When selling their home, a couple received an unconditional offer and everything was progressing smoothly until the day before settlement. They were informed by the purchaser’s lawyer that the property’s heat pump was not working.

The couple was aware of the heat pump’s issues but had figured out how to manage its deteriorating function. Since they could still “operate” it, they didn’t think it necessary to disclose the problem.

The Costly Consequences

Negotiations ensued, leading to a price reduction equivalent to the cost of a new heat pump and its installation. This adjustment left the sellers several thousand dollars short of their expected net sale proceeds.

Avoiding Such Issues

This situation could have been easily avoided by adding the phrase “as is, where is” next to “Heat pump” in Schedule 2 of the Agreement of Sale and Purchase, where chattels included in the sale are listed.

Best Practices for Listing Chattels

1. Transparency: Always disclose any chattels that are not functioning properly or at all. Being upfront about the status of your chattels is unlikely to make your property less attractive and helps ensure a smoother pre-settlement inspection, avoiding last-minute surprises and inconveniences.
2. Avoid Increased Costs: Not disclosing faulty chattels can lead to reduced sale prices and increased legal fees due to necessary negotiations.
3. Reasonable Working Order: Chattels listed in Schedule 2, and all equipment providing services or amenities (e.g., security, heating, cooling), must be delivered in reasonable working order, in the same state of repair as when the agreement was signed, excluding fair wear and tear.

Key Points to Remember

– Unencumbered Chattels: Ensure all chattels are unencumbered at settlement (i.e., not under hire purchase or After-Pay payments).

– Disclosure of Non-functioning Items: If chattels are not functioning or not included in the sale, strike them through in the Agreement and remove them from the property before settlement.

Legal Guidance

If you’re unsure about what chattels to include in your Agreement or your liabilities regarding their status, consult your legal advisor to clarify your obligations.

Get Professional Advice

Leading law firms offer fixed-price Initial Consultations to help clients understand their options quickly and cost-effectively. Seeking professional advice can prevent costly mistakes and ensure a smooth property transaction.