If you’ve bought or sold a resale home in Ontario, chances are you’re familiar with the standard-form Agreement of Purchase and Sale by OREA. This agreement is widely used by many Real Estate practitioners across the province…myself included. The Agreement provides a thorough and easy to understand agreement for buyers and sellers. Included in this agreement are 27 standard-form worded clauses which provide for almost every ambiguity one might have about the intricacies of standard Real Estate sales in Ontario.
However, if you were to ask a dozen Sales Representatives what the Requisition Date is and how it might affect a property, chances are none of them would likely understand the Requisition Date, its purpose, or consequences. Provisions in pre-worded clauses such as these are commonly kicked out to “being the lawyer’s problem for closing”.
The Reality of this, however, is that the Requisition Date is an incredibly significant date and due care should be taken when selecting it. A Sales Representative or Broker who knows not of the gravity of such date is a liability to all involved in the transaction. This unfortunate lack of knowledge and understanding of the date, combined with some REALTORS® general lack of due care, can lead to calamity in a Real Estate Transaction, as illustrated by several court cases.
As a licensed REALTOR® and someone affiliated with a Law Firm, I can attest firsthand to the importance of planning the requisition date BEFORE the agreement is signed. Often times, by the time the agreement reaches the Lawyer’s desk, it may be too late.
What is The Requisition Date?
The Requisition Date is a date by which the Purchaser of Real Property in Ontario should have completed necessary Title and Off-Title Searches and be aware of all problems relating to Title of the subject property.
These issues include (but are not limited to) problems related to:
- Lawful continuance of present use
- Success in obtaining fire insurance
- Outstanding work orders or deficiency notices against the property.
It’s important to note that the Requisition Date itself is not the deadline for objecting to title issues. Rather, it is used in the calculation for such deadline.
Sound confusing? That’s because it is. The deadline for the objection of title is a confusing calculation. The Requisition Date is only one of many dates used to determine when the last day a Purchaser might be able to object to title-related issues on the subject property.
Calculate the Requisition Date
Here’s how the calculation section of the Requisition Date in the “Title Search” clause reads:
“Buyer Shall be allowed until 6:00 pm on [DATE] (Requisition Date) to examine the title to the property at Buyers own expense and until the earlier of (i) thirty days from the latter of the requisition date or the date on which the conditions of this agreement are fulfilled or otherwise waived or ; (ii) five days prior to completion, to satisfy Buyer that…”
On reading this clause, you might note that the requisition date, if improperly placed, might not have any effect on the Agreement whatsoever.
The method to calculate the Deadline to Object to Title Issues on the property is as follows:
1. Determine the Latter date between the (A) Requisition Date and (B) Date on which the last condition (if any) in the agreement is waived or fulfilled.
2. Calculate thirty days following (A) or (B). Remember this date.
3. Calculate 5 days prior to the “Completion Date” specified in the agreement.
The Earlier of (2) or (3) is the deadline to object.
Although the Requisition Date might not be used in determination of the deadline, it is an indicator of when a Lawyer should have completed the necessary searches.
How does The Requisition Date Affect the Agreement?
The calculated “Objection Date” affects both purchasers and sellers in an Agreement. Clause 10 (“Title”) provides that if such objections are made prior to the Objection Date and the Seller is either unwilling or unable to remedy the issues therein, (either by fixing the issues or obtaining Title Insurance), the agreement could be considered at an end and the deposit monies returned to the respective parties.
If the purchaser does not object to title by the Objection Date, then the purchaser will be deemed to have accepted title to the property.
“On Title” Versus “Off-Title” Issues
The clause in the agreement provides for objection to issues that may be more than “registered on Title”. It’s important to note that Title Issues on a property can exist in valid form even if not explicitly “on Title”. Tax Arrears, Work Orders, or deficiencies that may void fire insurance are all examples of valid objections that do not typically appear on Title.
Some ways a Lawyer should properly perform off-title searches include:
– A request to a City or Town’s Building Department, requesting confirmation that there are no work orders affecting the subject property.
– A request for the City or Town to provide a Tax Certificate, showing any arrears (which could take Title Priority) for the subject property
Running to The Root of Title
The “Title” clause in the Agreement of Purchase and sale provides for issues that run to the Root of Title.
In Ontario, the primary objective for a Lawyer acting for a Purchaser in an exchange of Real Property is to obtain good and valid title on behalf of their client. Lawyers, as well as Realtors®, should advise their clients of any issues that would affect title to the subject property and proceed according to clients directives.
It’s important to make a distinction between Title Issues, and issues that run to the Root of Title.
A Title issue is something that could affect the “marketability” of interest in a property. These issues might not injure the owner of Title directly, but could have implications. For Example, tax arrears on a property wouldn’t cloud title (in normal circumstances). The owner with the beneficial interest in land hasn’t lost title to their property or their priority in the claim of beneficial interest in land.
Similarly, an outstanding Work Order could affect the marketability of the property (i.e. the property isn’t legal until the Work Order is Complied with), but doesn’t really have an effect on the ability to transfer title from one owner to another. (Exceptions, as always, may apply). The Market Value of the property might be reduced due to these issues, but no prohibition on the transfer of title exists in these situations.
By contrast, An issue that runs to the Root of Title, is a claim or encumbrance that effectively prohibits a purchaser from obtaining good and valid Title. For example, a mortgage would have to be discharged in order for the property (as specified in the agreement) to be conveyed to a purchaser. If the Purchaser accepted Title without ensuring this encumbrance is cleared, it would be essentially the same as purchasing the property LESS the value of the Charge/Mortgage.
Issues that run to the root of title can be objected to right up until the date of closing.
It’s important to act in good faith when objecting to issues. Lawyers, Purchasers, and Sellers, should always be acting with the common interest and goal of successfully conveying subject property from the Seller to the Buyer. Cooperation, collaboration, and reasonable accommodation is expected by both parties.
Various cases exist related to Title objections, where one party attempted to hide, construe, or otherwise manipulate facts pertaining to title to gain competitive advantage in the sale. The courts do not look favorably upon this type of behavior. Read about an interesting case here.
Preprinted Versus Typed
Working in Real Estate, I’ve seen some interesting clauses proposed by agents in Agreements. Recently, I received an offer on a property with a clause similar to the following:
“Seller Agrees to rectify and remove any work orders at their expense.”
As a REALTOR®, I have many issues with this clause. However, the biggest issue is that it essentially supersedes the Title Search and Requisition process, and applies a blanket covenant by the Seller.
The OREA Agreement of Purchase and Sale stipulates that typed clauses supersede their preprinted counterparts. It’s important when reviewing an agreement to not inadvertently waive a right provisioned for in preprinted Agreement wording.
Missing the Deadline Date
The Requisition Date should be of utmost importance to Purchasers in an Agreement of Purchase and Sale; second only to condition deadline dates.
While missing the Requisition Date (or associated deadline) can have consequences in conveying Real Property, it isn’t the end of the world.
As a reminder, if the issue runs to the Root of Title, concessions must be made or the agreement could be viewed at an end.
Problems that do not to the root of title but are discovered outside of the deadline can be mediated with options such as Title Insurance.
The Requisition Date is an incredibly important date in the Agreement of Purchase and Sale. Due care should be taken by Purchasers, REALTORS®, and Lawyers when selecting, negotiating, and operating in accordance with such dates.
Wish to work with someone who knows all about Requisition Dates? Have additional Questions? Contact ReaLawState or ask Baron to represent you in your next transaction.