Selling a home in Ontario: Transferring of any rental contracts, such as water heaters or alarm systems, must be agreed to by buyer.
When you sell your home, if you expect the buyer to take over any of your rental obligations, be clear, or you will end up paying for it yourself later.
A Niagara Falls case where a home was sold with an alarm monitoring system shows what can happen.
Aidong Gu sold his home on Robin Ave. to Anna Carnovale on July 19, 2012. About 18 months earlier, Gu installed an alarm system with Reliance Protection and signed a three-year monitoring contract for $45 a month including tax.
When he sold the home to Carnovale, under the chattels included section of the real estate contract, it said “Alarm System and equipment.”
Later, under the rental item paragraph, it said that the buyer agreed to assume the rental contract for the hot water tank. No mention was made of assuming the monitoring contract associated with the alarm system.
After the deal closed, Gu continued to be billed for the monthly fee because the modem that monitored the system remained active. He thought that Carnovale was taking over the payments after closing. When he learned that she wouldn’t, he sued.
The real estate agent who prepared the contract testified in small claims court that it was his understanding that Carnovale would take over the contract but that was clearly not what the contract said.
Carnovale testified that she knew nothing about the modem and never agreed to take on the payments. She expected to receive the alarm system equipment with the understanding that if she wanted to activate it later, she would call someone at Reliance to arrange this. She said she knew nothing about the monthly payments or the modem.
In a decision dated September 11, 2013, Deputy Judge Terry Marshall of the Welland Small Claims Court accepted Carnovale’s evidence that she was unaware of the ongoing charges. He dismissed the claim because the alarm system should have been listed as a rental contract, but was not.
Many buyers take on rental contracts, including hot water tanks, furnaces, air conditioners, water softeners and alarm systems. When it comes time to sell, sellers must be clear about which contracts must be assumed by the buyer. They should disclose the details of every contract, so the buyer can make an informed decision.
If the listing includes several rental contracts that need to be assumed, buyers should consider making any offer conditional on reviewing and being satisfied with all the terms of the rental contracts, especially if there are any penalties for cancellation.
By being clear and prepared before signing any real estate deal, there will be no unwanted surprises or unanticipated charges after the deal closes.
Mark Weisleder is a lawyer, author and speaker to the real estate industry. You can contact Mark at email@example.com.