What if the Furnace on Your Home Purchase is Leased?

Chattels are personal property and don’t stay with the sale of the home unless included. Fixtures are attached, are considered part of the real estate and stay with the home unless specifically excluded. Accessory parts like a remote control to a garage door opener or attachments to a central vacuum system are treated as part of the respective fixture.

The standard Agreement of Purchase and Sale has three areas that deal with Chattels and Fixtures.

  1. Chattels Included: The first clause asks for a list of chattels included. These can consist of anything the seller is agreeing to leave that is not attached and considered personal, such as stove, refrigerator, and washer and dryer. Sometimes fixtures, though included, are listed in this section to emphasize the point.

The bottom of this section also states that unless otherwise stated the Seller agrees that all fixtures and chattels shall be free and clear of any claims or liens.

  1. Fixtures Excluded: The next clause deals with fixtures excluded. So if the seller wants to take a lighting fixture or even an outside plant, these are stated here.
  2. Rental Items: The last related clause deals with rental items leased or on a lease-to-own contract, are not included in the purchase price and which the buyer agrees to assume, if assumable. Assuming the monthly payments on a rental hot water tank rarely presents a problem for the buyer as the cost is viewed as nominal.

What if the furnace is leased? If the seller, however, has a rental contract on the furnace (as an example) this can be a big problem as it conflicts with buyer expectations. It not only represents a substantial monthly cost that the buyer does not want, it’s also a fixture (and major home system) that should be included in the purchase price. The buyer will want this lease contract paid out before closing and this will be stated in the purchase agreement. Payouts can be $10,000 or more. So what might have seemed like a good idea at the time turns into a major cost to the seller on closing.

Usually a rental furnace or other system will have a sticker on it stating it’s a rental. The Seller should know whether the furnace is a rental but the question should be asked. If through Direct Energy the monthly rental amount will be on the owner’s gas bill.

If the property is being sold under Power of Sale, and if no sticker is on the furnace, unless the contract is registered on title or registered with the Personal Property Security Act, then there might not be a way of knowing. This can be problematic as the buyer finds out about the lease contract after the deal closes.  

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