Representations & Warranties

Every Agreement of Purchase & Sale comes with a “Schedule B,” many of which are to protect the seller.

Have a look at the worst Schedule B that I have ever seen…

HouseFallingOver

Perhaps I’ve seen worse Schedule B’s, in terms of the ridiculous clauses that some agents and/or sellers try to include.

But I’ve never seen a Schedule B that basically says, “This house is falling apart, and you should destroy it.”

Talk about a tough sell!

But I guess the seller and agent decided that “disclosure, disclosure, disclosure” was the best way to go, and I can’t say I blame them for that.

Here’s a look at the clauses, with my comments below…

     “The Buyer acknowledges and accepts they are purchasing the property on an as-is, where-is basis without representation or warranty of any kind offered by the Seller.  The Seller, it’s agent, or anyone else acting on the Seller’s behalf makes no representations or warranty with respect to workmanship, state of repair or operating condition as it relates to the property, the principal dwelling, any mechanical systems or chattels therin, or the locations of structures, walls, retaining walls or fences (freestanding or otherwise) on the property.  The Seller shall have no responsibility whatsoever to remedy any defect, infraction or encroachment regarding same or to complete any work deemed as unfinished by the Buyer.  The Buyer acknowledges having relied entirely upon his own inspection and investigation with respect to condition of the property, chattels & fixtures, as well as any matters related to title and agrees to hold Seller and/or the Seller’s agents harmless from same.”

Well, that doesn’t leave much to the imagination!

The seller has covered his or her bases here, and absolutely nothing in this house is coming with any sort of warranty, nor can the buyer hold the seller responsible for anything, anywhere, at all.

I do believe, however, that this clause was hand-written.  A boiler-plate clause, used over and over, and written by a lawyer, would not refer to a seller as “it.”  There’s also some problems with plurals, ie. “warranty” versus “warranties.”  Who cares?  Why am I telling you this?  Well, because it gets worse…

“The Buyer Acknowledges that”

“The property is in poor condition, has oustanding work orders, and requires substantial and significant remedial and renovation work, including work of a structural nature, in order to bring the house into a condition fit for habitation.  Without limiting the generality of the foregoing, the structural walls are leaning, the building is structurally unsound, and work requiring one mor more permits has been completed without first obtaining such permits.”

Ummm….okay…

So, basically this is saying “you cannot physically live here.”

And it’s also admitting that work, which was of poor quality, was not done with proper permits!

Suddenly the first clause – indemnifying the seller and agent from ANYTHING seems to make sense.

Let’s go on…

“Walls and framing system has settled significantly over the years on the north side of the building.  Prior attempts to reinforce or stabilize the system have been noted along the north wall.  They system needs to be examined by a structural engineer to determine the severity of the problem and the best way to keep it from getting worse.  Cost to improve or stabilize the wall system will likely be significant.”

So what’s happening here?

The house is falling over, somebody tried to prop it up, failed, and now we’re being told to contact a structural engineer.  Well, maybe that could have been done before the owner decided to prop the house up with toothpicks?

My favorite part: “cost will likely be significant.”

As I said at the onset – disclosure, disclosure, disclosure!

But how about this one:

“The workmanship of the plumbing system is considered to be low quality.  A lot of the plumbing work (drains in particular) was installed by someone that clearly wasn’t a plumber.  Slow drainage may become a problem at some of the affected fixtures.”

Oh my God…

I think this is the first time I’ve seen sarcasm in a Schedule B!

“…..somebody that CLEARLY wasn’t a plumber.”

Who would actually write something like this?

Are we to believe this schedule was even looked at by a lawyer, let alone written by one?

It goes on:

“Evidence of basement leakage was noticed.  Elevated moisture noted at several locations in the basement – particularly at the basement walkout and beneath the electrical panel.  Damp proofing may need to be installed if exterior water management improvements are not successful.”

Geez, how about a warning, first?

Basement leakage and moisture is noted…….beneath the electrical panel?

How about something in the listing like, “Please do not step in the giant puddle of water below the electrical panel, which has live wires swinging to-and-fro.”

They sort of glaze over the fact that, while water in the basement is bad, there couldn’t possibly be a worse place for it than next to electrical!

And what is this new term, “water management improvements” that they speak of?  It’s like they’re inventing some cure-all for a house that is clearly falling apart.

But they saved the best; I mean the absolute BEST for last:

“The building on the property will likely have to be demolished.  The property attached to (address censored by TRB) will, as well, likely have to be demolished, an dthe entire structures containing both (addresses censored by TRB) be rebuilt.”

Unreal.

Their Schedule B is basically asking the buyer to acknowledge that the property has to be demolished!

So what was the point of all the preceding?

All those statements about leaning walls being fixed, plumbing being upgraded, water management improvements being necessary – what was the point of all that, if you’re just going to finish with, “Actually, just tear this sucker down to the ground and start over.”

It’s like buying all the ingredients to bake a pie, then throwing them out, and going out to purchase a pie instead!

I’ve seen some really wacky Schedule B’s before, as well as some crazy clauses.

HERE is a post I wrote last month about the most bizarre clauses in an offer I’ve ever seen.

But until today, I’d never seen a Schedule B that basically admits that the house is so miserable, it needs to be torn down!

How’s that for “marketing” to the buyer pool?

5 Comments

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  1. Kris says:

    Is this the Gladstone house? If so, I am surprised as whoever bought in 2009 bought as per the following ad “C1574381 – C01 – 312 GLADSTONE AVE,TORONTO, Ontario, Canada – $244,900

    Calling All Builders And Renovators! This Is A Real Opportunity Waiting For The Right Builder Or A Serious Renovator- Not For Your Casual Handyman. House Is Leaning And Needs To Be Inspected But Has Great Potential. Could Be Used As A Single Family Home Or Divided Into 3 Units For Renting. In Prime Location Steps From Little Portugal, This Location Is Good For Walking With Easy Access To Transportation, Parks, Dufferin Mall And Little Italy…

      1. @ the MASH

        Oh, you know I can’t talk about properties currently listed for sale, or disparage a competitor.

        So let me just say that I have no clue what you’re talking about…

  2. Frosty Johansen says:

    And yet the ensuing bidding war drove the price $150K above asking…

    Unless I’m seriously missing something, I think that’s a great Schedule B. It protects the seller by disclosing defects, both obvious and maybe less so, with the property. But I’d be curious what a real estate lawyer (or a litigator) would advise.

    1. @ Frosty

      Well, I suppose “best” or “worst” depends on which side you’re on.

      The first clause certainly indemnifies the seller, which is great.

      But all the other junk is just silliness.

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