Protecting your deals during COVID-19
During this difficult time of isolation due to COVID-19, everyone must do what they can to make sure buyers and sellers can still successfully enter into and complete their real estate contracts. Here are five questions and answers about real estate deals as they may apply in BC.
1. Has the government registration system closed down?
The online registration system has not closed down. The government registration system and lawyers have been deemed essential services by the province. However, law firms must be able to complete every part of a transaction remotely. Our law firm operates on our own IT infrastructure and is set up to deal with this ever-evolving situation, including signing clients remotely; digital transfer of funds (so clients do not have to attend the bank); and lockboxes for our sellers to promote social distancing; and paying sellers and real estate brokerages directly through EFT (no cheques to pick up). We can also hold the deposit of a real estate agreement in our trust account through a regular bill payment if any listing brokerage is not set up to do this. Please check to make sure your own law firm is also properly prepared to make sure your deal will close in time.
2. Can buyers or sellers cancel their purchase and sale agreement because of COVID-19?
Some people mistakenly believe that because of the pandemic, anyone can just turn around and cancel their real estate agreement. This is not true. It is similar to the market mini-crash in 2017 when prices fell almost 20 per cent overnight. These events do not give anyone the right to cancel an agreement. The only way a deal cannot close is if the government registration system closes down or lenders cannot fund loans, which is not the case right now.
3. What precautions can I put into an agreement right now to help make sure the deal closes?
The first clause is to pay all money on closing by wire transfer only. This eliminates having to deliver any certified cheque or money order.
The second is to permit all documents to be signed and delivered electronically. This will avoid having to deliver any documents by courier.
The third is for sellers to place lockboxes on their home, with the code given to the buyer lawyer at closing. This avoids having to go anywhere to pick up keys.
The final clauses deal with how to handle a delay, specifically if the government registration system goes down, to permit either an extension of the agreement or closing in escrow, which will permit buyers to move in, sellers to receive their money and protection by title insurance.
4. Should these clauses be inserted into agreements that were written in the last month but are closing next month?
Yes. All existing agreements should also be amended with these clauses to ensure that best practices of social distancing in all aspects of real estate closings is maintained, so that the deal will still close as scheduled.
5. What can people do to save deals where there are legitimate delays due to illness?
Buyers, sellers and their agents should work together with their lawyers to try and resolve any issue. Deals can be extended, on terms that are fair to everyone.