Five Critical Considerations In Real Estate Purchase Agreements

Recent trends in Canadian real estate transactions reveal evolving negotiation practices and shifting approaches to risk, regulation and due diligence.

Effective negotiations of real estate purchase agreements require focus on these five principal considerations:

1. Party Identification. Identifying and understanding the parties to a purchase agreement remains foundational. When beneficial ownership is separated from legal or registered ownership, the purchaser must confirm the true owner and consider, among other things, related tax withholdings and representations. Evaluating the strength of your counterparty's covenant provides greater certainty when structuring risk in the transaction. Where the counterparty is a single-purpose entity, consider negotiating a parent guarantee or a holdback to provide security in the event of a misrepresentation or default on post-closing obligations.