Ok, so you've purchased your dream home, but find yourself not sleeping at night for worrying about breach of contract. Will the property be OK? What if someone throws a wild party and smashes the walls? What if an angry tentant tears all the fixtures out?
With respect to taking out the insurance, arrange this as soon as possible to become effective upon the possession date. The mortgage finance company will want to see it. This does not mean before the possession date. This will not however cover any breach of contract on behalf of the seller. So far as any damages that occur between now and then, it's a bit of a gamble. The seller has warranted in the offer to purchase that the premises will be in substantially the same condition as when we viewed it.
For example, if there was damage to the carpets after the agreement was struck, but before the possession date, the seller would now be in breach of contract. it is contingent on the seller to rectify the defects prior to your taking possession. If that's not possible, then under common law, the seller would be in breach of contract and the parties would have to pursue any remedies which are available to them. Usually this is arranged between the parties but rarely the seller is not willing to do that. They typically will not want to be in breach of contract!
More often than not, arrangements will be made to correct it because the seller knows that you will have legal recourse to come after them for breach of contract. Usually, the lesser the defect, the more likely the seller will not take it seriously, however most folks, being fine and upstanding citizens, would not sleep well if they did not make it good on their end, so usually will actually leave the premises in a better way than they need to. This way they know for certain that they will not be in breach of contract.
Having been in the real estate business for a decade now, I have yet to see any major breach of contract. The worst was one seller removed all the light bulbs and switch plates. Another did not clean up as promised in the agreement. While both of these sellers were in breach of contract, we were able to work things out.
Sometimes a seller will be in breach of contract by accident. For example, when a real property report, ordered at the last minute reveals a flaw which simply cannot be remedied at all, or at least cannot be remedied in time. When a seller breaches a contract in this manner, the lawyer representing the buyer will negotiate a hold-back with the sellers lawyer in proportion to the severty of the breach of contract. It is not necessary to write a hold-back into the contract for this purpose, at least in Alberta, an authorization to hold-back fund in the case of such a defect.
The Alberta Law Society has provisions in their closing protocols for exactly this type of breach of contract. If you are ever unsure, however, and would like to get a second opinion, be sure to contact your own lawyer and ask him for his advice on breach of contract.
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