When it comes to listing agreements and Agreements of Purchase and Sale, dealing with rental items, such as hot water tanks, water softeners, furnaces, or air conditioners, can be a complex task. To avoid potential issues, it’s essential to confirm the true nature of these items and ensure they are accurately disclosed in the contracts. This article outlines how real estate agents can ensure rental items are correctly identified and managed during real estate transactions.
Verifying True Rental Agreements
Real estate agents should always verify whether an item is a true rental or part of a lease or other agreement that includes an obligation to purchase. To do this, agents can start by reviewing the seller’s utility bills, such as their Enbridge bill, which may disclose rental amounts paid to suppliers like Direct Energy. If the bill doesn’t clearly indicate a true rental, agents should request a copy of the complete rental contract or written confirmation from the supplier.
The Impact of Incorrectly Disclosed Rental Items
If an item is a rental but not disclosed as such in the Agreement of Purchase and Sale, the buyer can consider the item a fixture included in the purchase price. In this case, the buyer may require the seller to buy out the contract and deliver the equipment free and clear on closing.
On the other hand, if the item is not a true rental but is listed as one in the agreement, the buyer could require the seller to provide a rental item on closing. This may involve the seller buying out the contract and arranging for a true rental item or negotiating with the supplier, which can be both challenging and costly.
Potential Costs of Resolving Rental Item Issues
The cost of buying out rental contracts can vary significantly, ranging from a few hundred dollars to several thousand. However, these problems can be easily avoided by thoroughly investigating rental items before finalizing the agreements.
The Bottom Line
Accurately identifying and disclosing rental items is crucial for a smooth real estate transaction. Agents should take the necessary steps to verify the nature of these items and ensure they are correctly disclosed in the contracts. By doing so, they can prevent potential disputes and costly complications during the transaction process.