orea assignment clause

Agreement of Purchase and Sale Explained

Today, we will go over the Ontario Real Estate Association (OREA) Agreement of Purchase and Sale for resale properties and discuss each clause proposed by OREA and what rights and obligations the agreement imposes on both the buyer and the seller. There are many pre-set paragraphs and clauses, so be ready to spend at least 15-20 minutes of your day reading this post. Let’s dive in!

Most real estate buyers in Ontario choose to employ the services of a real estate agent to help them through the purchasing process. Of course, there is no requirement to use one. However, if you do, expect them to prepare the purchaser’s offer by using the OREA Agreement. What does that agreement look like and how does it work?

It is important to note that OREA provides many different Real Estate sample agreements used by industry professionals. There are different agreements for the purchases and sales of freehold properties, condominiums, assignments, and many more. Today, I will be using the OREA Form 100, or the sample agreement used for the purchases and sales of freehold homes.

FORM 100 (Freehold APS)

Transaction details.

In a real estate transaction, the agreement is normally prepared by the purchaser and presented to the seller as the offer to purchase. The Freehold APS consists of 6 main pages, the first page outlines the basic details of the agreement followed by the numbered paragraphs, the execution page, and Schedule A.

The agreement starts with the date of the agreement, the names of the buyer(s) and seller(s) and the address of the property being purchased/sold. The address consists of both municipal and legal designations of the property. Following the address, the agreement outlines the purchase price and deposit to be provided by the buyer as well as the timing of when the deposit is supposed to be provided. Lastly, this section confirms which Schedules form part of the agreement in addition to Schedule A.

DEPOSIT PROVIDED WITH PURCHASE

Let’s talk about the deposit provided by the purchaser in more detail. When real estate agents or brokers are involved, it is customary for the deposit to be held in trust by the listing brokerage (office representing the seller). This amount will be used to pay out the commission of the agents and any surplus will be returned to the seller upon closing. Should there be a shortfall, the seller’s lawyer is obligated to provide this amount to the listing brokerage upon closing. The amount of the deposit will be adjusted or (deducted) from the final amount to be paid by the purchaser on closing. Should the transaction not go through the deposit can either be returned to the purchaser or lost and surrendered to the seller. An example of a situation where the deposit can be returned to the purchaser in full is the mutual release of the agreement when both parties agree that the agreement does not need to be performed and it becomes a nullity. In a situation where the agreement is not completed due to a breach of the purchaser, the seller will seek for the deposit to be released to the seller as “damages”.

MODEL CLAUSES

There is a total of 29 model clauses in Freehold APS. They cover the steps of a standard real estate transaction as well as create the rights and obligations of both parties. I will dissect each clause below.

IRREVOCABILITY

As I mentioned below, the agreement is normally presented as an offer to purchase by the buyer to the seller. This clause provides the seller with exact timing of the validity of the offer. The seller has 3 options of how to proceed with the offer provided to them. They can accept, decline, or counteroffer. Each counteroffer will have its own validity period by which the other party has to respond to the counteroffer. Should there be no action taken by the end of irrevocability period, the offer will become null and void and the deposit will be returned to the purchaser in full without deductions.

COMPETION DATE

This clause confirms the exact date on which the agreement must be completed. This is your closing date. Both parties must exchange the closing documents and funds by 6PM on the closing date. The seller must provide the purchaser with vacant possession of the property by that time, once all the other conditions of the agreement are satisfied, unless otherwise agreed between the parties. Please note that the registration of the title transfer in the Registry Offices can only take place until 5PM on any given business day. Therefore, in an event of the closing taking place between 5PM and 6PM on the closing date, the agreement could be completed pending registration which will take place the next business day. The purchaser will be entitled to take possession of the property as per the agreement and the seller will be entitled to the proceeds of sale being released to them by their lawyer. It is important to note that it is also possible to agree to hold keys and funds in trust with the lawyers, pending registration the next day. These agreements are made between the respective lawyers following the instructions of their clients.

During the course of the completion of the agreement, many notices will be given to each party, be that the amended agreement clauses or notices regarding the conditions in the agreement. When employing the services of real estate agents, the agents and their respective brokerages become the authorized agents of the parties. This clause allows to include additional contact information (email and fax) of the parties for the delivery of notices.

CHATTELS INCLUDED

Chattels are personal property of the seller which, by default, is always excluded from the agreement unless expressly included. Although there is no clear-cut definition of chattels, the general rule is that any property which can be removed from the property without damage (having to detach it from the property) will be a chattel. Kitchen appliances or yard maintenance machinery. The buyer must outline all chattels that the buyer wants to be included in the purchase in this clause. The seller also confirms that both the chattels and fixtures are free from any liens and encumbrances and will be transferred to the buyer outright.

FIXTURES EXLUDED

Unlike the chattels, fixtures are items affixed to the property, and by default are included in the purchase. Again, there is no clear definition of what falls in the chattels category, and this area of law is a disputed one. Nevertheless, you can follow the general rule that if you must remove at least one screw to detach the item from the property, it will most likely constitute a fixture. Because all fixtures are included in the agreement unless explicitly excluded, the seller must take great care to outline all items that they wish to take with them after the sale is completed. Some common examples of what may constitute a fixture are lighting fixtures, window coverings, and kitchen cabinetry.

RENTAL ITEMS

This is a very important section as it deals with all those items not included in the sale as they are not owned by the seller. Often those items include, but not limited to, hot water tanks, furnaces, AC systems, and solar panels. If the equipment is listed in this section, the buyer must assume the rental contract on or before closing. In addition, the seller must confirm that the assignment documentation will or will not be available to the buyer on closing.

In a standard resale transaction (resale of a used residential complex), HST is normally not applicable. This must be confirmed by the seller on or before closing (by way of a declaration signed by the seller at their lawyer’s office). HST may be applicable if the property had been significantly renovated or remodelled (90% of interior gutted and rebuilt), and if the property had been used in a course of a business by the seller (i.e. short-term rentals).

TITLE SEARCH

This clause provides a deadline by which the buyer’s lawyer must complete a title search and review any instruments registered on title, if there any executions against the seller to make sure that their client is getting “good and marketable title”. Read more about title searching in this blog.

The seller is only required to confirm the current use of the property in accordance to local zoning and land planning by-laws. Any future use by the buyer which may be inconsistent with the current use will be the buyer’s issue which they will have to deal with themselves.

Whereas paragraph 8 deals with the deadline for the searching of title, this paragraph deals with a brief definition of good and marketable title. Although, there is no explicit definition, this paragraph confirms which instruments must be accepted by the buyer. Those instruments are:

• Any restrictive covenants that run with the land, provided that they are complied with.
• Municipal agreements and/or agreements with publicly regulated utility companies.
• Utility or communication services easements.
• Easements for drainage, storm or sanitary sewers.

In short, this paragraph allows for instruments which allow for owner’s use and enjoyment of the property by way of supply of municipal and utility services to the property.

CLOSING ARRANGEMENTS

This paragraph provides instructions as to how the closing process is to take place between the lawyers. The registration of the title transfer is to take place electronically (as opposed to paper registration previously used in Ontario) and the required documents and funds are to be held in trust pending registration of the title transfer. There are, of course situations where the keys and funds can be released by the lawyers upon mutual agreement of the parties. These situations mostly happen when the funds are provided to the seller’s lawyer between 5PM and 6PM on the completion day, because the Land Registry Offices close at 5PM even with the use of electronic registration.

DOCUMENTS AND DISCHARGE

According to this paragraph, the seller is only required to provide the buyer with the documents relating to the property which are in their possession. The buyer, in turn, cannot ask the seller to produce any documents not in the seller’s possession (i.e. a new survey completed specifically for the buyer). This relates to various property certificates, surveys, and rental contracts.

In addition, when the seller has mortgaged the property to an “institutional lender” (as opposed to a private one), it takes the bank a while to process the payment through its numerous departments and register a discharge (release of their interest) with the Land Registry Office. Due to this common occurrence, this paragraph creates an obligation for the purchasing lawyer to accept the seller’s lawyer’s undertaking (personal promise) along with the current mortgage statement and the seller’s direction (written instructions) to their lawyer to pay their lender the required amount in lieu of the registered discharge on the closing date. The same cannot be done with private mortgages.

The real estate market fluctuation often prone the buyer to close on a property with minimal conditions to win their bid. This paragraph explicitly confirms that the buyer had had an opportunity for an inspection of the property and chose not to have a professional inspection done. Should the buyer want to have a professional inspection of the property completed, this should be noted in a schedule to the agreement.

Based on the heading of this paragraph, it is not hard to figure out what it deals with. Until the sale is completed, the property remains a responsibility of the seller, who is required to maintain adequate insurance policy until the property is transferred to the buyer. Should any damage occur at the property, the buyer has a few options:

• They can terminate the agreement and have their deposit returned to them in full, or
• They can have the insurance proceeds paid to them and close as is.

There are scenarios where the buyer may be assuming the seller’s mortgage or the seller themselves becomes the purchaser’s lender (by way of Vendor Take Back Mortgage). In this situation, the tables turn, and the buyer is now the one who is required to provide an insurance policy confirmation to the seller.

PLANNING ACT

Planning Act is a topic that I find the most difficult to explain to my clients. The rules imposed by the Act are extremely complicated and require a lot of time and effort to understand fully.

This section provides that the agreement only creates a valid interest in land if the seller has complied with the subdivision control provisions of the Planning Act. Planning Act violations could nullify the transaction years after its completion which could have devastating consequences on mortgages and further interests registered on title.

DOCUMENT PREPARATION

The parties’ respective lawyers are responsible for the preparation of the documents which their clients need to execute with the exception of the transfer document. The transfer in its electronic form must be prepared by the seller’s lawyer (at the seller’s expense) and sent to the buyer’s lawyer for review and completion of the Land Transfer Tax portion.

Everyone often talks about the consequences of buying real estate as a non-resident, however, what happens if you sell real estate as a non-resident? If the seller is a non-resident, they will be required to pay Canadian non-resident withholding tax. The buyer will be required to hold back from 25-50% of the sale proceeds depending on the situation until a Certificate of Compliance is received from CRA.

ADJUSTMENTS

Your lawyer is the person responsible for the preparation of the final accounting for your purchase or sale, albeit, this accounting is very basic. First the amount due to the seller subject to adjustments is determined and recorded on the statement of adjustments. In accordance with paragraph 18, these adjustments include:

• Rents, if the purchaser is assuming tenants.
• Mortgage interest, if the purchaser is assuming the seller’s mortgage.
• Property taxes.
• Unmetered or private utility charges, and
• Unmetered cost of fuel.

Secondly, your lawyer will prepare a trust ledger. For a buyer, the trust ledger confirms the total amount due from them to the lawyer after taking into the account the mortgage the buyer is approved for, the amount due to seller, land transfer tax, and legal fees and disbursements. For a seller, the trust ledger would confirm the amount received from the buyer, mortgage paid by the lawyer, legal fees, and the total remaining amount due to the seller.

Read more about the closing process in the blog post next week  and the closing costs and considerations here .

PROPERTY ASSESSMENT

Each property in Ontario is assessed on an annual basis to confirm the value of the property used in property tax calculations. Depending on the market landscape and potential upgrades done to the property, its value and therefore taxes may go up significantly following the closing. This paragraph confirms that in an event of an increased property assessment, the purchaser will not pursue a claim against the seller due to increased property taxes due from the new owner.

TIME LIMITS

As with most contracts, time is of the essence in the OREA agreement. This means that the deadlines provided by the agreement are not taken lightly and they must be complied with accordingly. Should there be a change in timing, it must be mutually agreed upon by the parties in writing. If a deadline is not complied with and no written amendment has been done, the party who was supposed to comply with a deadline is in breach and there is a chance that the agreement may be at its end with the consequences to follow.

In order to complete the agreement, both parties have certain obligations to perform on closing date. These obligations include delivering certain documents and funds to the opposite party.

The paragraph also confirms the method of delivering the funds – money must come from the lawyer’s trust account in the form of a bank draft, certified cheque, or a wire transfer.

FAMILY LAW ACT

Family Law Act creates certain property rights for spouses who are not on title of their family home. These rights provide that the family home, also knowns as matrimonial home, cannot be disposed of or encumbered without the consent of the spouse not on title.

The agreement provides that no such rights exist unless the consenting spouse signs the Spousal Consent portion located on the Execution Page of the agreement.

Urea Formaldehyde Foam Insulation or UFFI has been banned in Canada since 1980 and most newer houses in Ontario do not contain UFFI at the property. This paragraph is a warranty by the seller that while they have owned and occupied the property no UFFI was used.

LEGAL, ACCOUNTING AND ENVIRONMENTAL ADVICE

As previously mentioned, real estate agents cannot provide legal advice to their clients. That is also true with accounting and environment advice. The parties are required to retain licensed professionals to obtain legal, accounting, and environmental advice.

CONSUMER REPORTS

This paragraph gives the seller the right to obtain the buyer’s credit check in order to make sure that the buyer is able to complete the agreement as agreed between the parties.

AGREEMENT IN WRITING

OREA standard agreements are extremely useful for any real estate transaction. However, they also provide the parties with the flexibility as it allows the parties to opt out of any pre-set provisions by including their own provisions in schedules to the agreement.

Furthermore, the paragraph confirms that any changes or amendments to the agreement must be in writing and any oral agreements between the parties are replaced by this one written agreement.

ELECTRONIC SIGNATURES

This paragraph allows for the agreement to be signed by way of electronic signatures.

TIME AND DATE

OREA agreements are mainly used in Ontario, where there are 2 time zones. Any reference to the time shall refer to the time zone of the location of the property. This time shall be used for closing.

SUCCESSORS AND ASSIGNS

The agreement binds the heirs, successors or assigns of a party to the agreement who passes away before the agreement is completed. This is the section of the agreement where the parties sign to indicate their intention to be bound by the terms of the agreement. In addition, if the property sold is a matrimonial home and the spouse occupying the property is not on title to it (and therefore is not one of the sellers), they would sign this section as a consenting spouse.

Any non-standard terms would be added to the schedules of the agreement. This includes any conditions the parties choose to add to the APS. The offer can be conditional on anything the parties agree to, however, more often than not, it is conditional on the following 3 items:

• Financing – this gives the purchaser time to arrange financing and exit the contract if the financing cannot be arranged in time;
• Inspection – this gives the purchaser time to arrange for a property inspection to take place to ensure that the property is in good condition with no notable deficiencies;
• Lawyer review – this condition normally only applies to condominiums and new construction agreements of purchase and sale. It gives the purchaser’s lawyer time to review the documents to ensure that everything is in order and no terms of the agreement need to be renegotiated.

In conclusion, the Ontario Real Estate Association (OREA) Agreement of Purchase and Sale, particularly the OREA Form 100 for freehold properties, emerges as a critical and detailed framework governing real estate transactions in the province. Our exploration of its clauses, ranging from transaction details to deposit considerations, model clauses, and specific provisions on various aspects, reveals its comprehensive nature. This document meticulously outlines the rights, responsibilities, and obligations of both buyers and sellers, emphasizing the importance of professional advice and adherence to legal standards. As a dynamic and adaptable tool, the OREA agreement stands as an essential guide for real estate professionals, ensuring a structured and informed approach to the complexities of real estate transactions in Ontario.

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Assigning an Agreement of Purchase and Sale

Martin Rumack | Jul 26, 2016 | 0 comments

At its essence, an assignment of an Agreement of Purchase and Sale – informally known as “flipping a home” – is a simple concept: A buyer of a new home allows someone else to take over the purchase contract, which allows that person to buy the home.

More specifically, the original buyer enters into a formal Agreement of Purchase and Sale with a builder, and then allows another person – who we will call the “new buyer” – to step into his or her shoes through what is legally known as an “assignment” of that original agreement or offer to buy. The new buyer pays the original buyer a higher price than what was set out in that original agreement; the difference is the original buyer’s profit. All of this takes place after the original buyer has agreed to buy from the builder, but before the deal closes; the original buyer never takes title to the property.

This arises primarily with homes: For newly built homes with typically long closing dates (often 18 months or more), an assignment is particularly attractive in situations where the builder has already sold all of the units in the development early on, but where there is still demand for soon-to-be-completed homes and new condominium units in the development.

The assignment of a new condominium unit is also interesting for similar reasons, although the time frame may be significantly longer depending on when the assignment occurs. This puts the original buyer in position to make a profit by inflating the new price well above what he or she agreed to pay the builder in the first place.

What is the benefit to the new buyer? There can be several:

• The new buyer may be able to buy into a desirable neighbourhood at a time when there are no more units available to be purchased directly from the builder;
• Even taking the original buyer’s profit into account, the assignment may give the new buyer a price advantage over other properties that are currently on the market; and
• Depending on the timing of the assignment, the new buyer may be positioned to choose finishes and make minor changes to the yet-to-be-built home.
• Whatever the respective motivations of the original and new buyer, the assignment of an Agreement of Purchase and Sale has many specific features – and just as many potential pitfalls.

When can an agreement of purchase and sale be assigned?

Unlike the standard Ontario Real Estate Association (OREA) agreements, many builders’ own (customized) Agreements of Purchase and Sale contain a clause that generally prohibits the assignment of the contract outright – or else allows it only with strict conditions and in exchange for a significant fee payable to the builder.

In fact, the vast majority of new home or condominium-purchase agreements do not allow the original buyer to assign the contract to someone else and stipulate that any attempt by the buyer to do so, or to list the home for sale on the MLS system or otherwise, or else list the property for rent, will put the original buyer in breach of the agreement. This triggers the builder’s right, with notice, to terminate the original agreement, keep the original buyer’s deposit and seek additional damages from him or her. (And in most cases, the original buyer’s agreement is “dead”; he or she cannot go back and try to complete the transaction as if no assignment had taken place).

All of this means that anyone who has agreed to purchase a home from a builder should give careful consideration to, and should seek legal advice prior to signing the agreement, or in the case of condominium units during the 10-day cooling-off period in order to determine whether it’s possible to assign the agreement in the first place.

This in turn involves a careful review of the clauses in that agreement.

Typical (and not-so-typical) provisions

As a practical matter, there are as many variations in these types of provisions as there are builders.

Many Agreements of Purchase and Sale will include a largely standard “no assignment” clause, which disentitles the original buyer from “directly or indirectly” taking any steps to “lease, list for sale, advertise for sale, assign, convey, sell, transfer or otherwise dispose of” the property or any interest in it.

A potential exception – and this is important – arises if the builder gives prior written consent, although in the more draconian version of these kinds of contract, that consent may be “unreasonably and arbitrarily withheld” by the builder, essentially on its whim. In other words, the buyer is not allowed to deal with the property, unless the builder pre-approves it in writing, but in many cases the builder has no obligation to give that approval and may withhold it for any reason whatsoever, including unreasonable and arbitrary ones.

(With that said, the “no assignment” clause in some agreements will allow for express exceptions or situations where the builder will not withhold consent, for example: a) assignments made to a member of the original buyer’s immediate family; or b) where the builder has determined that a sufficient and satisfactory percentage of the available units have already been sold).

The bottom line is that the basic clause in an Agreement of Purchase and Sale may or may not allow for the assignment of the agreement to a new buyer, and if it is allowed, it will be subject to specified conditions such as obtaining the builder’s written consent. Most agreements will embellish this basic clause by adding further written stipulations such as:

• Having both the original buyer and the new buyer sign an Assignment Agreement that has been drafted by the builder;
• Mandating the original buyer will not assign the agreement until the builder has managed to sell a certain percentage of the units in the overall development (for example, 85 or 90 per cent), and even then it must be with the builder’s written consent as usual;
• Requiring the original buyer to pay a fee to the builder of (for example) $5,000 plus taxes as part of obtaining the builder’s consent to the assignment;
• Requiring the original buyer to pay another fee plus taxes to the builder’s lawyer (ostensibly as a sort of “legal processing fee”);
• Getting the pre-approval of any lending institution or mortgagee that is providing funding to the builder for construction or otherwise;
• Assuming the builder agrees to the assignment in the first place, prohibiting any further assignments of the offer by the new buyer to any subsequent party;
• Confirming that the breach of any of the original buyer’s promises in relation to how and when an assignment can occur will be considered a breach of the whole agreement (and one that cannot be remedied); and
• Requiring the original buyer to confirm in writing that the property is not being purchased for short-term speculative purposes.

Note that even if the Agreement of Purchase and Sale does not expressly allow or provide for it in writing, some builders will permit an original buyer to make an assignment nonetheless. This is because it is always in the builder’s discretion to give up (usually for a fee) its right to technically insist on the purchase going ahead with the original buyer.

Getting the builder’s consent

It’s important to remember that, initially, the original buyer and the builder had a valid legal contract in place that obliged the buyer to purchase a home or condominium unit from the builder. That original buyer, for whatever reason – whether it’s a change of circumstances (such as a change in a marital situation, job transfer to another city, province or country; birth of children resulting in a home/condominium unit being too small for the buyer), cold feet, or simply the desire to make a profit – has subsequently decided to “sell” that right to buy to the new buyer.

To protect the builder, the assignment will contain clauses that are designed to safeguard the builder’s rights. The most important one is that, as discussed, the builder must give its written consent to the assignment. This will often involve specific builder-imposed requirements, fees and forms that must be completed.

Once consent has been obtained, there may be additional restrictions on the manner in which the original owner can market the property. For example, some builders will insist that the property is not to be listed on the MLS system (where it may be competing with the builder’s own listings for still-unsold homes and units in the same development); if the original owner does so nonetheless, it will be tantamount to a breach of the Agreement of Purchase and Sale, which could entitle the builder to damages, or rescission of the Agreement of the Purchase and Sale while retaining the deposits paid, as well as the monies paid for extras.

However, aside from any marketing/advertising restrictions that may be imposed, the original buyer must clearly indicate in any listing that it is an assignment of an Agreement of Purchase and Sale, not merely an ostensible sale from the original buyer.

Continuing liability after assignment

One key provision in the Agreement of Purchase and Sale – and one that is easy to overlook – may significantly impact whether an original buyer will want to assign his or her agreement at all.

Even though the original buyer has essentially transferred his or her right to buy the property to the new buyer, the original buyer is not fully off the hook. Rather, under the terms of the assignment document, the original buyer can remain liable to go through with the contract if the new buyer does not complete the transaction with the builder.

This written obligation appears in the original buyer’s Agreement of Purchase and Sale, and is couched in phrases that give the buyer continuing liability for the “covenants, agreements and obligations” contained the original agreement. But the net effect is that the original buyer remains fully liable should the agreement between the builder and the new buyer collapse. The agreement may also stipulate that the assignee, meaning the person receiving the benefit of the assignment (the new buyer) must sign an “assumption covenant”, which creates a binding contract between the new buyer and the builder.

(Incidentally, in contrast some builder’s agreements quite conveniently allow the builder itself to freely assign the agreement to any other builder registered with Tarion, which completely releases the builder from its obligations.)

The original buyer’s continuing liability under the Assignment Agreement is a major drawback in these types of arrangements. The original buyer always has to balance the risks and rewards inherent in this scenario.

Documenting the transaction

Assuming that the assignment of an offer is even permitted by the builder, then (as with all contracts) it must be documented to reflect and protect the legal right of the parties.

The technical aspects of an assignment require more than simply taking the original buyer’s Agreement of Purchase and Sale with the builder, scratching out his or her name, and replacing it with the new buyer. (Although, in some cases people do try to “squeeze in” assignment-of-offer terminology into a new Agreement of Purchase and Sale made out in the new buyer’s name – but this is definitely NOT recommended).

Rather, a properly documented transaction makes reference to the Agreement of Purchase and Sale between the original buyer and the builder, but adds a separate document called an “Assignment of Agreement of Purchase and Sale.”

OREA provides a standard form that can be used, although in many cases those builders who permit assignments will insist that the original buyer and the new buyer use the builder’s customized assignment forms, rather than the OREA standardized version.

The specifics of the deal – who pays what?

1) recouping the original buyer’s costs .

At the point where the assignment is being negotiated, the original buyer has typically paid a deposit to the builder, may have pre-paid for certain upgrades and extras and has a large balance owing. This means that in the course of striking a deal to achieve the assignment, the original buyer should give some serious thought to the various costs, fees, pre-paid deposits and tax repercussions of the deal, and how these should be reflected in the price that he or she will want the new buyer to pay under the Assignment Agreement. The timing of the payment(s) will also be a consideration.

For both original buyer and new buyer who are considering an assignment arrangement, here are some of the questions to ask:

• Does the price to be paid by the new buyer include any fee that the builder is charging in exchange for the original buyer’s right to assign the Agreement of Purchase and Sale?
• Does it include any deposits paid by the original buyer to the builder, after the agreement was signed? Does it include any interest that has been earned on those deposits?
• Does it clearly state that the new buyer will take over the entire contract, including the adjustments that are to be paid to the builder on closing? Or are those adjustments to be split between new and original buyer?
• Does the price include money paid by the original buyer for extras and upgrades?
• Are there any additional deposits that are still owing to the builder, under the original agreement?
• Who is responsible to pay the additional fee (the builder-imposed fee) in exchange for the builder giving consent? Usually this will be the original buyer, but the parties may negotiate otherwise.
• Does the new buyer agree to take on responsibility under the original agreement for making additional deposit payments until the final closing date (which may still be months or even years away)?
• Does the new buyer have a full understanding of the amount of all the adjustments that must be paid to the builder pursuant to the original agreement?
• If the original buyer has negotiated any special financial incentives into the Agreement of Purchase and Sale that has been reached with the builder, have these been addressed in terms of whether the new buyer will receive the benefit of them?

In any case, the final purchase price payable from the new buyer to the original buyer will typically be made up of:

• The outstanding balance owed to the builder by the original buyer, that will now be payable by the new buyer;
• The total deposits already paid by the original buyer to the builder;
• The total payments already paid by the original buyer to the builder for any upgrades and extras and
• The profit that the original buyer stands to make in the deal.

2) Deposits and interest on deposits

The treatment of deposits and the interest they may have earned merits a brief separate discussion.

Under virtually all Agreements of Purchase and Sale with builders, the original buyer will be required to pay a series of deposits to the builder, starting with the initial deposit paid when the agreement is signed and on a set payment schedule thereafter. The total of those deposits can be significant.

Once the agreement has been assigned to the new buyer, how those deposits are treated will form part of the negotiations. Typically, the original buyer will get those deposits back from the new buyer as part of the overall purchase price of the assignment transaction; he or she will usually receive them at the time the assignment agreement is entered into and the builder has consented to the assignment.

The potential problem with an Assignment Agreement is financing. The original buyer will want his deposit funds returned before closing, but if the new buyer does not have funds on-hand, he or she may find that financing is very difficult to obtain because banks do not advance mortgage funds at the time an Assignment Agreement is entered into; rather, the financial institution will provide funds only on final closing. This can serve as a roadblock to the new buyer’s ability to repay the deposits and potentially to embark on the transaction at all.

The question of who is entitled to the interest on any deposits pre-paid to the builder is also a topic for the original and new buyers to discuss. In many cases, the interest will be only a small amount (if any) and may be credited to the new buyer, rather than the original one. However, in cases where the original buyer has paid significant deposits over time, and where larger interest amounts have accrued, the parties may want to negotiate a different outcome.

3) Land Transfer Tax

When negotiating the deal, the original buyer and the new buyer must discuss the structure of the deal between them, to ascertain the exact selling price on which the Land Transfer Tax (and any Municipal Land Transfer Tax) should be payable; whether it is the original buyer’s price with the builder (net of HST and the HST New Housing Rebate, which is discussed below), or whether it’s the newly inflated price being paid by the new buyer under the assignment.

Generally speaking, it will be the latter, although in some assignment arrangements the parties have attempted to structure it so that they pay the Land Transfer Tax based on the lower initial price asked by the builder, while taking the position that difference between that and the increased price is merely the “fee” paid to acquire the original Agreement of Purchase and Sale entered into with the builder (thus avoiding having the tax calculated on the higher sale price).

In any case, once the Assignment Agreement is reached, it will be the new buyer who is obliged to pay Land Transfer Tax and any Municipal Land Transfer Tax on closing, not the original buyer.

4) HST and the HST New Housing Rebate 

The issue of how HST is to be treated in an assignment scenario is crucial, but is fraught with pitfalls.

The first issue is how HST on the transaction should be calculated. Because the new buyer’s price will inevitably be higher than the one the original buyer agreed to pay to the builder, there is an important issue as to whether the difference – meaning the original buyer’s profit – should be subject to HST (and if so, who will pay it in the transaction).

This determination hinges on whether the assignment is a “taxable supply” under the tax legislation and on whether the original buyer can be considered or deemed a so-called “builder” of the home for HST purposes. This, in turn, involves a number of complex legal concepts and factual findings – including the intentions of the original buyer as to whether the home is going to be a primary residence.

Next, there is the issue of the HST New Housing Rebate. In a typical scenario, the original buyer may have been entitled to the HST New Housing Rebate, based on meeting numerous qualifying requirements and stipulations. However, once he or she assigns the agreement, that eligibility is obviously lost because he or she is no longer taking title to the home on closing. Only one HST New Housing Rebate application per dwelling can be filed.

But once there has been an assignment, it is the new buyer’s circumstances that will determine whether the opportunity for an HST Rebate exists. He or she will have to meet the stipulated legislated requirements and may either apply directly to the Canada Revenue Agency (CRA), or arrange with the builder to have the rebate amount credited right at closing.

Note that the new buyer may want to take steps to protect his or her position in this regard. For example, when negotiating the Assignment Agreement, the new buyer should make the agreement conditional on receiving written confirmation from the builder that any HST New Housing Rebate will be credited to him or her on closing, assuming that the qualifying requirements are otherwise met. Otherwise, if this commitment is not in writing, the builder, being entitled to exercise its discretion on whether to credit the buyer with the rebate amount on final closing, can withhold it and force the new buyer to apply to CRA directly after closing. Obtaining this commitment in writing is especially important, given the likely lack of prior dealing between the builder and the new buyer.

Other things to consider:

1) who is responsible for the documentation.

In addition to ascertaining whether the original buyer or the new buyer will pay for certain items, it is also important to determine – in advance – which of them will take care of arranging the documentation. The questions to ask:

• Who will prepare the documents needed to achieve the assignment? And who will bear the cost?
• Will the builder’s lawyer prepare the builder’s needed consent to the assignment?
• Since the new buyer cannot renegotiate any of the provisions of the agreement that the original buyer entered into with the builder, are any of those terms objectionable, and if so, how will they be resolved and who will bear the cost?

As discussed, the Assignment Agreement will be conditional on the builder giving its consent. From the new buyer’s standpoint, it should also be made conditional on him or her giving close review to the original Agreement of Purchase and Sale (as signed by the original buyer), the Assignment Agreement, as well as any amendments, waivers, notices (and for condominium purchases, the Disclosure Statement). If for no other reason, it will give the new buyer a chance to consider the specific list of adjustments for which he or she will be responsible to pay on closing. Needless to say, this review should be undertaken with the guidance of an experienced lawyer.

Once the terms of the assignment are settled and the builder’s written consent has been obtained, the Assignment Agreement must be drafted and is attached to the original Agreement of Purchase and Sale that the original buyer entered into with the builder.

Incidentally, the builder may have certain requirements that must be incorporated into the process and accommodated as well. For example, the builder will require the new buyer to provide I.D. and will need confirmation that he or she has the financing required to close in place.

2) Tarion registration 

When negotiating the assignment arrangement, the original and new buyers must be aware of the impact of the New Home Warranty Program as administered by Tarion, particularly if the home being “flipped” is a condominium unit.

3) Financing

There may be financial issues for the new buyer to work out before the deal can go ahead.

As usual, the transaction may be conditional on financing, which will be arranged on the higher price that the new buyer has agreed to pay. However, since some mortgage brokers may be unfamiliar with financing an assignment transaction, getting approval for the new buyer’s purchase may be challenging. This is something that needs to be investigated long before the original buyer and the new buyer start their negotiations in earnest.

4) Commission

A final issue to be negotiated is who is paying the commission with respect to the Assignment Agreement transaction. This includes consideration of the specific commission rate, together with the details on how and when the commission gets paid.

While an Assignment Agreement can be beneficial to both the original and the new buyer – and even to the builder (in extra fees) there are many issues to be addressed and negotiated.

As an agent, make sure your client obtains legal advice prior to finalizing any agreement to assign the original Agreement of Purchase and Sale.

Be careful… be aware… and think!

• Agreement of Purchase and Sale

Toronto lawyer Martin Rumack’s practice areas include real estate law, corporate and commercial law, wills, estates, powers of attorney, family law and civil litigation. He is co-author of Legal Responsibilities of Real Estate Agents, 4th Edition, available at the TREB bookstore and at LexisNexis . Visit Martin Rumack’s website .

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OREA Form in Real Estate:  Fully Explained with Samples

OREA form is most commonly used in real estate transactions in the Greater Toronto Area, Ontario. OREA (Ontario Real Estate Association) prepares all those forms for its member use. 

In this article, all the frequently used forms are listed with a brief discussion regarding what it is used for, the main considerations you would take, and the common practices. To learn the detailed explanation of clauses, please click the link of each individual page. The relevant form template is also provided for your convenience.

OREA Form For both home buyers and sellers

Form 810 working with a realtor is no longer in use. the new replacement is called reco information guide ..

1.    Working With a Real Estate Agent: describing the benefits of working with a real estate agent, what a buyer or seller can expect from an agent, the duties owed to clients, and the responsibilities of clients

2.    Know the Risk of Representing Yourself: explaining the risks when you are a self-represented party in the transaction, though you may still get assistance through an agent who is representing a client. 

3.    Signing a Contract With a Real Estate Brokerage: explaining that a contract is required – a representation agreement – to become a client, and highlighting the information a prospective client should look for in an agreement and understand before they sign.

4.    Understanding Multiple Representation: explaining what multiple representation is and why it is rarely in a client’s best interests to agree to it.

5.    A Note About the Content of Other Offers: intending to clarify to buyers and sellers that the sharing of the offer content is the seller’s decision and the seller can change his decision during the process. 

6.    How to Make a Complaint: providing information about making a complaint to a brokerage or to RECO

Agreement of Purchase and Sale Form 100 

• It is for residential homes except for condos.
• You would ensure to understand it well before signing.
• When you sign this contract it is called an offer on a house. When the seller agrees to your offer and signs it back, it becomes a legally binding document.
• Main clauses and terms include the offer price, irrevocable time, conditions, deposit, completion date, title search, chattel, fixture, etc.
• You would know that conditions are for your benefit and the consequence of removing conditions.
• Full explanation on Agreement of Purchase and Sale

Form 101 for the condo buyer

• It is a purchase contract specifically for a condominium.
• The main clauses and terms different from Form 100 are Certificate Status, Meetings, property management, common expenses, parking, lockers, etc 
• Status of certificate is a fundamental document to tell you the fiscal and physical health of the building and unit. You probably need a lawyer's assistance. 
• Full explanation of Agreement of Purchase and Sale

FORM 320 Confirmation of Cooperation and Representation

It is an agreement between the seller’s brokerage and buyer’s brokerage and it defines the buyer relationship with the buyer agent as well.

It stipulates how much the real estate commission is paid to the buyer brokerage.

If you have a commission rebate from a buyer agent, it is the place you would know the total commission that the realtor is paid.

Full explanation of Form 320

FORM 801 Offer Summary Document

• It is used to ease the amount of paperwork that agents need to file. It covers the basic information such as name, property address, when the offer is registered, irrevocable time, etc

FORM 120 Amendment to Agreement of Purchase and Sale 

• It is used when any change occurs after the agreement is signed by both parties. You can not make any change to the signed purchase contract.
• Typical changes include a name change, completion date, house price, deposit, etc.
• To be effective, this amendment needs to be signed by both parties. 

Form 123 Waiver

• If there is a conditional offer, the conditions are not satisfied to you after the due diligence, but you still want to proceed with the deal, then you can use this form to waive the conditions.

Form 124 Notice of Fulfillment of Condition

• When your due diligence on the conditions is met, you use this form to notify the other party to move on with the deal.

Form Schedule A and B

• Home buyers commonly put their conditions and clauses in SCHEDULE A as an attachment to the purchase contract.
• Home sellers commonly put their conditions and clauses in SCHEDULE B of the contract.

FORM 630 Fintrac

• It is requested by the Canadian government, but there is no need for your signature. 
• Your realtor may need some personal information including your employer, your job title, et

FOR BUYER ONLY

Form300 buyer representation agreement  .

It is used when a realtor provides a service to you.

It covers buyer commission obligation, holdover period, indemnification, etc.

To avoid being locked by the exclusive buyer brokerage agreement, you can specify the property address and shorten the period of validity.

A full  explanation of the buyer agency agreement

Cashback Rebate Agreement

There is no standard form for it. Cashback realtor would commonly document it in the addendum (Schedule A) of the Buyer Representation Agreement or FORM310. 

You would ensure the accuracy of the amount or percentage of the commission rebate, when and how it would be delivered to you. 

FOR SELLER ONLY

Form200 listing agreement.

It is a contract between the seller and the listing brokerage.

It is mandatory for you to sign. There is also a minimum time period request by Treb if you are selling a home with MLS.

The main clauses and terms cover realtor fee, holdover period, indemnification, information usage, etc

Holdover period may appear confusing. You can simplify it as a commission deficiency obligation to the original agency.

Full explanation on the seller agency agreement

MLS Data Information Form

• If you plan to list your home in MLS, you need to use this form.
• It covers most of your home details such as house type, features, square foot, property tax, etc.
• You would also provide your agent with the relevant documents such as property tax bills, utility bills, rental contracts, permits, surveys, etc. 

Seller’s Direction Re: Property/Offers FORM244 

• You can use this form to instruct your realtor to follow your preferences regarding offer notifications. For example, you don't want to be notified of offers untill a specific date.

Lockbox Authorization Form if provided

Open house authorization form if provided, for tenants and landlord.

You would need to fill out and sign this R esidential Tenancy Agreement in Ontario .

RELATED READINGS

• Agreement of Purchase and Sale
• Conveyancing
• Estate Administration
• Estate Planning
• Chattels and Fixtures
• Surveys and Boundaries
• RECO Discipline
• Contract Law
• Agent Obligations
• Residential Tenancies
• Market Conditions
• Interesting
• Expert Witness
• Arbitrations and Mediations
• AEA Program
• List of Courses
• Testimonials

Assignments and Extensions of the Closing Date (Ontario)

I represent the Assignee in a transaction for a condo under construction.

The original Agreement of Purchase and Sale with the Builder provides for a closing date of June 30th.

The Assignment specifically states that “profits” are to be paid on completion of original Agreement. The closing is now delayed.

Assignor is demanding that his profits be paid on 30 June using the “time is of the essence” clause contained in the Assignment. Is this accurate?

The question here is as follows:

“is the first buyer’s consent necessary to an extension of time for closing under the initial sale agreement?”

The answer here, would be “no”, provided you used the standard Form OREA Assignment Agreement. This naturally begs the further question, “if you are a Seller, should you include additional clauses for your own protection?” And, here, the answer would be “yes”.

The “time of the essence” clause in the second agreement (the assignment) has no bearing on this issue. Extensions and alterations all take place under the original agreement (the purchase). By virtue of the OREA Assignment, full authority to “extend” was transferred by the original Buyer to the new Buyer. That doesn’t need to be the case. The Assignor could have negotiated some input/ money/ restrictions/ consent, but I gather that he did not. So, it’s a little too late now.

The closing on deal #2 was predicated on completion of deal #1. It didn’t have to be, but again, if that’s the deal, then, that’s the deal.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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Understanding OREA Forms 100 and 101: A Guide for Ontario Real Estate Transactions

Read our guide on OREA Forms 100 and 101. Learn about their differences, main clauses, and their critical role in property transactions.

Published On

June 16, 2023

The real estate market in Ontario involves various forms and documents to facilitate transactions, with the Ontario Real Estate Association (OREA) being the primary body that issues these forms. Among the most critical documents are OREA Form 100 and OREA Form 101. Understanding the differences and purposes of these forms is important for anyone involved in the real estate transaction process.

OREA Form 101 Explained

OREA Form 101, also known as the Agreement of Purchase and Sale, is a document specifically used for condo buying in Ontario. This form is essentially a contract that details the terms of a real estate transaction. During the negotiation process, this document is referred to as an offer. Once the contract is signed by both parties, it becomes an agreement​1.

Key clauses in OREA Form 101 include real property, common expenses, parking and lockers, title and title search, status certificate and management of condominium, meetings, approval of the agreement, and adjustments. These clauses are critical in a condo purchase and contain information about the condo corporation, monthly maintenance fees, parking spaces, restrictions on title, status certificate, and more​1.

OREA Form 100 Agreement of Purchase and Sale

OREA Form 100, like OREA Form 101, is also known as the Agreement of Purchase and Sale, but it is used for all other types of houses in the residential resale market, not just condos. This form outlines the terms and conditions related to the sale of a property and includes critical information such as the price, closing date, and any conditions that must be met for the sale to proceed​​.

Whether you're a buyer or a seller, if you're participating in a real estate transaction in Ontario, you'll likely need to use the OREA Form 100. It provides a clear framework for the agreement between the buyer and seller, ensuring all parties understand the specifics of the sale. This form also serves as the foundation of any real estate deal in Ontario, providing legal protection to all parties involved, reducing potential disputes or confusion during the transaction​​.

Explanations of Main Clauses

Real Property: This clause requires more information to be provided compared to freehold property resales, including details about the condominium property type, legal name of the condominium corporation, condominium plan number, unit number, level number, building number, and the number and level of parking space, among others​1​.

Common Expenses: Also known as monthly maintenance fees, these are charges the condo corporation levies on the buyer to maintain common areas such as the lobby and gym​1​.

Parking and Lockers: If parking and lockers are privately owned, they can be sold separately. If they are for exclusive use, they are transferred with the unit on the closing day​1​.

Title and Title Search: This clause includes registered restrictions on title placed by the Condo corporation, which the buyer must agree to​1​.

Status Certificate and Management of Condominium: The Status Certificate is a crucial document containing vital information that may impact the buyer’s decision. It's typically included in the condition terms of the contract and needs to be reviewed by a lawyer​1​.

Meetings: This clause deals with any meeting notices the seller may have received that could impact the buyer

Approval of the Agreement: The condo corporation reserves the right to disapprove of the transaction. If it does, the agreement is null and void​1​.

Adjustments: Unlike Form 100, Form 101 does not adjust for the seller’s share of any assets or liabilities of the Condominium Corporation. This includes any reserve or contingency fund to which the seller may have contributed prior to the date of completion. All the rest is prorated by the completion day​1​.

These clauses are an integral part of OREA Form 101 and provide crucial details that inform the real estate transaction.

Mastering the Closing Process

Understanding the nuances of OREA Forms 100 and 101 is vital for anyone involved in a real estate transaction in Ontario. Both documents serve as the Agreement of Purchase and Sale but are used for different property types. While Form 101 is used for condo purchases, Form 100 is utilized for all other types of residential resales.

These forms contain critical information that both the buyer and seller need to understand thoroughly, as they form the legal foundation of the real estate transaction. They detail the specifics of the sale, providing legal protection to all parties involved and reducing potential disputes or confusion during the transaction. Therefore, it's recommended that anyone involved in such transactions familiarize themselves with these forms or consult a real estate professional for advice.

Contact TDJ Law for Help with OREA Form 100 or OREA Form 101

Navigating the complexities of Ontario's real estate market can be challenging. OREA Forms 100 and 101 are integral to residential property transactions, and understanding them fully is important for a successful deal.

At TDJ Law, we have a team of experienced real estate lawyers who can help simplify these forms and guide you through the entire process. We can ensure that your rights are protected, and all the legal requirements are met. Whether you're buying a condo or another type of residential property, we're here to provide expert assistance and peace of mind.

Don't let legal jargon or complex clauses hinder your real estate journey. Reach out to us today and let our team help you understand and navigate OREA Form 100 or OREA Form 101.

Ready to get started?

Take the first step toward your legal needs — get a free quote today.

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