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Over the years we have heard from many excited potential Buyers and their Realtors of the amazing opportunity they are seeking by buying a property under Power of Sale for less than fair market value. Of course, there is nothing wrong with that, as everyone always wants a good deal!  However, when it comes to buying a property under Power of Sale, keep in mind that price is NOT everything!

Please note the following clauses that tend to be inserted by Sellers of a Power of Sale in an Agreement of Purchase and Sale (“APS”) that limit the rights of Buyers:

• “The property is being sold by the Lender on an “as is, where is” basis without any representations or warranties in the Agreement of Purchase and Sale (APS).” 
• “There will be no abatement of purchase price allowed for any property misdescription in APS.”
• “Title to the property will be subject to subdivision agreements, easements for utilities, rights of ways, encroachments, condominium declaration, by-laws, special assessments and lawsuits.”
• “The Buyer must solely rely on its own inspection.”
• “The Buyer assumes work orders, deficiency notices and zoning infractions.”
• “There will be no Seller representation or warranty for retaining walls, fences, soil condition, Urea Formaldehyde Foam Insulation, or environmental matters.”
• “The Seller can only transfer the Seller’s interest, if any, in Fixtures and Chattels on “as is” basis with no warranty or representation.”
• “The Seller has no obligation or responsibility after closing with respect to the condition of the property.”
• “There will be no post-closing adjustments for taxes or utilities.”
• “The Buyer will be required to assume all existing tenancies.”

If all of that is not enough to make a Buyer very cautious in buying a property under Power of Sale, the Buyer must understand that the Seller usually has the right to terminate the APS if the Mortgagor or another interested party redeems the mortgage prior to closing.

This is not intended to discourage anyone from buying a property under Power of Sale, as often there could be a genuine bargain to be had on price. However, once all of the above factors are carefully considered, will the property really turn out to be a bargain?

Having the proper legal advice throughout the process will be the key to any successful purchase of a property under Power of Sale.  Contact a lawyer at Kormans LLP for any questions that you may have and for assistance with your real estate closing!

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David H. Korman is the Managing Partner at Kormans LLP. His practice areas include residential and commercial real estate transactions, commercial leasing and private and institutional lending. You can reach David at dkorman@kormans.ca. The information and comments herein are for the general information of the reader and are not intended as advice or opinion to be relied upon in relation to any particular circumstances. For particular application of the law to specific situations, the reader should seek professional advice. Kormans LLP cannot be responsible for the content of other sites. We expressly disclaim all liability with respect to actions taken or actions not taken based on content received from a third party website linked, directly or indirectly, to that of Kormans LLP.  The link to another site is not to be construed in any way as an endorsement of the host, the site or the information contained therein, nor is such link to be inferred as an association or affiliation with the host.