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7. Declarations and obligations of the buyer

The promise to purchase made by the buyer includes declarations and undertakings relating to various aspects of his process. His declarations concern, among other things, facts that precede his promise to purchase and of which the seller must be aware, such as the fact that he has visited the immovable and that he has entered into a brokerage contract to purchase with the broker who represents him, if applicable.

As for the undertakings, they relate in particular to the actions that the buyer must take, depending on circumstances, once the promise to purchase has been accepted. First, the buyer undertakes to assume the costs of preparing the deed of sale and its publication, as well as the payment of any property transfer taxes that may subsequently be required. The buyer also undertakes not to sell, assign or otherwise alienate his rights in the promise to purchase once it is accepted, without the seller’s prior consent. He also undertakes, in the event that the deed of sale cannot be signed through his fault, to compensate the broker representing the seller by paying damages equivalent to the remuneration that the seller would otherwise have paid to his broker.
 

 

Visit of the immovable

Clause 7.1 of the Promise to purchase form states that the buyer declares himself satisfied with the immovable after having visited it. The broker must indicate the date of the last visit. This declaration is made conditional upon the results of the inspection that he can have carried out, as provided for in clause 8.1 of the Promise to purchase form, or on any other condition set out in clause 12.1 of the form.

It should be remembered that, with respect to the warranty against hidden defects, the seller is not required to guarantee a hidden defect known to the buyer or an apparent defect, i.e., a defect that a diligent and prudent buyer is able to observe without the assistance of an expert. The Civil Code of Québec also provides that the seller cannot exclude or limit his responsibility if he failed to disclose the defects of which he was aware or could not have been unaware, a rule which provides for an exception when the buyer buys at his own risk from a non-professional seller.

This legal framework means that the buyer must act seriously and prudently by taking all the means at his disposal to make an informed purchase. In particular, he must carefully visit the property as any prudent buyer would do. The fact that the buyer is not obliged to retain the services of an expert does not diminish the importance of having the building inspected by a building inspector or a professional.

Similarly, this legal framework requires the seller to act with transparency and good faith. Although the wording of clause 7.1 is simple, its scope is considerable and is articulated in terms of the context, conditions and means taken by the parties to bring a potential transaction to fruition, including the exclusion of warranty, the information contained in the Declarations by the seller of the immovable form and the pre-purchase inspection.

Absence of visit

It may happen that the buyer does not have the opportunity to visit the immovable or a portion of it before presenting his promise to purchase. This could be the case with a rental property where visits will only be allowed after acceptance of a promise to purchase. The buyer may have already visited the property, but wish to see it again to verify certain elements or to show it to someone else. There could also be a situation where the buyer is out of the country, the market is hot or the type of property is in short supply, so the buyer wants to be the first to make an offer.

If there has been no visit, the broker must cross out in clause 7.1 the words “the BUYER has visited the IMMOVABLE, on [DATE], and declares that he is satisfied therewith.” and ask the buyer to initial the change. He should then add the following wording in clause 12.1:

“The BUYER may visit the immovable within ___________ days following acceptance of this promise to purchase. If the BUYER is not completely satisfied with this visit and wishes to cancel this promise to purchase for that reason, he shall notify the SELLER in writing within two (2) days following the expiration of the above deadline. This promise to purchase shall become null and void from the time of receipt of such notice by the SELLER. Should the BUYER fail to give notice to the SELLER within the specified time period and in the manner described above, he shall be deemed to have waived this condition.”

The period given to the buyer to complete this visit should normally be about the same as the periods given to obtain financing or have the property inspected. In reality, even if the time frame is similar to the others, the buyer will probably want to visit the property as soon as possible to determine if he wants to go ahead with the transaction or withdraw. If the buyer withdraws following the visit, he will not have to pay for an inspection that has become unnecessary. The buyer, sometimes at the seller’s request, may choose to conduct the site visit at the same time as the inspection, which makes it easier to approach the tenants.

Brokerage contract to purchase

In clause 7.2 of the promise to purchase, the buyer declares whether or not he has entered into a brokerage contract to purchase with the broker through whom he presents his promise to purchase. This declaration is significant. It allows the buyer to act with transparency with regard to the professional relationship he has with his broker. It is essential to explain to both the buyer and the seller the practical consequences of the buyer being represented under a brokerage contract to purchase and to review the general obligations of the real estate broker regarding representation of the parties to a transaction.

Thus, a seller who is not bound to a broker by a brokerage contract must be aware that the buyer’s broker represents and defends the buyer’s interests and that, consequently, the seller will only be entitled to fair treatment.

In addition, clause 7.2 provides a context for the price offered. The use of clause R2.5 of Annex R – Residential immovable, which can be appended to the promise to purchase, also makes it possible to instruct the notary to pay the remuneration directly to the broker who has concluded a brokerage contract to purchase with his buyer client. The total amount of the remuneration agreed upon in the brokerage contract to purchase will be indicated in this clause.

For more information:
Guideline – Conflicts of interest: 1. Obligation to protect and promote the interests of the person represented
Billing in cases where clause R2.5 is used
Including remuneration in the financing
Instructions to the notary regarding remuneration: a specific clause on this subject

Deed of sale

In clause 7.3, the buyer undertakes to pay all the notary’s fees related to the preparation and publication of the deed of sale, including the cost of copies. This obligation is imposed to the buyer under article 1734 of the Civil Code of Québec, which specifies that the buyer, in addition to taking delivery of the property sold and paying the price thereof, is bound to pay any expenses related to the deed of sale.

The fees referred to do not include the cost of preparing and registering a new deed of mortgage, which is at the expense of the buyer, a fact of which the buyer needs to be aware.

Transfer duties

In Québec, under the Act respecting duties on transfers of immovables, municipalities may impose duties on transfers of immovables, i.e. the transfer of ownership of an immovable located on their territory. These duties are calculated according to a standardized formula based on both a method of determining the taxable value and a series of tax rates according to value ranges. The duties must be paid by the buyer of the property. This is specified in clause 7.4 of the Promise to purchase form.

For more information: Property Transfer Duties

Sale or assignment of the promise to purchase

It is possible for a buyer to sell or assign the rights he holds in an accepted promise to purchase. If he wishes to do so, however, he must first obtain the seller’s written consent. This provision, set out in clause 7.5 of the Promise to purchase form, protects the seller and saves him from going to the notary to sign the deed of sale and finding out that the buyer is no longer the same person. This provision is also intended to curb, or at least make transparent, any speculative maneuver.

Protection of the seller’s broker’s remuneration

Clause 7.6 Damages states that in the event that no deed of sale is signed for the immovable through the buyer’s fault, the buyer undertakes to compensate directly the agency or the broker, bound to the seller by brokerage contract, in accordance with the rules of ordinary law, by paying damages that can be equivalent to the remuneration that the seller would otherwise have had to pay.

This clause allows the buyer to clearly understand the consequences of refusing to sign the deed of sale. In case of dispute, if the court rules in favour of the seller or his broker, the buyer may have to pay damages to both the seller and the broker (or agency) bound to the seller. Note that the payment of damages is not automatic (and never was) and cannot be made without applying to the courts.

A similar provision is made in clause 10.7 Damages, which provides for the payment of damages to the agency or broker bound to a buyer by a brokerage contract in the event of the seller’s default. These damages correspond to the remuneration that the buyer would normally have paid to his broker.