A Flood & The Offer To Purchase

We were shocked and stunned to see images of the flooding in Canmore, Calgary, High River and area.  A casual conversation quickly turns to the incredible power of mother nature and the awful path of destruction.  A recent conversation resulted in a question that many sellers this week might have wondered.

"I just "sold" my home but the buyer doesn't move in for a month, week or days.  What would happen if my home was one that was flooded?"  The answer is not always Black & White, and it certainly isn't a simple answer of "this will happen". 

The standard AREA (Alberta Real Estate Association) offer to purchase that most REALTORS® in Alberta use has terms in the contract designed to address possible scenarios. Terms such as:

5. INSURANCE
5.1 The risk of loss or damage to the Property shall lie with the Seller until the Purchase Price is paid according to the terms of this Contract. If loss or damage to the Property occurs before the Seller is paid the Purchase Price, then any insurance proceeds shall be held in trust for the Buyer and the Seller according to their interests in the Property.

The seller has an obligation to deliver the property in the same condition as when the offer was accepted:

4.2 When the Buyer obtains possession, the Property will be in substantially the same condition as it was in when this Contract was accepted.

A number of things need to be determined in the event a home has been damaged by a storm, or flood.  Is it habitable?  Can it be re-mediated?  What if the buyer says "I don't want it now" or maybe they say "I still want the house, I can deal with the problems that need to be fixed"?  All of which are possible scenarios and questions that can come up.  If you find yourself in a situation such as this, you need to be in contact with your lawyer.  Ask about different options, and the pros and cons of each.

We have seen instances where the property received water damage prior to possession and the buyer still wanted to proceed.  The buyer under those circumstances may be in a position to take possession "as is" and work with the remediation direct or they may prefer to delay accepting possession and wait for full remediation of the property.  Both options have risks and benefits to either party.  Because the property is still owned and insured by the Seller, the Buyer is waiting on the Seller and the Seller's Insurance company.  As you might expect the Insurance company may not communicate with the Buyer, and their client is the Seller.

When these situations occur it is important to have open communication with your lawyer, your bank, your insurance company, and your real estate agent.  All of those parties are there to assist and guide you through a difficult period.  Concerns such as "we'll be homeless" "I can't live in a hotel forever", and "we're supposed to be relocating to___" or "what about the house we are supposed to be moving into?" can all be worked through if all parties are agreeable. 

Our condolences to those impacted by flooding in Alberta recently.  It is very saddening to see the devastation.  For information on assisting please see www.redcross.ca

 Patrick Galesloot,

Century 21 Advantage

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