Introduction
Buying a home in Toronto can be a complex process, and unexpected situations can arise even after an offer has been accepted. One such scenario is when significant property damage occurs before closing. In this article, we’ll explore what buyers should do if a storm or unforeseen event damages a home after an offer has been negotiated, using a real-world example to provide guidance.
Background: A Buyer’s Dilemma
A couple in Toronto had an accepted offer on a home, scheduled to close in two weeks. A severe storm, however, caused extensive damage, including new siding, roof repairs, gutter replacement, and window damage. Additionally, the chimney was bent at a 45-degree angle, stonework was damaged, and the aluminum porch roof suffered harm.
The seller completed some repairs but requested additional concessions. Specifically, they wanted to revoke a previously negotiated $10,000 credit for foundation repairs and sought three months of free rent post-closing. Initially, the agreement included a $1,500 monthly rental charge for post-closing occupancy and a $10,000 credit for the buyers to address the foundation issue.
Faced with these unexpected demands, the buyers were unsure how firm of a stance they should take. Their primary concern was ensuring a fair resolution while still securing the home they wanted.
Understanding Risk of Loss in Ontario Real Estate Contracts
In Ontario, the risk of loss typically remains with the seller until the closing date. This means that if a property sustains damage before the deal is finalized, it is generally the seller’s responsibility to restore it to the agreed-upon condition. The Agreement of Purchase and Sale (APS) often includes clauses stating that the home must be in substantially the same condition on closing as it was when the offer was accepted.
If major damage occurs, buyers have options, including:
- Requesting full repairs before closing – The seller must ensure the property is in the agreed-upon condition.
- Negotiating a further price reduction – If full repairs cannot be completed, the buyer may ask for additional financial concessions.
- Walking away if the contract allows – If the damage is too severe and not addressed, some contracts allow buyers to withdraw from the deal.
Buyer’s Options in This Situation
In this case, the buyers wanted to find a fair middle ground without forfeiting their negotiated benefits. Here are potential courses of action:
- Agree to free rent but retain the $10,000 credit – This approach allows flexibility while still ensuring the foundation work is covered.
- Counter-offer with a compromise – Perhaps offer one month of free rent instead of three while keeping the credit intact.
- Insist on repairs and hold firm – Since the contract places the risk of loss on the seller, buyers can demand that all storm-related damage be fully repaired before closing.
- Consult a real estate lawyer – Given the complexities of Toronto’s real estate laws, seeking legal guidance ensures the buyer’s rights are protected.
Lessons for Future Homebuyers in Toronto
For those navigating the Toronto housing market, this scenario highlights key takeaways:
- Always review risk-of-loss clauses in the APS to understand who is responsible for damages before closing.
- Have a real estate lawyer review the contract to ensure protection in unforeseen circumstances.
- Be prepared to negotiate when unexpected issues arise, but also stand firm on previously agreed-upon terms.
- Understand the importance of a home insurance binder – Some buyers choose to activate insurance before closing to mitigate risks.
Conclusion
Real estate transactions are rarely without hurdles, and buyers should be ready for unexpected challenges. If a property is damaged after an offer is accepted, understanding contractual obligations, negotiating effectively, and seeking legal advice can make all the difference. In Toronto’s competitive market, preparation and knowledge are essential in ensuring a smooth closing process while protecting the buyer’s investment.
Richard Wang 