When it comes to the intricate process of buying or selling a residential property, understanding the legal aspects is crucial for a smooth transaction. Among the many components involved, warranties can play a pivotal role in shaping the terms and conditions of the sale. In this blog post, we will delve into the issue of warranties on chattels to provide clarity for both buyers and sellers.
Chattels in property transactions
Chattels refer to movable personal property that can be included or excluded from a property sale. While the sale of a residential property typically includes fixtures—items permanently attached to the property — chattels can vary. Common examples of chattels include appliances, furniture, and other movable possessions.
To avoid confusion, it is crucial for both parties to clearly outline which chattels are included in the sale. This information is usually detailed in the sales contract or a separate chattels list. Sellers should take inventory of what they intend to include or exclude, and buyers should review this carefully to avoid any misunderstandings during or after the sale.
Warranties with respect to chattels
Warranties are assurances or guarantees provided by the seller to the buyer regarding the condition of the property. In the standard purchase and sale agreement typically used in Ontario (the “OREA Standard Form 100”), the Seller only agrees to convey any chattels included in the Purchase Price free from all liens, encumbrances or claims affecting the said chattels. This is not a warranty that the chattels are actually in working order. If this is an important aspect of the purchase for the buyer, they will want to work with their realtor to ensure that a specific warranty is included. A typical warranty might read:
The Seller represents and warrants that the chattels included in this Agreement of Purchase and Sale will be in good working order on completion of this transaction. The Parties agree that this representation and warranty shall survive and not merge on completion of this transaction but apply only to the state of the property at completion of this transaction.
This promise on the part of the seller can serve to instill confidence in the buyer, ensuring that they can expect the chattels to be in “good working order” on the day of closing.
This phrasing, however, impacts the temporal scope of the warranty in two ways: (1) the chattels are only warranted to be working at closing, but (2) the warranty can be enforced after closing. Taken together, this means that there is no guarantee with respect to how long the chattels will remain in “good working order.”
This legal nuance underscores the importance of precision in contractual language and underscores the need for comprehensive property inspections during the pre-closing phase. Both a buyer and seller are well served if they have evidence of the working condition of the chattel on closing.
Navigating legal disputes
Typically, realtors and not lawyers are involved in the drafting of agreements of purchase and sale, however, it often falls to the lawyers closing the purchase and sale to mediate disputes that may arise from misunderstandings or disagreements regarding these terms. Whether you are the buyer or the seller, clarity and transparency during the transaction process can pave the way for a seamless experience. Legal guidance adds an extra layer of assurance, ensuring that both parties are protected and that the transaction is conducted within the bounds of the law.