Tag: COVID-19

A lot has changed in the world since the COVID-19 pandemic began just over one year ago.  The real estate industry has been no exception. We have seen clarifications by the courts respecting the impact the pandemic has on contractual obligations in real estate transactions. These decisions have resulted in parties seeking practical solutions in the face of pandemic-related issues in a transaction. As real estate lawyers, we have also had to adapt how we conduct our practice in order to continue to provide quality legal service in our real estate transactions.

COVID-19 Not an Excuse to Fail to Close a Transaction

The standard Ontario Real Estate Association Agreement of Purchase and Sale (“the Agreement”) does not include a provision addressing the pandemic as an event, that is, in itself substantial enough to enable either party to walk away from their contractual obligations. Without specific language in the Agreement, parties have had to turn to case law.

Since the pandemic began, case law has emerged demonstrating that the courts will not accept COVID-19 as an excuse to avoid closing a real estate transaction. In Burrell v Burrell, 2020 ONSC 3269, a seller signed an Agreement of Purchase and Sale in early 2020 before the pandemic began. The Ontario Superior Court of Justice refused to allow the seller to terminate the Agreement of Purchase and Sale, despite the seller’s argument that it would be difficult, and possibly even unsafe, to move during the pandemic. For a claim of frustration of contract to succeed, the bar has been set very high. In Naylor Group Inc. v Ellis-Don Construction Inc., 2001 SCC 58, the Supreme Court of Canada held that to successfully claim frustration of contract there must be an unforeseen event that renders meeting obligations under the contract impossible. At this time, it would be difficult to argue that COVID-19 related risks are unforeseen or render the person incapable of complying with one’s obligations under the contract.

Buyers and Sellers Should Act Reasonably

Despite the complications that COVID-19 may add to completing a real estate transaction, buyers and sellers must continue to fulfill their obligations under an Agreement of Purchase and Sale. Real estate remains an essential service and therefore services ancillary to real estates, such as home inspections, continue to operate. If an Agreement of Purchase and Sale allows for a home inspection or final walkthrough by the buyers, sellers are obliged to allow for the same and the pandemic in and of itself would not be an excuse to breach the contract. The parties should act reasonably with each other and look toward solutions to reduce COVID-19 related risks while continuing to meet their contractual obligations. For example, a final walk-through could be conducted with all persons entering the home wearing face coverings and gloves and, in some cases, virtual final walkthroughs may be appropriate and necessary.  

How Our Operations Have Changed:

When it comes time to close the transaction, our operations have adapted to ensure changes as follows:

1. Virtual Signing of Documents

Although our offices remain open, drop-ins and in-person appointments are discouraged. Meetings to sign closing documents can now be conducted via videoconferencing systems, and it is also possible to sign closing documents through electronic systems such as DocuSign, in certain circumstances.

2. Wire Transfer of Funds

Funds are now transferred electronically instead of through delivery of cheques. Our firm has been added as a payee at most banks so that our clients may electronically transfer funds to our trust account. We have also transitioned to the utilizing wire transfers when sending closing funds to the sellers’ and to our seller clients.

3. Keys left in lockboxes

Gone are the days when the seller’s lawyer would deliver or courier keys to the buyer’s lawyer. To reduce points of contact, sellers or their realtors now leave keys in a lockbox on the property. Once the transfer has been registered, the buyers are provided with the lockbox code to access the property, allowing the buyer to avoid having to travel to the lawyer’s office solely for retrieving their keys.

We continue to adapt how we close our transactions to ensure that we consistently provide the highest quality service in the most safe manner possible for our clients and our team.

If you have any questions regarding real estate transactions during the pandemic, please feel free to contact Ashley Almeida, real estate lawyer at Woitzik Polsinelli LLP Lawyers and Mediators at ashley@durhamlawyer.ca or 289-220-3235.

“This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”