Article: Be careful how you draft repair clauses in real estate agreements.
Most home sale deals are conditional on the buyer being satisfied with an inspection. If the inspector finds problems that are big enough, the buyer usually wants them corrected in order to go through with the deal.
As the following case shows, if you are not careful about how you word the repair clause, you might end up in court.
In June, 2004 Mark Rosenhek agreed to pay Elizabeth and Angelo Breda $1.995 million for their house on Doncliffe Dr. in Toronto. The Bredas had built the home in 1997 and lived there for seven years before putting it up for sale.
The agreement was conditional on a home inspection. The home had two spots where the roof was flat, not sloped and the inspector noticed that water was pooling on the flat roof area. He noted the pooling could later lead to leaks.
There were a few other small items identified in the inspection, including a broken window, flue caps for the chimney and some minor electrical repairs. The parties revisited the sale agreement and Rosenhek signed a waiver that said the deal would proceed as long as the Bredas repaired the deficiencies before closing.
The deal closed in September, 2004. Neither Rosenhek, nor his lawyer, asked before closing if the repairs had been made. After he moved in, Rosenhek did notice when looking out a bedroom window that water was ponding on the flat roof.
He did not contact the Bredas for three years when a leak appeared in the dining room ceiling beneath the flat root. Rosenhek got a repair quote which was more than $20,000 to replace the flat roofs with a sloping roof. He sued the Bredas for the cost.
In a June, 2012 decision Judge Laurence Patillo of the Ontario Superior Court decided that any repair obligations ended when the deal closed. It was up to the buyers to inquire about the status of the repairs and make any complaints on or before closing.
He accepted the Bredas’ evidence that agreed-upon repairs had been completed before closing.
Sellers, buyers and real estate agents are sometimes confused about how to deal with repair obligations. The best way is to get an estimate and give the buyer a credit for the amount on closing. Let the buyer fix it after closing. Otherwise, there are almost always arguments over whether the work was done correctly.
Buyers are also often mistaken, thinking that they can hold back money on closing if repairs are not completed as promised. In most cases, the buyer has to close and sue for the cost of repairs later. If you want the ability to hold back money, then a clause must be inserted into your contract in the first place that says specifically that money will be held back until both parties, acting reasonably, determine whether the repairs have been adequately completed.
Make sure you are properly protected before signing any real estate contract, to avoid unnecessary court proceedings later.
More columns by Mark Weisleder
Mark Weisleder is a Toronto real estate lawyer. Contact him at email@example.com