Is it necessary to have an acknowledgement of receipt of a Promise to purchase (PP) signed?
The broker must notify the buyer immediately of the seller’s refusal or acceptance of his promise to purchase
To show that the broker has notified the buyer, it is preferable to have him sign the “Acknowledgement of receipt” section of a Promise to purchase (PP). It is, however, possible to use other means to notify the buyer of the seller’s refusal or acceptance.
Even if the acknowledgement of receipt is not signed by the buyer, the promise to purchase remains valid since, according to what is indicated in the promise to purchase forms, the parties are contractually bound at the time of its acceptance, and not when the buyer has received the seller’s reply notice.
Other means available for the broker to show that he has notified the buyer:
Even if the signing of the “Acknowledgement of receipt” section is the best evidence that the other party was notified, the broker may also use other means that may serve as a proof that the seller’s or the buyer’s reply has actually been received:
- an email from the recipient confirming its receipt;
- a fax from the recipient confirming its receipt,
- a message through Immocontact;
- a telegram as a last resort (this means is not recommended since it is an evidence of the dispatch of the notice but not of its receipt).
The buyer must be notified immediately of the refusal or acceptance of his promise to purchase, and a written proof showing that the buyer was notified must be placed on record by the broker. This allows:
- the broker to prove that the seller’s reply was sent to the buyer;
- to prevent the buyer from falsely believing that he is released from his obligations while his offer is actually accepted;
- the buyer, when his promise to purchase is accepted, to immediately start the fulfillment of conditions set out in his promise to purchase (because deadlines start to run as soon as the promise to purchase is accepted, and not when he is notified of this acceptance).
When a promise to purchase is refused, the broker must also send a notice. Should the seller respond to a promise to purchase by a counter-proposal, the signing of the acknowledgement of receipt of the promise to purchase is not required. The seller’s counter-proposal made the promise to purchase null and void1.(1) The buyer was notified of the seller’s reply to the promise to purchase by the sending of the latter’s counter-proposal.
The broker should always recommend to the parties to reply to a promise to purchase or a counter-proposal, even if the reply is a refusal.
AGENCY EXECUTIVE OFFICER’S ROLES AND PRACTICES
1. Encourage brokers to use the “Acknowledgement of receipt” section in the promises to purchase and counter-proposals. This avoids using other forms of written proof to show that the notice was sent.
2. Inform brokers of the usefulness of the “Acknowledgement of receipt” section in the forms.
3. Ensure that there is a written proof on each transaction record.
4. If the broker notified the buyer of the seller’s reply by phone, it would be appropriate to confirm in writing, afterwards, that the notice was provided by phone with the date and time of the call. If the broker fails to confirm it in writing, there will be a problem in providing a proof in case of a dispute or an ethical or inspection complaint. For example, the buyer may say that he has never been informed of the acceptance of his promise to purchase and therefore has not fulfilled the conditions within the specified time frames. The PP may become null, or the buyer may have waived some conditions without knowing it, which would cause him harm.
5. Inform brokers that they can still recommend to their clients to use of the standard clause 3.18 - Acceptance including notification, where appropriate. For example, this may be the case where a buyer retained two interesting properties in a particular area and decided to make a promise to purchase on one of them. He can make his promise to purchase conditional upon a notification strict deadline, to ensure he knows the seller’s reply within a specified time period.
3.18 - Acceptance including notification clause
The BUYER and the SELLER declare that their consent is not the result of any representation or condition not contained in this promise to purchase. The BUYER is irrevocably committed until _______:______ on___________. If the SELLER accepts this promise within this deadline, acceptance shall be notified to the BUYER withinhours following the expiration of the deadline. If the SELLER does not accept it within this deadline, or if the BUYER is not notified of the acceptance within this deadline this promise to purchase shall become null and void. However, if the promise is accepted and notification is received within the deadline, this promise to purchase shall constitute a contract that is legally binding on the parties. A refusal by the SELLER shall render this promise to purchase null and void. A counter- proposal by the SELLER shall have the same effect as a refusal.
6. Invite brokers to check out the different tools, including the Professional Practices Guide - Main residential real estate brokerage forms, which provides a lot of information on the use of clauses and forms.
- Reference number
- 208275
- Last update
- August 25, 2023