Can a Real Estate Deal Fall Through Due to COVID-19?

3. Can the Government Land Registry System close down?

While this is theoretically possible, we have been assured by the Director of Titles that this will not occur since the system is being operated by staff who are working remotely. In the unlikely event that this did occur, most real estate closings could still proceed as long as the buyer had title insurance which provides gap coverage, meaning that the agreements can close as scheduled, money can be paid to sellers, keys released to buyer and registrations occurring once the system is up and running again. Gap coverage means that in the unlikely event, a lien or judgment arises in the intervening period, which could affect the title. The buyer’s title insurance policy will remove it.

4. Can a buyer or seller complete a real estate closing without visiting a lawyer in person?

The answer is yes, but not all law firms offer this service. Technically speaking there is no requirement to meet any buyer or seller in person. All document signings can be done by video conference. If a law firm is registered as a bill payee at major banks, buyers can transfer the closing down payment directly to its trust account online, so that they do not have to line up at a bank branch with a mask for an extended period of time to obtain a bank draft. For sellers, this would mean signing all documents by video conference and automatically transferring closing funds by Electronic Funds Transfer directly to the seller’s bank account after closing, the same way real estate commissions are paid after closing.

5. Do you need special clauses to protect buyers and sellers during the pandemic?

Here are three practical clauses to include in any agreement during the pandemic:

1. The Buyer shall pay the balance of the purchase price, subject to the usual adjustments by wire transfer.
2. The parties acknowledge and agree that all closing documentation can be signed electronically and forwarded by email or fax in accordance with the Electronic Commerce Act, 2000, S.O.2000,c.17
3. The parties agree that the keys to the property shall be left in a lock box at the property and the code to the same is to be provided to the Buyer’s lawyer in escrow pending closing of this transaction.

Otherwise, no further clauses should be added, as they do more harm than good, especially when they give buyers or sellers the right to terminate an agreement. As stated earlier, even in the remote situation that the government registration system goes down, real estate agreements can still close if there is gap coverage in place through the title insurance. Legal advice should always be obtained before any additional clauses are introduced into any real estate agreement of purchase and sale.This article was supplied by RealEstateLaywers.ca LLP. It is being posted on the blog for information purposes only and does not constitute legal advice nor an endorsement of the author or his firm. Consumers are advised to reach out to and engage their own legal counsel regarding their specific situation. In Ontario you can find a lawyer by accessing the Law Society of Ontario’s Lawyer Referral Service.