Firstly, we hope you and all of your families are doing well and observing as much as possible the directive to stay home and work from home as much as you can. These are difficult times and this is the best way to get through them.
However, although most of us are home as much as possible, many of you have questions about the impact of Covid-19 measures on existing or new closings. Below is the essential information that you need to know. The Bottom Line is that Real Estate transactions are still closing:
- The Land Registry Office and Teraview system are digital and there is no expectation that they will be shut down at this time.
- Lawyers have been declared an essential service and as such can remain open to complete real estate closings, although many are adjusting to working from home.
- The Law Society has relaxed rules on Commissioning Affidavits and Declarations so lawyers are allowed to Commission sworn documents and Identify clients remotely using digital signatures and video interviews. Lawyers are signing clients remotely and banking online as much as possible. Also, the current circumstance has people thinking about estate planning and Wills, which often requires making sure title is held in joint tenancy so that if one person passes away the property automatically passes to the survivor. The Ministry of the Attorney General has advised that an emergency Order In Council has been made under s. 7.1 of the Emergency Management and Civil Protection Act with respect to the virtual commissioning and execution of wills. This means that people can both have their Wills and any Title Transfer required completed virtually.
- Lenders are allowing lawyers to sign their documents through digital signature and remotely on mortgages for purchases and refinances, although some lenders are not or are doing so on an ad hoc basis.
- Title Insurance companies have confirmed that their fraud coverage will apply to cover buyers and lenders accepting digital signatures and remote signing.
- The law is not clear on whether Covid-19 measures can excuse the performance of a Residential Real Estate contract. The two most likely elements or doctrines of law to apply to the situation are Force Majeure clauses and Frustration of Contract.
- Force Majeure: Unlike most Commercial agreements there are no Force Majeure clauses in the standard Orea Residential Resale forms. These are clauses which allow parties to be discharged from the obligations in the event of serious unforeseen circumstances.
- Frustration of Contract: This applies to discharge parties from their obligations when through no fault of their own unforeseen events make completing the contract something almost completely different than what they had bargained for. Essentially, the parties’ reasons for entering into the contract have to be destroyed by the unexpected event. It would be difficult to establish this in a Residential Real Estate transaction. Frustration of Contract is a final options which require the parties to almost have no other alternatives or workarounds to limit or avoid losses. Given that registry systems, law offices and banks remain open it is unlikely to apply to residential real estate transactions.
- Cooperation between the Parties and Lawyers: Given that the law is not clear, lawyers and clients are being advised not to take hardlines in instances where Covid-19 measures impact a party’s ability to close, as it is expected that courts will not look favourably on a party who is not reasonable or takes advantage of the current circumstance.
- Covid-19 Clauses: Covid-19 clauses have been drafted to factor this reality into an greement:
- Covid-19 Clause – more ways out, better for buyers as they are more likely to need a way out- although it does give both the buyer and seller more ways out: The parties agree and acknowledge that in the event that either the BUYER, SELLER, or any of their respective lawyers/notaries, relevant service providers, branches of Canadian Banks or other Lenders, Land Registry Offices or other Government Agencies become the subject of a Voluntary or Mandatory Covid-19 virus quarantine, closure or travel restriction prior to the time of completion herein which results in the Buyer or Seller being unable to complete the transaction on the completion date stated herein, the completion date herein shall be automatically extended at the request of either party for a period of up to ten (10) business days after such quarantine, closure or travel restriction order is lifted. Such extension shall be up to a maximum delay of sixty (60) days unless the parties otherwise mutually agree to further extensions. Upon the expiration of the maximum 60 day extension period either party may elect to terminate this Agreement, in the event of which both parties will be released from any liability or obligation to each other.
- Covid-19 Clause -less ways out, better for sellers as the are less likely to need a away out- although it does give both buyers and sellers less ways out and confirms an obligation to Close: The parties herein acknowledge and agree that they are required to close this transaction notwithstanding any impacts of Covid-19, save and except the closing of the Land Registry Offices and all financial institutions. In the event that the closing herein cannot happen because of a shutdown/disruption in the operation of the Land Registry System and/or financial institutions, the completion date herein shall be automatically extended to the fifth business day following the date upon which the said shutdown/disruption ends and the Land Registry System and financial institutions reopen.
- With many law offices closed, or lawyers working from home, clients should expect to have to wire funds to lawyers and key exchange arrangements to be made between buyers and sellers, perhaps with the help of agents.
- Tarion has amended its rules about times for extensions and many builders are using the “Unavoidable Delay” provision to extend transactions.
- Lawyers and all participants in the industry are being advised to be on high alert for possible instances of fraud because of the relaxed rules and video signing.
The situation is fluid with regular updates from the Law Society, Title Insurance, Lenders, and Governments so all of this is subject to possible change. We wish you good luck, health and safety during these difficult times.
Title Tips is not intended and should not be relied on as legal advice. For specific questions or situations, please feel free to call John Zinati for assistance.