The Promise to purchase

Depending on the type of property, your broker will use one of these mandatory Promise to purchase forms designed by the OACIQ:

Chiefly residential immovable containing less than five dwellings excluding co-ownership

Undivided co-ownership – Share of a chiefly residential immovable held in undivided co-ownership

Divided co-ownership – Fraction of a chiefly residential immovable held in divided co-ownership

Mobile home situated on leased land

Public curator

TALK IT OVER WITH YOUR BROKER

Ask him to explain all the clauses to make sure you understand them clearly.

GOOD TO KNOW

If you are looking to buy a new residential property built or on plans from a real estate developer or builder, the Civil Code of Québec requires the use of a preliminary contract in lieu of the Promise to purchase, which is used by brokers for resale transactions. Your broker has a duty to require the use of a preliminary contract where appropriate. When this type of contract is drafted, he must also make sure that the form GST-QST New Housing Rebate Application: Rebate Granted by a Builder is duly completed.

Understanding the clauses

1 - Identification of the parties

This section is used to identify the buyer and the seller or their mandataries, if applicable. It will include your name, address, telephone number and email address (if applicable). The broker is responsible for verifying the identity of each of the parties to the transaction using a piece of ID.

2 - Object of the promise to purchase

This is where you promise to purchase the property and where the broker acting as your intermediary in the transaction is identified.

3 - Summary description of the immovable

The Promise to purchase must contain a description of the immovable, including:

  • Address;
  • Cadastral description;
  • Size and area of the lot.

Undivided co-ownership property

If the immovable is held in undivided co-ownership, the Promise to purchase must specify, among other things:

The exclusive uses relating to the share being purchased;

The area of the share;

Whether the area indicated on the certificate of location is “gross” or “net.”

Divided co-ownership

The Promise to purchase must specify:

The cadastral description of the private portion. If parking and storage spaces are private portions, their cadastral descriptions must also be indicated since they are different;

The share and cadastral descriptions of the common portions.

Immeuble à revenus

It is recommended for the buyer and his broker to attach an Annex L – Income property form to the Promise to purchase in order to clearly spell out the conditions relating to this type of immovable, for example by allowing you to make your Promise to purchase conditional upon receiving information or undertakings from the seller regarding current leases or the status of the immovable.

4 - Price and deposit

This is the section of the form where your broker will enter the price you are offering to the seller for his property, which you undertake to pay in full upon signing the deed of sale.

This is also the clause that specifies whether or not the property is subject to GST and QST and, if so, in what proportion. Generally, the sale of a residential property that is not a new construction and has not had major renovation work done is exempt from GST and QST.

An income property can include a residential portion and a portion used for commercial purposes, which would be subject to GST and QST.

You can give your broker a deposit on the purchase price to show to the seller that you are a serious buyer. If your Promise to purchase is accepted, your deposit will be deposited without delay in a trust account held by your broker or his agency.

5 - Method of payment

The Promise to purchase specifies how the purchase price will be paid. It lists the deposit, the down payment and the mortgage loan that will be used.

6 - New hypothecary loan

The terms of the mortgage loan which you undertake to obtain must be entered here. In addition to the amount required, the clause must specify the current interest rate that shall not be exceeded, the duration of the amortization plan, and the minimum term you desire.

If you do not provide proof of borrowing of the amount offered on the Promise to purchase within the specified deadline, the seller may:

  • Require that you make a new application for a mortgage loan in accordance with the conditions set out in the Promise to purchase, with a specific mortgage lender and within a given period of time; or
  • Render your Promise to purchase null and void.

If the seller does not avail himself of any of these options within the time period stipulated, your Promise to purchase will become null and void.

7 - Declarations and obligations of the buyer

This clause specifies various elements, including:

  • The date on which you visited the immovable and declared yourself satisfied therewith;
  • That the notary fees (cost of the deed of sale, its registration and any copies) are at your expense (unless otherwise agreed by the parties);
  • That you undertake to pay the transfer duties (commonly known as the “welcome tax”);
  • That you may not sell, assign or otherwise alienate your rights in the Promise to purchase without the prior written consent of the seller;
  • In the event that no deed of sale is signed through your fault, you undertake to compensate the agency or the broker bound to the seller by brokerage contract, by paying damages equal to the remuneration that the seller would have had to pay.

8 - Inspection by a person chosen by the buyer

Your broker must recommend that you have an inspection done of the property you are proposing to acquire. This is where he will indicate if your Promise to purchase is conditional upon an inspection by a building inspector or a professional. He must also specify the time period in which this inspection must be completed.

You may waive your right to an inspection by checking the box to this effect. Be sure that you understand clearly the implications of your decision not to have an inspection done.

Divided co-ownership

You may limit the inspection to the private portion. However, an inspection of the entire building is recommended.

For more details, please refer to the section entitled The inspection.

9 - Review of documents by the buyer

In this clause you can enter the documents you would like to review, such as leases, leasing contracts for devices such as the water heater or the alarm system, or warranties concerning the inclusions. You will also specify the time period which the seller has to provide you with these documents.

If you do not obtain these documents within the specified time period, or if you are not satisfied following your review and verification, you will have the right to cancel your Promise to purchase. In this case you must notify the seller in writing within seven days following expiration of the period in which the seller had to produce the documents.

Divided co-ownership

Certain documents are automatically listed, including the declaration of co-ownership, the by-law of the immovable and the minutes of meetings of co-owners.

GOOD TO KNOW

If you do not obtain the documents requested within the period specified, or if you are not satisfied following your review and verification, you may cancel your Promise to purchase.

10 - Declarations and obligations of the seller

This is the clause where the seller declares that he is the owner of the immovable or is duly authorized to sign the Promise to purchase.

The declarations concerning the immovable are covered in the Declarations by the seller of the immovable or Declarations by the seller of the immovable – Divided co-ownership.

10.2 Delivery of the immovable

In the Promise to purchase, the seller undertakes to deliver the immovable in the condition in which it was when you visited it. It is important to agree clearly on the inclusions and exclusions, which are often the subject of disputes. This can include light fixtures, the spa, appliances, etc.

Your broker must indicate the inclusions and exclusions you wish in your Promise to purchase. The inclusions must be in normal working order at the time of delivery of the immovable.

TALK IT OVER WITH YOUR BROKER

Ask him for information and advice concerning the legal warranty of quality.

10.3 Ownership documents

The Promise to purchase specifies the seller’s obligations regarding ownership titles. The seller must be able to provide a valid title of ownership confirming that the immovable is sold free of any real right or other charges, other than the usual and apparent servitudes of public utility (Hydro-Québec, municipality, etc.).

He must also supply his act of acquisition and a certificate of location describing the current state of the immovable and reflecting any cadastral renovation. In this context, “current state” refers to both the physical and legal state of the immovable. A change in zoning by-laws (e.g. flood, erosion or ground movement zone) requires a new certificate of location.

Divided co-ownership

If the immovable is held in divided co-ownership, the seller must provide you with a certificate of location describing the current state of the entire co-ownership, which includes the private portion or, if unavailable, a certificate of location pertaining to the private portion only.

If the certificate of location provided covers the entire immovable held in co-ownership, it must include a description of the private portion (the lot or door numbers of the private portions without a description is not sufficient). When the general certificate does not include a description of the private portion, or when modifications have been made to the private portion, a certificate pertaining to the private portion must be obtained.

10.4 Costs relating to repayment and cancellation

This clause indicates that the costs related to the seller’s mortgage loan (repayment, cancellation, etc.) are to be borne by the seller (unless otherwise agreed by the parties).

10.5 Defect or irregularity

The Promise to purchase provides a mechanism in the event that, after signing the promise but before signing deed of sale, you discover a defect or irregularity – for example a crack or water infiltration – that was not disclosed in the Declarations by the seller of the immovable attached to your Promise to purchase.

The form states that you are not obligated to purchase with this defect or irregularity if the seller fails to remedy it. You could therefore ask in writing for the defect or irregularity to be corrected, failing which you could cancel your Promise to purchase. The seller will have 21 days from the date of receipt of a notification to this effect to inform your broker in writing that he has remedied the defect or irregularity at his expense or that he will not remedy it.

TALK IT OVER WITH YOUR BROKER

Make sure your broker guides you through the steps of this process.

10.6 Intervention of spouse

The Promise to purchase also includes a clause stipulating that the seller must provide proof of the spouse’s consent:

  • If the immovable or a portion of it constitutes the seller’s family residence; or
  • If rendered necessary by the seller’s matrimonial regime.

10.7 Damages

Under this clause, in the event that no deed of sale is signed through the seller’s fault, the seller undertakes to compensate the agency or the broker bound to you by a brokerage contract, by paying damages equal to the remuneration which you would otherwise have had to pay.

11 - Declarations and obligations common to the buyer and the seller

The Promise to purchase includes declarations and obligations that are common to both parties:

  • The date of signing of the deed of sale before the notary;
  • The date and time of occupancy of the premises;
  • The date when adjustments will be made for taxes (real estate, general and special), condo fees, fuel reserves and income and expenses relating to the immovable;
  • If necessary, the amount of compensation that will be paid by the seller if he occupies the premises after the signing of the deed of sale;
  • The instructions to the notary regarding the payment of remuneration;
  • Any items included in and excluded from the sale;
  • Any leased equipment or goods covered by a service or leasing contract (or any other contract which must be assumed by you).

12 - Other declarations and conditions

This is where your broker will include any special clause necessary for the protection of your interests. For example, he could include a clause that requires the seller to start his pool in a case where the deed of sale is signed after the date where the pool should normally be started.

13 - Annexes

The Promise to purchase can refer to annexes; these documents form an integral part of the Promise to purchase. Your broker will help you navigate through these annexes and understand their clauses.

Here are a few examples of annexes:

  • Declarations by the seller of the immovable form;
  • Annex F – Financing, which contains the clauses relating to the taking over of the existing hypothecary obligations and the balance of sale price required for the purchase of your home;
  • Annex R – Residential immovable, which contains other clauses concerning the transaction, such as the condition of selling your current property, or, if you signed a Brokerage contract – Purchase, a clause regarding the financing of your broker’s remuneration;
  • Annex – Expert report, which includes clauses allowing you to make your Promise to purchase conditional upon the performance of certain tests, analyses or studies (including on soil quality);
  • Annex – Drinking water and septic system, which includes clauses allowing you to make your Promise to purchase conditional upon the performance of certain tests, analyses or studies regarding drinking water and the septic system.

In the unlikely event that the Declarations by the seller of the immovable is not available at the time of signing of your Promise to purchase, your broker must make obtaining this form a condition of your offer.

Rural areas

Among other things, your broker will recommend that you have the property’s water tested (quality and quantity) and the water purification system checked using the form Annex – Drinking water and septic system..

 

GOOD TO KNOW

You wish to pay in cash? To protect his client, the seller’s broker will require that you provide proof of availability of the funds. This will be indicated on the mandatory form Annex F – Financing. Once this step is successfully completed, the real estate broker will recommend that you sign the deed of sale as quickly as possible, among other things to ensure that the seller has the funds at his disposal. On this topic, see the article entitled Certain precautions are required for a cash purchase.

 

GOOD TO KNOW

You may include your broker’s remuneration in the purchase price in order to have it financed. The mandatory form Annex R – Residential immovable contains a clause (R2.5) for this purpose and must be added to your transaction proposal. This clause can be used only if you have signed a brokerage contract to purchase.

14 - Conditions of acceptance

This clause specifies the deadline (date and time) by which the seller must signify his acceptance of your Promise to purchase. This deadline is important, because if it is not respected, the Promise to purchase becomes null and void. If you change your mind during the period of acceptance by the seller, you cannot withdraw your Promise to purchase.

However, the Civil Code of Québec allows you a short period in which you can cancel your offer, which is the period between the time when you sign the Promise to purchase and the time when it is presented to the seller. A cancellation that reaches the seller before the presentation of the Promise to purchase renders the promise null and void. However, you should know that promises to purchase are usually presented to sellers very quickly.

15 - Interpretation

This section specifies that the Promise to purchase and the performance thereof are governed by the laws of Québec.

16 - Signatures

The Promise to purchase must be signed by all buyers and all sellers and, if applicable, the sellers’ spouses. The signature of a witness is recommended but not essential to the validity of the contract. Make sure you read and clearly understand all the clauses contained in the form before you sign it.

TALK IT OVER WITH YOUR BROKER

Ask your broker any questions you may have so that no doubt remains in your mind. For example, has the date of occupancy clearly been established?

 

IMPORTANT

Take time with your broker to check the dates entered for occupancy, adjustments (including the date at which you become responsible for property taxes and utilities), and signing of the deed of sale. To avoid any misunderstanding, the phrase “To be determined” should never be entered in lieu of a date on the Promise to purchase.

 
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