In an effort to capture the key takeaways, we attended real estate lawyer and honourary CREB^® member Jeff Kahane’s recent Drafting Contracts workshop at CREB^®, and here’s what we learned.

Make the Residential Purchase Contract part of your DNA! Kahane recommends picking it up every other month and reading every line.

Ambiguity can mean lawsuits, so unless you’re fond of getting sued, your contracts must be clear and complete every time. Fill in the blanks and leave nothing unaddressed. Unconditional offer? Cross out fields that don’t apply and have your client initial. The final contract should reflect your client's intentions and always be in good faith.

Don’t exclude something if you don’t understand it. If ever you’re unsure, or if you could use some help drafting a term or condition on a contract, don’t be shy to contact a real estate lawyer.

A term provides a contractual obligation – a rule both parties must follow, and a condition is usually set by one party for the other party to meet (or complete) by the deadline provided. Conditions must be waived before the deal can close; do not waive conditions if your client has any outstanding concerns.

Following are some common clauses and what you need to know:

• 24-hr walk-through – This term provides no real legal discourse for your buyer in the event of discovering possible problems the day before possession unless a holdback accompanies it. However, a holdback as part of the offer to purchase can be rejected by the seller, so depending on current market conditions, that might not be practical.

  What is the point of a 24-hour walk-through clause? It may allow potential issues to be identified early and give your buyer more time to negotiate a solution.

• Old RPR – If the dwelling is a teardown and re-build, an old RPR might not be a terrible option to consider. However, for a standard sale, it is vital to review the RPR thoroughly. Identifying Encroachments and Relaxations is important as you will need to relay this information to your buyers. Failure to accurately give this information to your buyer may result in an unhappy buyer taking legal action against you.

  When working with an old RPR, you will need to pay attention to any additions to the property. Was that A/C unit or shed on the old RPR? Did the size of the deck change? These are just a few items that may lead to issues down the road, so they require your careful attention now. Conversely, if something was removed from the property on the old RPR, you will need to identify and inform your buyers accordingly.

• Cleaning terms – Buyer want the carpets professionally cleaned after the seller’s are packed up and moved out? Cleaning terms can be very ambiguous and must be written with precise detail. Consider the 5 W’s when drafting this term: Who will do the cleaning? What will be cleaned? Where on the property? When will it be completed? And Why (or how) will trigger the holdback if set? Even with a beautifully written, detailed term, cleaning quality can be very subjective – be sure to prepare your buyer with the “what ifs.”
• Items to be fixed – Similarly to cleaning terms, items to be fixed can leave a lot of room for interpretation. What is to be fixed or replaced? Who will be conducting the repairs (professional or DYI)? When will it need to be completed by? And to whose satisfaction? Is there a warranty on the replaced or repaired items, and does the warranty transfer to the buyers? Write these carefully, with extraneous detail, and prepare your client for the possibility of a less-than-desirable outcome. You will not get into trouble for being too specific or wordy; less room for interpretation means more protection for you and your buyers!
• Material latent defects – These are defects that are not discoverable through a reasonable inspection and adversely affect the property's value or use. It is vital that if a defect is discovered in the home, it is fully disclosed in the contract. Failure to disclose will find you on the wrong end of a lawsuit.
• Patent defects – These are defects that are discoverable by doing a reasonable inspection of the property. In cases when dealing with patent defects, explain the pros and cons of disclosing and have them make an informed decision. Whatever their decision may be, you will need to make sure that it is in writing so that there is a paper trail for the decision (emails, texts, etc.).

If your client asks for your opinion, advise carefully and know your limits. Often, advising clients to seek the counsel of experts is the best course of action. Although seeking the expertise of a third party may cost extra, you and your client will have peace of mind knowing that you’ve done your due diligence.

No matter the specifics, when discussing terms and conditions with clients, your best bet is always to provide them with ALL the information and have them determine how to move forward – this will help them make the best decision and help you steer clear of liability.

And remember, on contracts, words matter.