Issues with the Time of Completion
The closing date and time should be clear and concise and not pose any particular challenges.
Let’s have a look at the standard Form OREA Agreement of Purchase and Sale and what it says about the “completion date”, (2016 version):
2. COMPLETION DATE: This Agreement shall be completed by no later than 6:00 p.m. on the .............. day of ................................................... 20 ............... Upon completion, vacant possession of the property shall be given to the Buyer unless otherwise provided for in this Agreement.
You will see that there is a specific date to be included. Make sure it’s not a Saturday, Sunday or Statutory holiday.
Next, you will notice that it specifies a time on that date, namely “6:00 pm”. Only one little problem, the Registry Office closes for registrations at 5:00 pm, one hour earlier.
That leaves us with a one hour period where closings are allowed but the Registry Office is closed. That doesn’t make any sense. Some people have argued that it is to provide a grace period, in the event of unexpected delays throughout the day. During this grace period, transactions would be closed in escrow and the registrations would take place the following day. The problem with that is that there is no place in the Agreement which sets out the escrow arrangements.
Certainly, if parties agree, they can always willingly arrange to complete the transaction as they like. The contract is needed for unwilling parties!
In my view, this was a simple error or oversight, and it should be changed.
The next issue is “vacant possession”, this means “no stuff” and “no people”.
By the time of the actual closing whenever that happens to have been arranged throughout the day by the respective lawyers, the Seller is to be “out”, that means all his belongings, his family and his tenants.
The problem here, is that the closing time could be sprung upon him without his knowledge. His lawyer might have closed the deal at 10:00 am, meaning that now he should have been out by 10:00 am. At the same time, he thought that he had until mid-afternoon. He was planning to be out by 3:00 pm. Easily he has just become responsible for a 5 hour delay.
The next issue is his tenant. If the tenancy comes due on the closing day, the Tenant has the right to stay there until 11:59 pm. That means vacant possession could not be given at 6:00 pm and the deal might not close. This would be a good way for a Buyer to get out of the deal.
So, knowing that at the outset, the Buyer should have accepted the Tenancy, even if it was just for a few hours.
To be sure, change the closing time to 5:00 pm. Avoid all the escrow closing arrangements.
And, if the Seller needs the money for his own purchase, then have the closing time specified as 12:00 pm (noon). That means the Buyer’s funds will be available to be used for the Seller’s purchase, in the afternoon, that same day.
This is a short clause, but there can be issues and concerns for real estate agents who are not paying attention.
Brian Madigan LL.B., Broker