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Real Estate

General Information About Agreements of Purchase and Sale

A contract by nature, the Agreement of Purchase and Sale (“Agreement”) brings with it all the obligations, responsibilities and procedures of contract law. A binding contract is composed of the elements of offer; acceptance; exchange of consideration; and the meeting of the minds. In the Province of Ontario, every real estate board has adopted the Ontario Real Estate Association (OREA) form of Agreement. Though this standard form of Agreement contains things common to many real estate transactions, a lawyer has to be competent in drafting additional clauses so as to accommodate local requirements as well as the requirements of the party the lawyer is representing.

The parties


If, prior to closing, the buyer decides to take title with another party (for example, a spouse deciding to put the property in both names), an amendment to the Agreement of Purchase and Sale is not necessary. It should be sufficient to give a written direction to the sellers in the matter. There are instances when the buyer is noted to be “in trust”, meaning that the true purchaser is unknown. The name that appears as the buyer is a trustee for the actual buyer. Should the buyer wish that the title ultimately be held in the name of a corporation, then the Agreement would state that the buyer will have the right to transfer the Agreement to a corporation. In the event of the corporate entity refusing to complete the transaction, the original buyer may be responsible for any damages that the seller has incurred, s. 21, Business Corporations Act (OBCA). The basic principle here is that a buyer can only assign its rights, not its obligations. In order to avoid buyer’s liability, it is necessary to provide for a release of the original buyer within the terms of the Agreement.

Seller, as an individual

As opposed to the buyer, it is crucial to correctly identify the true seller. Say, for example, only one of two registered owners executes the Agreement. If so, then the buyer would ultimately only obtain the interest of that seller. In such a situation, a sub-search of the title will reveal who the registered owners are, and if those owners are not properly named in the Agreement, an Amendment should be prepared.

Corporate party

Where the seller is a corporation, the corporate name has to be accurately described, besides ensuring that only authorized people sign the contract, even though there is some protection from what is called the “indoor management rule”, s. 19, OBCA.

Partnership property

Although the law provides that a general partnership selling real estate in the ordinary course of business requires only one partner to execute a binding contract, in many instances the sale happens to fall outside of that category. It would be prudent in all cases to have all the partners execute the Agreement of Purchase and Sale.

Estate sale

If the property being sold is part of an estate, all the estate trustees must sign on behalf of the estate. Estate trustees are identified in the will of the deceased. Should there be no will, then an application will have to be made to appoint estate trustees before the estate can take a decision to sell the property.

Seller not the registered owner

There are instances when the seller in the Agreement is not the registered owner, like some property being sold by the sheriff to satisfy an outstanding judgment, or by a mortgagee under power of sale. In such circumstances, it is essential to identify the capacity of the seller.

Joint tenants

In a joint tenancy, upon the death of any one of the joint tenants, the surviving joint tenants become the owners of the deceased’s interest. An exception to this is the death of a married spouse owning an interest in a matrimonial home as a joint tenant with a third person and not with the other spouse. Section 26 of the Family Law Act stipulates that the joint tenancy is deemed to have been terminated immediately before the time of death.

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