Buying or Selling Property? Don’t Ignore Tenancy Clauses!
When you're buying or selling a property, whether it's vacant or tenanted, paying close attention to Section 5 of the Contract of Purchase and Sale (CPS) is essential. This section typically grants vacant possession unless otherwise specified, such as if there's a tenant. Realtors must address tenancy matters in the CPS to avoid potential complications.
A notable case is Aulakh v. Nahal in the British Columbia Supreme Court. In this case, the realtor, acting as a limited dual agent, knew about two tenancies but didn't follow up on obtaining the tenancy agreements from the sellers. Assuming the buyer intended to keep the tenants, she left Section 5 requiring vacant possession unchanged. In court, the realtor testified that both parties intended to handle tenancy matters directly, but this was never documented. The sellers did not terminate the tenancies, and the realtor failed to verify the tenancy status.
On the possession date, the buyer refused to complete the purchase because the tenants still occupied the property. The court found the sellers in breach for not delivering vacant possession and held the realtor 25% liable for not addressing the tenancies in the contract. The court concluded the realtor was negligent for not documenting her understanding that the buyer would keep the tenants, failing to record that the parties would handle tenant matters directly, and not following up before closing to ensure this was done.
As a buyer or seller, it's crucial to review the contract carefully and ensure that Section 5 accurately reflects the tenancy situation. Don’t let oversight lead to legal troubles!