The pre-purchase inspection is an essential step in a real estate transaction

OACIQ Promise to Purchase Forms in Effect Since June 22, 2021

As part of the measures put forward in response to the issues raised by real estate overheating, the Ministry of Finance and the OACIQ have agreed to modify the promise to purchase forms to strengthen the messages regarding the risks associated with waiving a pre-purchase inspection.

In a real estate transaction, the buyer must act prudently and diligently. Only a proper inspection by an inspector or professional can reveal any apparent defects (faults) in the building.

Risks of Waiving a Pre-Purchase Inspection

If a problem arises with the property after the sale is complete and the buyer wishes to sue, the court will have to consider whether the buyer exercised due care and diligence. Waiving the inspection could be detrimental to the buyer.

The buyer may have to live with any issues that may have been raised during the inspection.

The average buyer does not have the skills of a building inspector. By doing the inspection himself, the buyer will not be able to claim, if necessary, to have acted as a prudent and diligent buyer. Even if the expert does not see the hidden defects in a concrete way, he can perceive the apparent manifestations which may not be significant for the buyer.

The buyer could lose his recourse against the seller if an apparent defect is discovered after the conclusion of the sale.

In the event of a sale without legal warranty, the inspection is all the more appropriate, because it allows the seller's declarations to be supplemented in more detail.

Broker's obligation to recommend inspection and inform of risks associated with waiver

The broker is not a building inspector. However, he has the duty to recommend to the buyer to carry out a complete inspection of the building by a professional or a building inspector who:

• holds professional liability insurance against faults, errors or omissions;

• uses a recognized inspection service agreement;

• carries out its inspections in accordance with a recognized building inspection practice standard;

• provides a written report to the party using its services.

(article 81 of the Regulation on the conditions for carrying out a brokerage transaction, on the ethics of brokers and on advertising).

The amended forms of promise to purchase containing an inspection clause present:

• An addition specifying that the buyer is informed by the broker of the risks associated with waiving the inspection is intended to further educate the buyer and ensure that the discussion on this subject has indeed taken place between the buyer and the broker.

• A warning to raise awareness among the buyer that, except in exceptional circumstances (for example: replacement or major renovation of the building), the buyer should not waive the pre-purchase inspection.

Since June 22, 2021, only amended promise to purchase forms must be used in real estate transactions carried out through an OACIQ permit holder.

Last updated: June 16, 2022

Item number: 208631