Counter-proposal
Although it often relates to price, the counter-proposal can also deal with other aspects of the promise to purchase. Any change to a promise to purchase, no matter how minor, must be made by way of a counter-proposal.
Consider the example of a seller who wishes to accept a promise to purchase at a price that exceeds his expectations, but wants to keep a chandelier that was not excluded in the promise to purchase. Since the promise to purchase is a package deal and cannot be accepted while unilaterally amending it, the reply to the buyer must be made in the form of a counter-proposal, which necessarily entails that the promise to purchase is refused. In this example, the seller cannot accept the promise to purchase but specify that the chandelier is not for sale. To exclude it from the sale, he must make a counter-proposal. Another solution would be to accept the promise to purchase in the hope of convincing the buyer to modify the agreement to exclude the chandelier, but there is no guarantee that the buyer will accept. The seller would then have to honour his commitment.
The original proposal is always the reference document that is being amended; all counter-proposals prior to the last one made become null and void. By making a counter-proposal, one of the parties to the transaction is challenging the other, so that the latter is no longer bound by its original proposal and can make any changes it sees fit. The seller who receives a promise to purchase replies with a counter-proposal, as does the buyer who made a proposal to which there was no reply and who decides some time later to try his luck again with a counter-proposal. If a counter-proposal is finally accepted, the agreement will consist in this counter-proposal and the promise to purchase to which the accepted counter-proposal is appended; all other counter-proposals will become null and void.
The mandatory Promise to purchase form has an acceptance deadline. If a promise to purchase is not accepted within the specified time period, it becomes null and void. This does not mean, however, that the seller who wishes to reply to the promise to purchase with a counter-proposal must do so within this period. Since the seller’s counter-proposal is the equivalent of a new promise to purchase, it can be submitted even after the acceptance period has expired. The same applies to a counter-proposal replying to another counter-proposal.
Of course, any counter-proposal should be made within a reasonable time following receipt of the proposal to which it responds. This period may vary depending on circumstances, but it is normally expressed in days, not weeks. After a certain period of time, it is preferable to simply restart the negotiations with a new promise to purchase. If some of the deadlines in the promise to purchase and its annexes refer to a date rather than a number of days from acceptance, then the counter-proposal should specify the new applicable dates.
The Counter-proposal form must not be used to renegotiate the terms of a promise to purchase that has already been accepted (e.g. negotiating the sale price following the building inspection). In this case, the promise must be amended using the Amendments form.
P1. Identification of the parties
The seller and the buyer are identified in the counter-proposal as either the counter-proposer or the respondent, a role which they may hold alternately depending on the progress of the negotiation. In the first counter-proposal, the seller is the counter-proposer and the buyer the respondent. In the second counter-proposal, if any, the buyer becomes the counter-proposer and the seller the respondent. To identify them, the broker must enter the first and last names of all persons designated in the promise to purchase as seller and buyer.
P2. Amendments
Once the counter-proposer and the respondent have been identified, the broker must specify in clause P2.1 whether the counter-proposer is promising to sell (if the seller) or to purchase (if the buyer), and enter the address of the immovable, which must match the address appearing on the promise to purchase and the other transaction documents.
The Counter-proposal form stipulates that this promise to sell or purchase is made according to the same conditions as those set out in the promise to purchase form, with the amendments described below. The broker must enter the number of the promise to purchase for which amendments are proposed in the space provided.
Clause P2.2 of the form stipulates that any previous counter-proposal is null and void, whether made by the seller or the buyer. The effect of this stipulation is that the final agreement between the parties will consist of the terms of the promise to purchase and those of the last accepted counter-proposal. Any changes that may have been requested in any other counter-proposal will not be part of the agreement if they were not included in the last accepted counter-proposal.
Clause P2.3 includes the wording of the most common changes made in a counter-proposal, namely those relating to price and the dates of signing of the deed of sale and of occupancy.
Price change
The broker must enter the new proposed price in words and numbers. The broker does not have to change the amounts originally entered in the methods of payment (clause 5 of the promise to purchase) since the adjustment is made automatically. However, if the price change results in the addition of a new condition, the broker must specify its nature in P2.3.4 Other amendments (example: in counter-proposing a new price, the seller also offers a balance of the sale price for an amount corresponding to the difference with the price originally offered, while the promise to purchase did not provide for a balance of sale). This change should be noted in P2.3.4, and an Annex F – Financing, with clause F2.4 completed, must be attached. This annex will be referenced in clause P2.5.
In addition to these most common changes in the course of negotiating a promise to purchase, the buyer and seller may wish to revisit any other aspect of the promise to purchase and even add other items. The broker should record these changes in clause P2.3.4 Other amendments and, if space is insufficient, in an Annex G – General form which must be linked to the promise to purchase and the counter-proposal and form an integral part of the counter-proposal.
The broker must enter the number of the clause or paragraph of the promise to purchase that is being amended and describe the change being made. If it is a new condition, the use of a standard clause is recommended.
If the counter-proposal is to be conditional upon cancellation of an earlier promise to purchase already accepted by the seller, the broker must check box P2.4 to make this condition an integral part of the counter-proposal, and enter the date and time by which the seller must confirm to the buyer that he has obtained such cancellation.
This provision corresponds to clause R2.4 of Annex R – Residential immovable. Just as in that provision, the seller does not undertake to take steps to obtain the cancellation of the first promise to purchase, unlike what is stated in clause R2.3 of the same form. Rather, in the event that the first promise to purchase becomes null and void, the seller undertakes to notify the second buyer within the specified time period, at which time the latter will begin fulfilling the conditions contained in his promise to purchase.
Documents may be annexed to the counter-proposal. If that is the case, they must be referenced in clause P2.5.
Other conditions
According to clause 14.1 of the Promise to purchase form, the promise to purchase becomes null and void if the seller makes a counter-proposal. However, clause P2.6 of the Counter-proposal to a promise to purchase form provides that the terms of the promise to purchase that are not amended in the counter-proposal remain unchanged. This means that the terms of the promise to purchase that are not amended in the counter-proposal are transferred and incorporated into the counter-proposal, without the need for the broker to re-enter all the unchanged clauses of the promise to purchase.
Conditions of acceptance
The date and time by which the counter-proposer, whether the buyer or the seller, becomes irrevocably bound must be indicated in clause P2.7.
P3. Signatures
The broker must ensure that all counter-proposers sign the form, indicating date, place and time of signing. There are also spaces for witness signatures. In addition, the broker must obtain the consent of the seller’s spouse, if the situation so requires.
The counter-proposer must acknowledge receipt of the respondent’s reply, whether the counter-proposal is accepted or refused. This avoids any ambiguity (e.g.: the buyer thinks he is free to make a promise to purchase on another property when in fact the seller has accepted his promise). Informed promptly in the event of acceptance, the buyer will then be able to start fulfilling the conditions set out in his promise to purchase, especially as the time periods start to run from the time of acceptance.
For more information:
Using the ‘Counter-Proposal to a Promise to Purchase’ to respond to a Promise to Purchase or a Counter-Proposal
Is it necessary to have an acknowledgement of receipt of a Promise to purchase (PP) signed?
The importance of confirming the cancellation of a promise to purchase
Promise to purchase: signing the acknowledgement of receipt
