Brian Madigan LL.B., Broker
BRMadigan@Rogers.com

RE/MAX West Realty Inc.,
Brokerage
Independently owned and operated

96 Rexdale Blvd. 
Toronto, Ontario 


Phone: 416-745-2300

Cell: 647-404-8150 
Toll Free: 1-888-507-0817

Search in:  
    
    
       

Sort by:

Warranties: Issues and Restrictions on Closing

February 17, 2018 - Updated: February 17, 2018

Warranties: Issues and Restrictions on Closing
 

There are several issues which arise when it comes to Warranties.
 

  • What is the nature of the Warranty?
  • Will the Warranty Survive Closing?
  • What is the Remedy for Breach?
  • How Long will the Warranty Last?
  • Is there a Restriction on Condition?
     

What is the nature of the Warranty?
 

Let’s consider several different matters by way of example: appliance operation, swimming pool opening, and flood damage.
 

Appliances: The Seller represents and warrants that on completion the appliances will be in good working order.
 

Pool Equipment: The Seller represents and warrants that the pool equipment will be in good working order when the pool is opened in the Spring.
 

Flooding: The Seller represents and warrants that on completion, there is no known damage to the basement, roof, or elsewhere caused by water seepage or flooding.

 

Will the Warranty Survive Closing?
 

There’s not much point having a Warranty if the doctrine of merger is just going to bring it to an end on closing.
 

It could be possible, in the case of a long closing for the Seller to warrant some matters. Those warranties would simply run out and exhaust themselves by closing. In fact, that’s the law, unless it is made very clear that there is in fact a collateral agreement and the intention is to have the warranty continue after the closing.

 

One of the best statements you could choose would be the following:
 

“The Parties agree that the representations and warranties stated herein shall survive and not merge on completion of this transaction…..”.
 

This clause is good evidence of the fact that the intention of the parties was that the Warranty would continue AFTER the contract was completed.
 

So, this phrasing is highly recommended.
 

What is the Remedy for Breach?
 

If something goes wrong with the Warranty before closing, then ordinarily the only remedy is damages; that would be a credit to the purchase price. However, termination of the agreement is also possible, but that would have to be clearly specified.
 

Let’s say we have an appliance warranty. The dishwasher doesn’t work? What do you get a brand new dishwasher or a second hand dishwasher, the same age as the one that broke, only this time it still works?
 

In that regard, the new dishwasher is worth $1,000.00 and the second hand one is worth $200.00. That’s a big difference! This issue should be addressed and resolved in the contract rather than left to the parties to sort out afterwards.
 

The same issue would arise with the pool. This time it needs to be fixed and rarely would any second hand equipment ever be available. So, if the repair is completed by a professional, some certainly is added.
 

When it comes to flooding, the clause said “known”. That’s an issue. How do you really prove that the Seller knew about it after the fact? You might be able to tell from repairs, active concealment or for certain, an insurance claim.
 

This warranty could potentially have significant value.
 

You could always specify: professional repairs with a 90 day Warranty.
 

How Long will the Warranty Last?
 

Frequently, the warranty will contain the following statement:
 

“The Parties agree that the representations and warranties stated herein shall survive and not merge on completion of this transaction, but apply only to the state of the property at completion of this transaction.”
 

You will notice here that we are dealing with both timing (the day of completion) and continued duration, namely, the day of completion, when it comes to the condition of the item.
 

But, the real issue here is how long is the Warranty… 1 day, 30 days, 90 days! That needs to be specified. One day might work for a dishwasher, but if we are talking about the pool equipment, then we have to get out to the month of May to have it make any sense.
 

Is there a Restriction on Condition?
 

The warranty likely contains the following statement:
 

“The Parties agree that the representations and warranties stated herein shall survive and not merge on completion of this transaction, but apply only to the state of the property at completion of this transaction.”
 

We just looked at this same clause but in a slightly different context. This statement is very limiting. It concerns the time of closing and the condition of the item at that point.
 

So, for the appliances, including the dishwasher, what was its actual condition on closing? How are you going to prove that? You need almost immediate evidence of malfunctioning.
 

When it comes to the pool equipment, we have to eliminate the statement “but apply only to the state of the property at completion of this transaction”.  Be sure to delete that phrase. This equipment is supposed to work. It’s been warranted to work. So, it better work! And, who really cares what it was like in January?
 

In addition, in this clause, the Seller is taking responsibility for damage due to weather conditions etc.
 

Warranty Clause
 

Every warranty clause is different since they are all applying to different situations. Be sure to amend and modify them as required for your purposes.

granite warranty
 

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com


Tagged with: warranty expiry merger survive how long conditions restrictions ontario law
| | Share

Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

Phone: 416-745-2300

BRMadigan@Rogers.com

Powered by Lone Wolf Real Estate Technologies (CMS6)