Caveat Emptor Modified
While Buyers may seek to include a clause to ensure that caveat emptor doesn’t apply to the chattels and fixtures, in a signback, the Seller may attempt to reinstate the doctrine to some degree.
This is the clause for the Buyers:
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.”
The Seller may find that the Buyer’s proposal was a little too much. So, they may simply have stricken it out in its entirety. That’s possible, however, they may have comeback with something of a compromise.
Here, are two clauses which the Seller may have included:
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.”
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.”
In this regard, anything that is a chattel is simply struck out. Notably, these would be the kitchen appliances: stove, fridge, dishwasher and microwave. This might be quite reasonable. They may all be 10 years old and the balance of their lifespan now quite unpredictable.
However, the Seller has opted to include references to numerous items of “equipment” whether they be classified as chattels or fixtures. It now, doesn’t matter.
These items are “major”. They are all the internal working parts of the house. These could be costly to repair if there are problems. It appears rather obvious that this particular clause has some shortcomings. Does this include the plumbing system? Is it included in mechanical? It would have been very obvious to include it, if that was intended. So, maybe it was not intended? Further, it would be preferable to include it as a “representation” as well. Not that many residential properties have elevators, so, we should probably modify that clause as follows:
“The Seller warrants and represents that all the mechanical, plumbing, electrical, heating, ventilation, air conditioning systems, and their respective components, furnaces, humidifiers, de-humidifiers, air purifiers, water sprinkler systems, central vacuum systems 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.”
The Seller having specified “equipment” has restricted the warranty to those parts of the house that are “operational” in some way. That, of course, eliminates roofs, structural components, walls, insulation, building foundations and other similar items.
You can see the benefit of the Buyer simply having included the word “fixtures” since that one word covered everything. It was somewhat innocuous and many Sellers would miss it and just simply accept the Offer, not really appreciating that they signed away caveat emptor.
Caveat emptor would naturally apply to the property itself, including easements and restrictions unless those matters were specifically addressed.
Brian Madigan LL.B., Broker