Blog

Tag: coliving agreement

  • Should I Be Drafting My Own Agreement of Purchase and Sale?

    Should I Be Drafting My Own Agreement of Purchase and Sale?

    Some homeowners or home buyers have contemplated at some point whether they should be buying or selling their home without the help of a Real Estate agent, or privately as it is commonly referred to.

    We are not going to debate the reasons for and against buying or selling privately.  We believe that Buyers and Sellers need to understand the pros and cons of using certain professionals in their transaction, and ultimately, it is entirely up to the individual Buyer or Seller to decide what resources they may or may not want to use for their purchase and sale.

    What we have seen lately is Buyers and Sellers who are completing their transactions privately and are drafting their own agreement of purchase and sale; occasionally using templates and forms from the Real Estate boards and associations, or the similar forms to what Real Estate agents are using.

    There is one positive aspect about using templates and drafting your own Agreement of Purchase and Sale in order to negotiate your private transaction and that is, it is better than a hand-shake after all.  When an Agreement is signed by both parties and consideration is provided, it becomes binding. Which means all parties are now obligated to fulfill the terms and conditions of the said Agreement.

    While the “do it yourself” (DIY) drafting of a contract method may work for purchasing a used car or some simple low-cost items, a home is one of the largest purchases you will ever make.  A mistake or an issue with an Agreement can end up costing you a significant amount should things not play out the way you have expected them to.  

    That is why it is almost critical to have your Agreement reviewed by a lawyer prior to signing. No matter how simple or straightforward you may believe the Agreement to be. We have seen DIY Agreements that missed inclusions of appliances (imagine moving into your new home only to discover the seller took all their appliances while you were assuming they were included). All the way to incorrectly describing the property or land. Ultimately, minor mistakes can become costly in the end.

    But I’m Using the Same Forms Real Estate Agents Do, What Can Go Wrong?

    On a practical level, Real Estate forms are the standard way to contract for a Real Estate Purchase or Sale.  However, there are issues right off the bat with using real estate templates.

    First, most forms are copyrighted and licensed by the Real Estate boards or brokerages. For example, in Ontario, OREA licenses its forms to their members and the OREA purchase and sale form is used as a standard by Real Estate agents across Ontario.

    Even though they are readily available by doing a simple Google search, you may be infringing on copyright or licensing agreements if you are not licensed to use the forms. Second, forms that are found online may be outdated or may have been modified, sometimes in undetectable ways.

    The other thing to keep in mind is that Real Estate agents are licensed, regulated and insured.  When a Real Estate Agent writes up an Agreement, they have been trained to do so through their licensing process, by their brokerage, or through experience of putting together many Agreements.

    They are also insured by an errors and omissions policy. Say your agent made a mistake on the Agreement, which caused you financial damages.   Your agent (or their insurer), would be responsible for any claims and settlements.

    When it is you who writes the Agreement, no matter if it is on a Real Estate form, you are not insured. Therefore, any claims for a mistake you may make, must be paid out of pocket.

    Can I put the Agreement Together and Have a Lawyer Review?

    Yes you can, an experienced Real Estate lawyer works with Agreements of Purchase and Sale on a frequent basis and has the experience to spot any potential issues.   A lawyer can either review an Agreement you have put together prior to signing, or offer to draft an Agreement for you from scratch.

    How Much Will it Cost to Review an Agreement?

    It is probably less than you think.  Especially if considering the peace of mind and potential risks you may be taking. At Deeded, we would be happy to help review and/or draft your Agreement and provide you with a quick turnaround.

    1
    Read more
  • Buying Real Estate With Friends? Use a Co-Living Agreement

    Buying Real Estate With Friends? Use a Co-Living Agreement

    If affording Real Estate in Toronto is out of the question for you, there may be a light at the end of the tunnel.

    With prices of Toronto and Vancouver Real Estate skyrocketing, co-living is starting to become an increasingly popular way for people to get into the market. According to a report by RE/MAX realtors, more than 40% of Canadians overall would think about buying with a friend or relative.

    So, what is co-living?  Co-living (or co-housing as it’s sometimes called) is where residents share living space and a set of interests, values, and/or intentions.  It’s a new take on an old idea, inspired by the sharing economy.

    Essentially, it involves buyers sharing occupancy and ownership costs of buying a home.   It could be with friends, family members, or in a growing amount of cases, strangers. Sharing the costs of the down payment, mortgage payments, utilities and property taxes opens up a new door to home ownership, but what are the risks?

    No matter if it’s family, your best friend or a stranger, it is important to consider that priorities can change and things can always be unpredictable.  While owning even a part of a home is an asset, it may not be as easy to pull out your money and walk away should things not work out.

    Therefore, having an airtight and binding arrangement is essential before agreeing to a co-living agreement or co-investment situations.  Here are some of the elements we suggest discussing with (and eventually agreeing on) with your co-living partner(s):

    Budgets

    • • Understand initial outlays such as deposits, closing costs
    • • Calculate operating costs such as property taxes, utilities, repairs, maintenance fees, etc.

    Financing and Deposits

    • • Did all parties pre-qualify for their portion of the required financing?  
    • • Does everyone have access the needed deposits or down payments, plus closing costs?

    Equity and Ownership 

    • • What percentage of ownership does each party get on title?
    • • How will you divide ongoing expenses such as repairs and insurance?

    Liquidity 

    • • What happens when all parties agree to sell?  
    • • What happens when one or more of the parties do not agree to the sale of the property?   
    • • How is risk/reward shared in a market where a property may appreciate (or depreciate)
    • • What process will be used to value the home should there be a sale

    Management and Rules of the House

    • • Dividing up common chores such as, for example, cutting the lawn
    • • What would happen if one person becomes unemployed or ill and can’t afford to pay his or her share of the mortgage
    • • If one of the co-owners falls behind on mortgage and tax payments, how does the other owner recover his or her share of the arrears?

    Even though some of these items may lead to a naturally uncomfortable discussion, it is critical to have an agreement in place that ensures not only the smooth operation of the property, but a fair division of ownership and a fair way to unwind the partnerships should things go in a different direction.

    Consulting an experienced lawyer is an essential part of ensuring a fair, binding and enforceable co-living agreement.  It is a worthwhile expense, even if things are looking rosy at the moment.

    1
    Read more