There are instances where either the vendor or the purchaser may wish to back out of the agreement. You have to be careful because legal problems can result in litigation, and litigation is expensive, time consuming, stressful, protracted, and uncertain in outcome. You want to get legal advice before you act from a streetsmart real estate lawyer. Some of the various types of legal options are discussed below. Generic examples are given, as you could be buying property in Alberta, B.C., or other provinces.
Rescission
In several provinces of Canada and states in the United States there is a “cooling-off” or rescission period, whereby the purchaser of a new property has a period of time (usually from three days to thirty days) to back out of the contract by giving notice to the vendor in writing before the deadline. The vendor is obliged to pay back without penalty all the money that the purchaser has placed on deposit. In cases where legislation does not give an automatic right to rescission the documents that are a part of the property package may have a rescission period built in. If you do not have a statutory (by legislation) right to rescission and it is not part of the documents relating to the purchase of a new property, then you may want to make it a condition of your offer.
Specific Performance
If the vendor or purchaser refuses to go through with a purchase and sale agreement when there are no unfulfilled conditions attached to the agreement, the other party is entitled to go to court and request the court to order that the breaching party specifically perform the terms of the agreement, eg, complete the transaction. The party who succeeds in obtaining the court order would be entitled to ask for the costs of the application from the court. Costs are based on a tariff schedule established by provincial legislation. Generally, court costs awarded represent about 25% to 40% of the actual legal costs incurred; therefore those who “win” at court ultimately “lose” financially in terms of total cost recovery of legal costs expended.
