"Amendments and notice of fulfilment of conditions" form: When to use it?
Notice to reader
Please note that the following article has not yet been updated since the coming into force of the new Real Estate Brokerage Act on May 1, 2010. The OACIQ positions which are conveyed in this article may have evolved since the date of its publication. It is your responsibility to ensure, at all times, that you are acting or that you are exercising your rights or recourse in accordance with the Real Estate Brokerage Act, its regulations or any other applicable law.
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by Me Jean-François Savoie Legal Affairs Department, ACAIQ
As we know, real estate brokers and agents who en-gage in brokerage activities regarding a chiefly residential immovable containing less than five dwellings must use certain mandatory forms. Although we have already published an article on this subject, the use of one of these forms - the "Amendments and Notice of Fulfilment of Conditions" form - still seems to raise questions. We are therefore taking the liberty of providing a few clarifications on this issue, illustrated with examples of common situations. As its name indicates, this form must be used in two types of circumstances: 1) when the parties to an agreement already signed (Promise to Purchase or Brokerage Contract) wish to amend its terms and conditions and 2) when one party must notify the other that one or more of the conditions prescribed in a Promise to Purchase are fulfilled.
Changing the terms of an agreement already concluded
It necessarily requires the agreement of each of the parties to change certain terms and conditions of an agreement concluded hence the necessity of using an amendment form. The signature of each party to the agreement the parties wish to amend is therefore essential. However, an exception to this principle exists. This is the case where a buyer wants to extend the period for acceptance of his Promise to Purchase. In this case, the buyer's signature alone is sufficient to extend the acceptance period, since the amendment applies to an offer that is not yet accepted and that only binds the buyer. In general, the parties will first agree on the amendments they want to make to their agreement. The agreed-upon amendments will then be recorded, by the broker, on the amendment form which will have to be signed by the parties. However, one of the parties may take the initiative and submit a draft amendment without knowing whether or not the other party will accept it. The other party will then have the choice of accepting it, rejecting it or making his own amendment proposal. What must be remembered here is that a party will sign at the bottom of a form containing an amendment proposal only if he wants to accept the proposed amendment.
Fulfilment of conditions
The "Amendments and Notice of Fulfilment of Conditions" form must also be used when a party notifies the other party that one or more of the conditions prescribed in a Promise to Purchase are fulfilled. Contrary to the case where the form is used to amend the agreement, the signature of the party for whom the Notice of Fulfilment of Conditions is intended does not certify the agreement of the parties but simply acknowledges receipt of the notice. The recipient's signature is therefore not essential to the notice's validity. However, it is preferable to obtain this signature, because it proves that the notice has been given within the period provided to do so.
Examples of situations where the "amendments and notice of fulfilment of conditions" form must be use
Amending a Promise to Purchase following an inspection
Let's consider the situation where a Promise to Purchase conditional on inspection of the immovable has been accepted. In accordance with clause B2.4 of Annex B of this Promise to Purchase, the buyer conducts an inspection within the prescribed period and this reveals certain problems which the buyer could "put up with" if the seller agreed to reduce his price. The buyer therefore, before the expiry of the period allowed for him to exercise his option to render the Promise to Purchase null and void, wants to "reopen" the negotiations and make a proposal to the seller in order to obtain a price reduction acceptable to him. Be careful! In speaking of "negotiation" and "proposal", you may be tempted to complete a Counter-proposal, when it is the "Amendments and Notice of Fulfilment of Conditions" form which must be used in such circumstances. The objective is thus to amend a binding agreement between the parties. If the parties agree to the amendment to be made to the Promise to Purchase, this agreement will then be recorded on the "Amendments and Notice of Fulfilment of Conditions" form, taking care to specify all the factors that justify the amendment (e.g. indicate that the price has been amended because of a specific problem raised by the inspection report). If the buyer and the seller do not agree on the amendments to be made, the parties simply remain bound by the initial agreement (the accepted Promise to Purchase). If the buyer then wants to render the Promise to Purchase null and void, he must act in accordance with the provisions of the inspection clause (e.g.: send a notice to the seller with a copy of the inspection report within the prescribed period).
Amending the term of a Brokerage Contract (extension or cancellation)
If a Brokerage Contract is on the verge of expiring and the broker and the customer want to extend the term, it is sufficient to complete clause M2.1a) of the amendment form by recording the new date and time of expiry of the contract. The same procedure will be followed if the parties agree to shorten the term. This particularly will be the case if they want to "cancel" the Brokerage Contract. The date and time at which the parties terminate their agreement will then be indicated. In the latter case, it is strongly recommended that the amendment form indicate the terms of any agreement concerning the termination of the Brokerage Contract (e.g.: record the amount of any financial compensation paid to the broker).
Amending the compensation prescribed in the Brokerage Contract
The seller and the broker may agree to amend the amount of the compensation payable to the broker. Once again, the "Amendments and Notice of Fulfilment of Conditions" form must be used.
Notifying the seller that the buyer has sold his property
A last example of circumstances in which the "Amendments and Notice of Fulfilment of Conditions" form should be used is when a Promise to Purchase conditional on the sale of the buyer's property has been accepted. If the buyer sells his property, before the expiry of the deadline to do so, he must notify the seller, in accordance with clause B2.1 of the Annex B form which was used to complete the Promise to Purchase. The Amendment form is then the appropriate document to give notice to the seller. It will be sufficient to complete it by indicating in the space provided for this purpose that the condition written in clause B2.1 is fulfilled.
Example of situations where it is inappropriate to use the "amendments and notice of fulfilment of conditions" form
The mandatory and recommended forms published by the ACAIQ require, in various circumstances, that notices not concerning the fulfilment of a condition be given to one party or another. In these cases, it is not necessary to use the "Amendments and Notice of Fulfilment of Conditions" form. For example, it is inappropriate to use this form in the following cases: a) when the buyer wishes to notify the seller of the discovery of an irregularity affecting the titles; b) when the buyer wishes to notify the seller of his intention to render the Promise to Purchase null and void following an inspection of the immovable; c) when the seller wishes to notify the buyer benefiting from a clause of first refusal of the receipt of a new offer which is acceptable to him; d) when the seller wishes to notify a buyer who has failed to supply proof of hypothecary financing within the prescribed period, to file an application with a lender he designates for him or when the seller renders the Promise to Purchase null and void. In each of these cases, the notice could simply take the form of a letter addressed to the party to whom the notice must be given.
Obtaining the hypothecary loan
Another major exception to the obligation to use this form to give a notice concerns the case where, when a Promise to Purchase is conditional on the obtaining of a hypothecary loan, the buyer wishes to notify the seller that the loan has been obtained. In such a case, the "Annex A - Immovable" form provides that receipt of a copy of the lender's undertaking will have the effect of satisfying this condition.
Renewal or extension of an expired Brokerage Contract
By definition, a Brokerage Contract which has expired no longer exists. Thus, it will not be possible to amend an expired Brokerage Contract to extend it. If the parties wish to "renew the listing", it will be necessary to make a new Brokerage Contract.