YVR REMO Show Ep. 08 - COVID-19 and Real Estate Law w/ special guest Tony Spagnuolo
We have been getting a ton of questions about the legal part of buying, selling, or refinancing right now.
Today we chat with Tony Spagnuolo of Spagnuolo Company of Real Estate Lawyers. He'll be here to answer all of these specific questions for us today.
How Has The Pandemic Affected Tony Business?
Mid-March there was fear that deals wouldn't be able to fund and keys wouldn't be able to change over. There was a lot of panic the first few weeks about that. Realtors were trying to add clauses to contracts to deal with the closure of the LTSA (Land title and Service Authority), lawyers, and rotary offices. That went away a week and a half ago when the provincial government released a list of essential businesses. Lawyers, realtors, notaries, and moving companies have been listed as essential. Now we're getting questions about whether financing or appraisal will be ok. There's also the stress of actually getting to see a lawyer in person and what does that look like? Spagnuolo Company has about a third of their staff working from home. By the time this article airs, that number will be up to two-thirds.
Are Virtual Signings Possible On The Legal Side? What Are The Restrictions and What Do We Know?
The LTSA has now allowed for remote signing of documents through Zoom or Skype. It does present some challenges. One is, the has to be in Canada and we need to see ID in advance. Lenders don't seem to be fully on board yet. Lender's have still been insisting on in person meeting but they are starting to switch towards remote.
Does this create more documentation?:
Document amount hasn't increase but we do see more challenges regarding the logistical side of documentation. Tony has to be able to email the documents to the client, they need to be able to print and sign them, and then scan it back to us. The other alternative is have a courier take these documents to and from the client. This addition to the process can cause delay. Spagnuolo Company is still allowing clients to stop by the office at this moment.
Do you think that virtual/remote signings will be carried forward after the pandemic?
The pandemic will look at how everyone does their business. With video signings the potential for fraud increases. if someone commits real estate fraud, the amount of money potentially lost will be great. Remote signings are considered high risk files.
What Are Some Myths Circulating Involving The Legal Side Of Real Estate During This Pandemic?
The buyer deciding to walk away from their deposit, essentially backing out of the deal.
If a buyer decides not to close, they will lose their deposit. They could also be on the hook for further damages. That seller has a duty to mitigate. There's carrying costs, extra mortgage payments, and a drop in price. The buyer could easily be on the hook for these extra costs. Tony has talked to about 20 potential buyers wanting to back out of their deal. Facing the possibility of facing these extra costs, every one of those buyer's had decided to close. This law is in place for any real estate contract, not just during this time.
Have You Seen Any Purchases Not Complete Or Run Into Issues Due To Quarantine?
There were a lot of clients overseas who were coming back to sign their mortgage documents, commitment letters, and disclosure statements. Travel restriction has made that impossible to accomplish. Spagnuolo Company has already extended roughly five to ten files for another three to four weeks. The other side is working with their lender to try and get those documents to an exemption for remote signing. We're seeing difficulty for a lot of pre-approvals where they are not able to come back to sign those mortgage documents. Although we can remote sign the land title documents, a lot of lenders are not allowing the remote signing of the commitment letter and disclosure statements.
Are There Other Legal Ramifications For A Buyer Backing Out Of A Deal?
Assuming it's a clean contract with no loopholes, the buyer will be on the hook for any damages suffered by the seller. The seller has to mitigate. This means they have to act reasonably by trying to act quickly and get the property back on the market.
We've seen realtors putting in different types of clauses to protect against extensions of completion. Will these hold up? What are the potential issues coming from this?
These are called forced majeure clauses. Contracts affected by an act of god such as an earthquake. Those aren't in the standard contract of purchase of sale used by realtors. Tony has been recommending not to put these clauses in. Every case is different. A realtor should always get legal advice whether it's worth it or not to include these.
Tenants Rights
You may have clients who've entered a contract for purchase of sale and they want to move in. The property may currently have a tenant residing at the property. The tenant may have given a standard two-month notice to vacate. At this moment, the provincial government does not want this to happen. Those notices may no longer be valid. Any tenant given notice after March 30th, has no effect. Anything given before that date, while that eviction notice is valid, the residential tendency branch will not issue possession. There is no one to enforce that eviction notice even though it's a valid. If the tenants wish not to move out, you're stuck.
We're encouraging realtors to communicate with the seller and tenants as much as you can.
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