A promise to purchase is a contract with legal value that the signatories undertake to respect.
However, what happens if the buyer whose offer to purchase has been accepted by the seller decides, for whatever reason, to back out before going to the notary?
This is not impossible, but you will have to pay for collateral damage if there are no conditional clauses provided for in the offer.
What is a conditional clause?
An offer to purchase or, subsequently, a promise to purchase may be conditional. I will buy if I sell my house within the next thirty (30) days; I will buy if I have the property inspected to my satisfaction or I will buy if I obtain financing allowing me to acquire the property.
It’s important to set a deadline for your property’s condition of sale, such as 30 days, and to show good faith by being active during that time to sell your home.
Regarding inspection and financing, it is somewhat different. The buyer will have to take action to show his good faith, of course, but the final decision is not his. We understand that if all the banks refuse to lend me the funds, I will not be able to acquire the building. As for the pre-purchase inspection, the defects must be such that they modify my desire to acquire the building or that I no longer want to acquire it for such a high price.
What if there are no conditional clauses?
To show the seriousness of his intention to acquire the property, the buyer submits an offer accompanied by a deposit. If the sale is made, this sum is debited with the amount of the transaction. Otherwise, if the transaction fails without fault on either side, it is refunded to the buyer.
In the event that the latter refuses to become a buyer, the seller would have three options, according to Me Luc Audet, lawyer.
Two clauses to avoid problems
In order to avoid recourse to the courts and the procedures that follow, Me Audet suggests two clauses that may prove useful:
A. The forfeiture clause
It allows the buyer to discharge his promise to purchase in return for a sum pre-established between the parties.
B. Penalty clause
Unlike the previous one, the choice is up to the seller. The parties agree on the damages, but it is the seller who asks that the sum be paid to him, otherwise he will address the courts which will determine the amount of these damages.
In conclusion
It is not easy to get out of a promise to purchase on a building, unless the parties agree to go back on their word.
However, honesty is often a good trick to get by. If you do not think you can afford the property on which you have submitted an offer to purchase which was accepted, you can settle everything with the seller by explaining the situation to him. Who knows ? Perhaps it will allow you to find a new buyer who will become the owner in your place.
Tips
