During the transaction process for purchasing a condo, the promise to purchase (often referred to as an offer to purchase) is a contract that represents a commitment on the part of both parties involved. This document is signed before the deed of sale, but its legal value is quite real and binds the promising buyer to the promising seller, each one required to respect the clauses of the contract. Here is some important information to know about the legal weight of offers to purchase condos.
At What Point in the Transaction is the Promise to Purchase Signed?
First of all, to understand the function and legal value of a promise to purchase, it’s important to know when this document is drawn up and signed. As stated above, the offer to purchase is prepared and signed before the deed of sale. This is obviously presented in writing, and the parties can reject it or make a counter-offer. However, once it’s signed, it becomes an irrevocable contract.
What is the Legal Weight of a Promise to Purchase?
This document doesn’t represent the sale per se, but it nevertheless carries legal obligations for both parties. Once they’ve agreed upon the clauses to be included in the promise to purchase the condo, its content becomes definitive. Other clauses can be added afterwards, but the agreement of both the buyer and the seller must be obtained.
What Should the Promise to Purchase Contain to Ensure its Validity?
If the content of the offer isn’t specific enough or contains loopholes, this can open the door to potential problems. So you should make sure that the following information is included in the document before signing:
- The contact information of the buyer and seller
- The address and specific information regarding the condo in question
- A list of the documents required for the transaction
- The elements that are included in and excluded from the contract
- A description of the buyer’s requirements
- The price of the real property, as well as the amount of the deposit (if applicable)
- A description of the deadlines for the steps in the transaction
- The possession date of the condo
- The names of the professionals who are accompanying the parties in the signing of the promise to purchase (notary and real estate brokers)
- The signing date of the offer to purchase.
This list is non-exhaustive, and the promise to purchase may include other information in some cases. To make sure nothing is missing, it’s strongly recommended to ask a notary for help and to entrust the task of drawing up the contract to a specialist.
What are the Potential Limitations of a Promise to Purchase?
It’s of the utmost importance to ensure that the offer to purchase the condo is well written. Indeed, the document should not contain any vague aspects that could limit its validity. Any potentially contentious point must be clarified.
Is it Possible to Cancel a Promise to Purchase Once it has Been Signed?
The promise to purchase becomes valid once both parties have signed it. At this point, it’s difficult – but not impossible – to get out of it. On the other hand, you should be aware that if the document doesn’t contain any clauses that let you get out of the contract, the party that decides to cancel it will be exposing themselves to legal proceedings.
Certain clauses included in the contract may open the door to the cancellation of the promise to purchase the condo. For example, it’s possible to write that the promise to purchase is only valid on the condition that mortgage financing is obtained or subject to the presence of an inspection report that does not indicate any hidden defects. The presence of a “grace period” may also allow the parties to withdraw from their obligations within a specific timeframe.
To sum up, the signing of a promise to purchase represents a formal commitment and must be initialled only once the buyer and the seller have consulted with each other and agreed on all the essential elements to be included.