Lawyers recommendation to RTO Client

[saskbrian]

I have got to the point in my first RTO deal where my RTO clients have taken all the paperwork to their lawyer.Their lawyer wants them to register a caveat against the title in the amount of the downpayment ($10,000.) Would this not negate the whole idea that the downpayment is non refundable.
What are the implications should I let them do this? Without this, the couple have told me they are not willing to proceed. Has anyone else run into this problem? How does one assure their client that their downpayment is secure with me and my company?

Brian

 

[Dan_Eisenhauer]

What does the wording of your agreement call the "down payment"? If it refers to it as a DP, then you may be hooped, using one of Don Campbell`s favourite expressions. However, it should be called an "Option Fee", as the TB is paying for the option. It is a phrase well known by the legal community, and should not be registerable (if there is such a word).

Make sure both you and your TB understand what the document says. It could also be that the other lawyer is not a real estate lawyer, and does not really understand that an RTO contract is an Option Agreement, not an Agreement For Sale. So, with that in mind, is your agreement and Option, or an AFS?

Even if it an AFS, there should be no reason to register a caveat, IMHO. It is a contract to buy, and if the TB defaults under an AFS, you have the right to sue for Specific Performance, and/or damages.

Have you lawyer call the other lawyer to sort it out.

My Option Agreements now have numerous clauses that the TB must initial to specifically acknowledge that, as an example, they recognize they will lose their Option Fee and accumulated credits if they walk away from the deal.

 

[saskbrian]

Hello Dan ,
I have just looked at the Option agreement and the words "downpayment" do not appear anywhere in that agreement.This document is an option document not an agreement for sale. I will take your advice and have my lawyer call their lawyer to get it sorted out. I also like your idea that the tenant buyer initial the clauses, particularly the one regarding the loss of the option fee. Thanks.

Brian

 

[markl]

Brian,

Are they just registering their option on the property? This just protects them in the case you try to sell before their term ends. Speak with your lawyer on the wording on the contract but is their intent to retrieve monies in case of default or protect their interest?

Initialing is good we also get them to sign that they have had independent legal advice.

Regards,

 

[saskbrian]

QUOTE (markl @ Sep 5 2010, 09:36 PM) Brian,

Are they just registering their option on the property? This just protects them in the case you try to sell before their term ends. Speak with your lawyer on the wording on the contract but is their intent to retrieve monies in case of default or protect their interest?

Initialing is good we also get them to sign that they have had independent legal advice.

Regards,


Hello Mark,
Their concern is in protecting the option deposit money. I sent them to their lawyer to get independant legal advice and this is what their lawyer has advised them to do. Are you saying that its not a problem if they register the option, but it would be a problem if the wording of the caveat was to protect the $10,000?
If they register the option does`nt that in effect protect their deposit to some degree?

Brian

 

[markl]

Brian,

Please keep in mind that I am not a lawyer and have no idea about Saskatchewan legals but the agreements we use state that they are paying for an option to purchase a property at a certain time based on certain criteria. If they choose to use the option to purchase the property then the deposit given is used as a down payment. If they do not option the property there is no refund of the option money.

If I put an option on a piece of Farm land for a certain price in the future I would want to register my agreement so they couldn`t sell to somebody else If I didn`t exercise my option I would lose my option deposit. Same thing in RTO

Check with your lawyer. Perhaps you are hearing from your prospective tenant what he wanted to hear from the lawyer and not what was actually said.

Regards,

 

[Dan_Eisenhauer]

I agree with Mark`s comments.

But, as I said earlier, this may be a "Personal Injuries" lawyer who knows little about real estate. There should be no right of the TB to register the "Down Payment". It is common to register many land agreements, including Options.

A call from your lawyer may resolve the whole thing.

 

[saskbrian]

QUOTE (Dan_Eisenhauer @ Sep 6 2010, 07:16 PM) I agree with Mark`s comments.

But, as I said earlier, this may be a "Personal Injuries" lawyer who knows little about real estate. There should be no right of the TB to register the "Down Payment". It is common to register many land agreements, including Options.

A call from your lawyer may resolve the whole thing.

Hi Guys,

It has taken a bit of back and forth between the lawyers involved but we have got the issue resolved. They are going to register the Option against the title. My lawyer has advised me that this is a great solution and it has allowed me to get this deal DONE.

Thanks for your help and encouragement.

Brian