Accepted transaction proposal: The importance of obtaining proof of receipt when following up on conditions

An accepted transaction proposal usually contains conditions that must be fulfilled before the transaction can be concluded, such as financing, building inspection, review of documents, etc. The responsibility for following up on the fulfilment of these conditions falls to you. Thus your duties and obligations go well beyond simply negotiating a transaction proposal.

Following are the practices to adopt. 

Who is responsible for following up on fulfilment of conditions

Each of the brokers taking part in a transaction has obligations in this regard. As a broker, you must always protect and promote the interests of the party you represent in a transaction, and you must do so while providing fair treatment to the party who is not represented. 

It is therefore your responsibility to make sure that the parties to the transaction are well aware of any deadline to be met and any notice or document that needs to be provided. You must also inform the parties of their rights and obligations in connection with the documents (forms and others) that you are having them sign.

This is why it is so important to follow up, so that the risk of a failed transaction will be reduced. How can you do that?

Understanding the forms and being clear

First, a reminder that you always have a duty to ensure that the rights and obligations of all the parties to a transaction are recorded in writing and that the information adequately reflects their wishes.

As with the brokerage contract, any clause in a transaction proposal must be clear and leave no room for different interpretations by the parties. The pre-printed clauses on the OACIQ’s mandatory and recommended forms are designed to meet the requirements of most real estate transactions.

However, some situations make it necessary to amend an existing clause or to draft a new one. To this effect, we encourage you to read the article Drawing up a clause: Tips and examples of standard clauses.

A good knowledge of the forms and the drafting of clear and complete clauses greatly facilitate this task.

Obtaining acknowledgement of receipts of documents and notices, and use of the form Notice and follow-up on fulfilment of conditions

The obligations outlined in a transaction proposal concern both the buyer and the seller, or the lessee and the lessor. The role of the brokers acting in the transaction consists, among other things, in ensuring that the parties obtain proof of receipt of any document or notice sent.

For example, under the document review and verification clause of the OACIQ promise to purchase (or lease) form, the buyer can make his Promise to purchase (PP) null and void if he is not satisfied with his examination and verification of the documents, or if he does not receive them within the specified time period. How can the seller prove that he did send the document in a timely fashion? 

The only way the seller can prove that the documents were provided on time is by obtaining a proof of receipt of the documents by the buyer. The role of the seller’s broker is very important at this stage. He must make sure to get proof in writing that the buyer received the documents within the time frame and according to the mechanism stipulated in the PP. One way to do this is to send the buyer two copies of the documents, have him acknowledge receipt by signing one of them, making sure to include the date received. These documents must be kept in the transaction record.

In the case where the buyer is not satisfied with his examination of the document, he must notify the seller within the time frame and according to the terms stipulated in clause 9.1. The buyer’s broker should obtain a proof of receipt of this notice by the seller in order to establish that the notice was received within the deadline and confirm cancellation of the PP without a shadow of a doubt for the parties.

The recommended form Notice and follow-up on fulfilment of conditions (NF) can be used to send the most common notices required in the various forms. It is important to specify that clause AV4.4 of NF form used to follow up on the condition set out in clause 9.1 of the PP does not mention the forwarding of documents by the seller. To confirm receipt of the documents by the buyer, the mechanism described above could be used (i.e. acknowledging receipt on a copy of the documents).

Recap

Any means that proves receipt of a document or notice can be used. The important thing to remember is that the brokers representing both the seller and the buyer must ensure that fulfilment of the conditions contained in a transaction proposal is rigorously followed up on, and keep proof of this in their records. This is why it is so important to get an acknowledgement of receipt of any document or notice sent.