Maybe he is!  Maybe he is so good at what he does, that it’s going to make it impossible for you to buy a property.

We hire lawyers to look out for us, but what happens when their knowledge of the law is taken too far, and it impacts a buyer’s options?

Here’s an example that should split the votes 50/50…

My Dad is a criminal lawyer with thirty-five years under his belt, so when I complain about lawyers, it’s not like I don’t know anything about them.

In fact, having a father as a lawyer has taught me to think like one, or more to the point – understand why a lawyer might do or say something, or act a certain way.

When it comes to the purchase of real estate, be it a house or a condo, lawyers play a crucial role.

Their job is not just limited to discharging a mortgage, registering title, purchasing title insurance, and drawing up a statement of adjustments.

Some real estate transactions are very tricky, and very complicated, and a good lawyer can often pick a problem out of 200-pages of text.

Then, there are times when lawyers overly complicate things, either because they’re going above and beyond, and helping their clients, or often – because they believe the world should be perfect.

It’s the latter situation in the above example that I want to examine today, and it will have some people telling me by this post’s end: “David, you’re not a lawyer!  You should NOT be giving legal advice.”

But I’m not giving legal advice.  I’m just advising you to sometimes disregard the advice that you are given… 🙂

When a buyer purchases a condominium in Toronto, 98% of the time, the agreement is conditional upon the review if the condominium corporation’s “Status Certificate.”  This means the buyer (via their lawyer) has three business days to satisfy him/herself of the Status Certificate, and if all is well, provide a waiver of the condition.

The Status Certificate contains the condominium’s budget, financial statements, reserve fund study, rules and regulations, anticipated expenses, and a host of other items that the buyer’s lawyer needs to read through, looking for red flags.

More often than not, the Status Certificate review is a formality.  I have only once had a deal fall through on a Status review, and it had nothing to do with the Status, and everything to do with the buyer’s lawyer, who was her brother’s best friend, trying to persuade the buyer not to purchase the condo so the brother could get his hands on their dead mother’s money……long story….have I told that one before?

Anyways…

Once in a while, a lawyer will make suggestions on how the buyer can protect him or herself, by adding clauses to the existing Agreement of Purchase & Sale.  This is, of course, why we hire lawyers, and exactly what we hope they’ll do for us!

Having said that, I recently received a status review from a lawyer that was, in a phrase, an “instant deal-killer.”

The lawyer gave us nine clauses that he suggested we insert into the Agreement of Purchase & Sale, for a unit in a pretty average, run-of-the-mill condominium.

Here is one of those clauses:

The Seller represents and warrants that: (i) the Property is free of: (A) seepage and leakage (and there is no known damage to the Property caused by water seepage or flooding) and (B)  termite and insect infestation and toxic mould,  (ii) all chattels, fixtures and equipment included in the purchase price and systems (including mechanical, plumbing and electrical) and related equipment will not be replaced or substituted and are now and will be in good working order on closing, free and clear of all encumbrances, and there are no known problems with the electrical, plumbing or heating systems, and (iii) there are no known structural problems at the Property. The parties agree that this representation and warranty shall survive and not merge on the closing of this transaction but shall apply only to the state of the Property existing at the closing of this transaction.

Instant deal-killer.

Why?

Because there’s no way in hell any buyer would sign that.

I know this, because:

a) I have sold 200 condos and I have never seen this before, or anything like it
b) I would never allow my seller-client to accept an offer with this clause

There is no way that a seller could warrant something like this.  Even if it says “known damage,” you just don’t want to open yourself to litigation down the line.

There’s no way for a seller to determine if there’s termites, insect infestation, mould, seepage, or leakage.

It’s a freakin’ condo – it’s not a cottage with a barn!

The risk/reward equation just isn’t in the seller’s favor.  There’s no reason to warrant such ridiculous items in such a standard transaction, and thus the seller is better off to take the next offer, where the buyer’s lawyer doesn’t include a clause like this one.

But the lawyer, in this case, included the following note along with the above clause:

“If the seller refuses, you should ask him “why”.  Is there a problem? If not, why won’t you (ie the seller) include it.”

So now the lawyer is playing investigative journalist as well…

Look, I know the lawyer is doing his job, and he’s obviously good at it!

But if 299/300 condo transactions doesn’t have this clause, and ONE does, then what conclusion do you draw?

I didn’t tell my client not to include this clause, because that is beyond the scope of what I do.  I did, however tell my client, in no uncertain terms, “If you include that clause in an Amendment, the seller will not accept it, and you will not get the property.  Your lawyer is giving you legal advice, and it’s up to you whether to take it.”

I’m really in no position to trump a lawyer’s legal advice, so I would never do such a thing.  But as a Realtor, I know that no seller would accept this clause, so I have to tell my buyer that as well.

The whole status review was just bizarre.  Even little things – like the clause about “The property has never been used as a marijuana grow-op,” which many lawyers suggest their buyer include, was flushed out and looked like this:

“The Seller represents and warrants that during the time the Seller has owned the property, the use of the property and the buildings and structures thereon has not been for the growth or manufacture of any illegal substances or any illegal purpose, or the scene of any violent crime, death or suicide,  and that to the best of the Seller’s knowledge and belief, the use of the property and the buildings and structures thereon has never been for the growth or manufacture of illegal substances or any illegal purpose, or the scene of any violent crime, death or suicide. This warranty shall survive and not merge on the completion of this transaction.”

All I’m saying is that it’s unusual, that’s all.

If a seller gets an Amendment and sees “violent crime, death, or suicide,” they’re going to feel a bit uneasy.

Again, you might suggest, “The lawyer is trying to protect the interests of his client – your buyer!”

But I don’t think this does anything other than kill the deal.

Nine clauses, each one as stupid as the next, and completely, utterly needless.  If I’ve never seen them before, in ten years in the business, then they don’t need including for a very standard transaction in a building where units sell every day.

The lawyer may be doing his job, or may be showing off.  Or, maybe the lawyer thinks that the world should work in perfect harmony, and any seller of a condo should accept these clauses.  But in today’s downtown Toronto condo market, these clauses have no chance.

Maybe tomorrow, or maybe in another city, but not here and today.

So if you’re a buyer, and your lawyer wants to add a clause into the Agreement via an Amendment that ensures taxes, hydro, and other utilities are properly apportioned upon closing, then by all means – this is a standard clause, and a normal request.

But when you get into insects and mould, and dead bodies and suicide (hopefully not all together or that would be weird), you have to ask yourself, “How great is the risk, and do I want this property?”

As I’ve said before – there’s a first time for everything…