Clauses can wreak havoc with the
financing of your home
I cannot believe how certain builders (Vendors)
are trying to take advantage of new homebuyers on the issue of mortgages. There is an
attempt to squeeze extra money from innocent purchasers through certain clauses inserted
into the Agreement of Purchase and Sale (the Offer). Here are some examples:
This clause makes sense and allows certainty for both sides. Where the buyer gets
potentially damaged is when this clause is combined with the following one or two clauses:
The above clause is scary. First of all you have a Vendor with no restrictions or
obligation to be reasonable, and this Vendor will probably react only out of
self-interest. Our poor buyer, if terminated doesn't even get interest on his deposit and
this clause could be used right up to closing.
What this clause gives the builder is the unrestricted option to reduce the term, as an
example from 5 to 4 years (lowering the cost of money), and increase interest over what
you thought you were getting at the beginning. A fairly sneaky builder could get a
commitment that builds in a percentage of your mortgage payments as a bonus to the
builder. This clause could be used by an unscrupulous builder, to the extreme detriment of
an innocent purchaser.
What should you do?
a) Make sure you amend or delete the second and third clauses if they
appear in your Offer, or don't firm up. Point out to the salesperson that you want the
option to seek your own financing and get it in writing;
b) When you see clauses like numbers 2 and 3 be suspicious, especially
if they are buried in fine print, and begin to wonder whether you can trust a builder that
does this.
The moral of the story is to make sure that the Offer is conditional for a few days on
both financing and review by a lawyer. It is critical you get the right advice and only a
lawyer can provide legal advice, that is the law. When you select a lawyer find one who
cares about you and a long-term relationship.
Perhaps the most difficult part of writing these articles relates to not the actual
writing, but thinking of a topic to address. So help me! Mail, deliver or fax letters to
the magazine or to us, use the web site (www.newhomesandcondos.com - look for me in Legally
Speaking), E-mail (schwarzgillen@sprint.ca) and give us your questions, concerns,
critiques and quandaries. I will try to deal with them in print or electronic form.
Jayson Schwarz is a senior partner with the law firm Schwarz, Gillen Barristers and
Solicitors. He can be reached at (416) 486-2040, toll free at 1-888-609-8888 and by fax at
(416) 486-3325. |
