Realtors: Closing your transactions amidst the COVID-19 pandemic

Realtors: Closing your transactions amidst the COVID-19 pandemic

Will COVID-19 impact closing your Real Estate transactions?

A hotter than ever spring housing market coupled with a reduction in mortgage rates is responsible for record-breaking numbers of Real Estate transactions in markets across Ontario.

As the coronavirus (COVID-19) continues to spread, it may soon become a reality that your clients and perhaps you will face a quarantine much like we’ve already seen occur in China, Italy, Iran and other countries.

This may present unexpected challenges in closing your Real Estate transactions that may impact your clients and your business. Here are the most common questions we’ve received along with potential contingency plans to minimize disruption to your business and your client’s lives.

For firm deals, are clients obligated to close?

Most firm residential real estate transactions in Ontario require the buyer or seller to close the transaction by a specific date as set out in the Agreement of Purchase and Sale (APS). 

Most residential transactions do not usually include a force majeure clause that typically excuses a party from performance if the failure to perform is due to an event beyond the party’s control.

Therefore, in most cases, clients will still be obligated to close their transaction despite any challenges that may be beyond their control.

For any deals moving forward, consider including a COVID-19 delay clause to protect you and your clients from a delay that is caused directly by COVID-19 disruption (such as a quarantine). This clause should be written and reviewed by a lawyer as it will need to be specific, clear and enforceable.

Can closings be delayed as a result of COVID-19?

Closing can be delayed if an amendment to the agreement of purchase and sale (APS) is signed and agreed upon by all parties.  If you or your clients foresee the need to postpone or change your closing date, the sooner amendments can be signed by both parties, the better. 

Given the uncertainly, it is important to proactively communicate with your clients, lawyer, and the co-operating agent to ensure the closing is proceeding as scheduled.  Knowing the flexibility of your buyers and sellers can make a big difference in putting together potential amendments.

What if clients cannot make it to sign closing documents?

To close the transaction, your clients will have to attend a lawyer’s office to sign closing documents.  Some lawyers may offer at-home signing, which may not work in the case of a full quarantine.

At Deeded, we have started to leverage remote signing and ID verification technology to allow clients to sign documents via video conference from the comfort of their home.  This service is available to qualified clients. Please reach out to us at hello@deeded.ca if we can help with your closing.

What if lenders are disrupted by Coronavirus?

Most employers are taking serious measures to protect their employees and prevent further spread of the virus in the workplace. As such, lending operations may face delays and logjams caused by shortages of staff.

Mortgage instructions from the lender are required to close a deal that requires financing and a delay in getting mortgage instructions may mean a delay in closing. It is best to be proactive, working with your partners on the deal to ensure that:

  1. Clients sign mortgage commitments – Some lenders may offer remote options to sign paperwork.
  2. Mortgage instructions are sent to the lawyer’s office at least 2-3 days prior to closing

What if the land registry closes down?

Most title insurance policies include Gap Coverage that insures both purchasers and lenders against losses due to intervening registrations on title between the date of closing and the date of registration.

This means that in the event that online registration is no longer available, or land registry offices experience delays or closures due to COVID-19, transactions can close on time and funds and keys can be released to the respective parties.

What if my brokerage is closed?

Some brokerages have advised agents to work from home and may take additional steps to close their office during the pandemic and have deal staff working from home. This may impact your ability to take deposit cheques and collect commission cheques in a timely manner.

For deposits, you can ask that it be wired or directly deposited into your brokerage’s trust account instead of taking deposits as cheques. Payment for commissions can also be wired/transferred from the lawyer’s office to the brokerage and if your broker is already setup to transfer commissions into your bank account, this can avoid any delays and potentially disrupting your cash flow.

What else should I consider?

The escalating situation with the spread of COVID-19 may impact other parts of your transaction such as your lawyers, mortgage brokers, stagers and other key resources.  It is more important than ever to proactively communicate with your partners and develop a contingency plan. 

Important note: This article is not Legal Advice.  Please consult with your lawyer for specific information or any advice related to your specific case.  No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.

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