Thinking of buying a home? One of the things that is often overlooked is how the transfer of rental appliances is handled. The Agreement of Purchase and Sale makes reference to rental appliances, but in our experience, the contract is often left vague to state “if assumable”.
What does that mean practically speaking? If there are rental appliances in the home, such as a water heater, furnace or air conditioner (or other), you should investigate what the cost of those rentals are, before agreeing to assume the rental equipment. You can ask your agent to see a copy of the bills associated with the rental equipment and any contract, including the cost to buy out the equipment. Generally, you can also obtain a ‘comfort letter’ or ‘ real estate transfer letter’ setting out the terms of the rental before you agree to ‘assume’ the contract.
If you sign an Agreement of Purchase and Sale which says you will assume any rentals and have not done your due diligence to determine if you are satisfied with the terms of the contracts, you can’t later try to get out of the rental on the basis of lack of knowledge as you ought to investigate this prior to signing the offer to purchase a property.
Similarly, if you are a seller, and you don’t know if you own or are renting your appliances, do your own due diligence before entering into the Agreement of Purchase and Sale. If you don’t specify that the equipment is rented, and then sell your house, you have an obligation to payout the contract on the rental equipment to the rental company, as you did not get the new buyer to ‘assume it’. The Buyer is relying on the appliances being owned, as this is what the Agreement of Purchase and Sale represented. This could cost you hundreds or thousands of dollars.
It is often a good idea to make your offer conditional on lawyer review prior to ‘firming it up’. This is one of the topics we would discuss with you to ensure you understand your obligations. If you are buying or selling a home in Barrie, Simcoe County or surrounding area, feel free to contact us for assistance.