” The previous owner will usually have about ten days to assess the problem and take the necessary steps to resolve it. During this time, the buyer should avoid carrying out repairs to preserve their right to possible recourse for hidden defects.
If the seller does not respond to the notice or refuses to carry out the repairs, the buyer can send a formal notice demanding that the problem be rectified, failing which legal action can be taken.
Source: Centris
