It’s easy to use the standard form documents without reading them. What else might there be? And, aren’t they the ones that the best agents use? After all, they are the standard forms.
Let’s have a look at one of those clauses a little more closely.
"The Seller represents and warrants that the chattels and fixtures as included in this Agreement of Purchase and Sale will be in good working order and free from all liens and encumbrances on completion."
That was a rather simple clause. It said that the chattels and fixtures will be in “good working order….. on completion”. Just ignore the fact that any liens will be discharged.
This is a simple, straightforward statement about the chattels and fixtures.
Break it apart, a bit, and it says:
- all the chattels will be in good working order, and
- all the fixtures will be in good working order.
That may not actually be what was intended!
Does everything work? So, it says! And, what more is there, than chattels and fixtures? From the perspective of the land and the building; not much.
This type of clause may be fine if you are acting for the buyer and want to ensure that the stove, fridge and dishwasher all work.
Now, the real problem is acting for the seller. A quick read of the clause allows you to direct your mind to the stove, fridge and dishwasher. But, what about the furnace?
It’s a fixture, and using this standard clause without modification, means that the seller offered up a statement to the effect that the furnace will be in good working order.
Let’s have a look at the other choices from the standard forms:
CHATTELS / EQUIPMENT / FIXTURES
CHATT-1 Chattels and Fixtures – Good Working Order
The Seller represents and warrants that the chattels and fixtures as included in this Agreement of Purchase and Sale will be in good working order and free from all liens and encumbrances on completion. The Parties agree that this representation and warranty shall survive and not merge on completion of this transaction, but apply only to the state of the property at completion of this transaction.
CHATT-2 Chattels – No Warranty
The Buyer acknowledges that there is no express or implied warranty by the Seller on the chattels included in this Agreement of Purchase and Sale.
CHATT-3 Equipment – Good Working Order
The Seller warrants that all the mechanical, electrical, heating, ventilation, air conditioning systems, air compressors, elevators, conveyor systems, sprinkler systems, boilers, and all other equipment on the real property shall be in good working order on completion. The Parties agree that this warranty shall survive and not merge on completion of this transaction, but apply only to those circumstances existing at the completion of this transaction.
Now, when you have a look at the clauses, you will notice that there is indeed another statement regarding “equipment”. Here, although not mentioned, you would have thought that the furnace might have been mentioned specifically. It wasn’t, but “heating” was, so it was certainly intended to be included under the equipment clause.
Nevertheless, the entire building situate on the land and the accessories, are either fixtures or chattels. You might also be able to classify some items as equipment, but they will still fall under the category of chattels or the category of fixtures. No exceptions!
So, if you don’t want to make any particular representations about the furnace, then don’t accept this standard form. It’s a risky clause to have in an agreement.
Brian Madigan LL.B., Broker