December 14, 2012
There is a reason why real estate deals have to be in writing. Things said, but not written down, are open to interpretation and misunderstanding later as a decade old case in Brampton illustrates.
In this instance, the discussions meant the end of a real estate contract and eight years of court battles.
In August 2000, Tony Rizzuto put in an offer on a 32-acre farm in Brampton. He offered the owners, Jennifer Footman and her husband, $1.7 million based on a price of $52,000 per acre. The Footmans rejected the offer, signing it back for $65,000 per acre for a total price of 2.1 million, plus the right to remain living there rent-free for three years after closing.
Rizzuto was satisfied with the price, but didn’t like the three-year rent-free period. He asked his agent, Richard Durbano, to see whether the sellers would agree to either six months or a year instead. Durbano spoke to Footman and later testified that Footman told him that one year rent-free would be fine. Footman later told a court he did not agree to this. .
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Later that day, Rizzuto accepted the counter offer, agreeing to the price as well as the three year rent free period. However, he still wanted to try and change the deal to a one year rent-free period so he asked his lawyer to prepare an additional amendment to the contract, making that change. He did it this way because he was afraid that if he changed the three year period to one year, then it would be considered a counter offer. So he tried to first accept the offer but then negotiate the amendment separately.
Durbano left all the papers at the Footmans with a covering letter that said, “Enclosed please find the accepted Agreement of Purchase and Sale. As discussed and agreed to yesterday, the period that you would be staying on the property would be for one year after closing. Accordingly, please find amendment to agreement for your signature.”
Mrs. Footman refused to sign the amendment. She said all the documents were really a new offer and when she refused to sign the amendment, the deal was dead. Rizzutto argued that even though Mrs. Footman refused to sign the amendment, they still had a deal, with the three-year rent free period.
Rizzuto sued and won at trial in 2007. But Footman appealed. In an Ontario Court of Appeal decision dated June 3, 2008, the judges reversed the decision, saying that based on all the evidence, the parties did not come to any final agreement, so there was no deal.
It took eight years from the date of the agreement until the final court decision.
Many times real estate contracts are conditional on home inspections being done and buyers having 4-5 days to waive the condition if they are satisfied with the home. Buyers then find something wrong during the period and try to negotiate a reduction to the purchase price, using an amendment. If this is not approached carefully, sellers might also take the position that if they refuse the amendment, the deal is over, and the buyers no longer have the right to waive their original condition. The lesson is to make sure that any price reduction is agreed to by both sides, in writing, before the date when any waiver is to be sent.
So, whether you’re a seller or a buyer, when you receive an offer, my advice is to do one of three things; accept it, reject it or make a counter offer. Do not play games with amendments and be careful about any verbal negotiations. You will avoid long and costly lawsuits where only the lawyers win. If it is important to you, put it in writing and leave it that way.
Mark Weisleder is a Toronto real estate lawyer. Contact him at firstname.lastname@example.org