When selling or purchasing a home, rental items such as hot water tanks, water softeners, furnaces, and air conditioners can often lead to confusion and unexpected costs. If these items are not accurately disclosed in Listing Agreements and Agreements of Purchase and Sale, disputes can arise, leaving buyers and sellers with unwanted financial obligations.
This guide explains how real estate agents, buyers, and sellers can verify rental items, prevent contract disputes, and avoid costly buyouts during real estate transactions.
Understanding True Rental Agreements vs. Lease Obligations
Not all rental items are the same. Some agreements are pure rentals, where the homeowner pays for the use of the item but does not own it. Others are lease-to-own contracts, meaning the homeowner is obligated to purchase the item after a set term.
💡 Example: A homeowner may assume their water heater is a rental, but the contract may have a buyout clause requiring them to purchase it before transferring ownership.
Real estate agents and sellers should verify the exact nature of rental items before listing a property to ensure accurate disclosure.
How to Verify Rental Items in a Real Estate Transaction
✅ Check Utility Bills – Review the seller’s utility or gas bills (e.g., Enbridge) for rental charges from suppliers like Enercare or Direct Energy.
✅ Request the Rental Agreement – If unclear, obtain a copy of the full rental contract or written confirmation from the supplier.
✅ Clarify Seller Responsibilities – Determine if a buyout is required or if the rental agreement can transfer to the buyer.
By confirming this information in advance, sellers can avoid last-minute surprises at closing that could delay or complicate the sale.
The Impact of Incorrectly Disclosing Rental Items
If rental items are misrepresented in the Agreement of Purchase and Sale, either party could face legal and financial challenges:
🚨 Scenario 1: Rental Not Disclosed as a Rental
- The buyer may assume the item is included free and clear in the home purchase.
- The seller could be forced to buy out the rental contract before closing.
🚨 Scenario 2: An Item Is Incorrectly Stated as a Rental
- The buyer may demand an actual rental item be provided at closing.
- The seller might need to negotiate with the rental company or purchase a rental replacement, increasing costs.
💰 Cost Implications:
Buyout costs for rental agreements vary from a few hundred to several thousand dollars, depending on the type of equipment and remaining contract term.
Best Practices for a Smooth Real Estate Transaction
🏡 For Sellers:
- Review all utility bills and contracts before listing your home.
- Be transparent with your real estate agent and lawyer about rental obligations.
- Offer documentation to the buyer upfront to prevent delays.
🔍 For Buyers:
- Ask for confirmation of rental items before signing the purchase agreement.
- Verify whether the rental agreement can be transferred or if you’re required to assume ownership.
- Consult a real estate lawyer if there are uncertainties regarding rental items.
✍ For Real Estate Agents:
- Always verify rental item status early in the transaction.
- Educate clients on the potential risks and costs of mislabeling rental items.
- Work with legal professionals to ensure agreements are properly drafted.
The Bottom Line
Properly identifying and disclosing rental items can prevent costly disputes and ensure a smooth transaction. By taking proactive steps to verify rental agreements, buyers, sellers, and real estate professionals can avoid unnecessary financial surprises at closing.
💡 Need help reviewing rental agreements in your real estate transaction? Contact us for expert legal guidance.