Buying a home can be a stressful life event. Mortgage loans add to household debt, causing extra financial burdens to homeowners. Undoubtedly, an un-assumed furnace rental contract discovered by homebuyers after closing can leave them terrified.
Andrew Liu is new homeowner in Toronto. A few weeks after moving into his new home, he has received a bill from a furnace and AC rental company. Liu shockingly discovered that his home had locked into a 10-year lease contract with the rental company that requires him to pay $100+tax per month for the equipment rental.
Liu can hardly believe it. His home purchase agreement clearly states that furnace and AC are all included in the home purchase price. Nowhere in the contract indicates that he has assumed the rental contract of any fixers in the home.
Liu also found that the contract was signed by the home seller a few days before the closing date. Liu contacted the rental company and was told that if he wanted to buyout the equipment, it would cost him $10,000 – including the price and the penalty.
“I think that the seller lied in the home buying contract and misled me into assuming this rental agreement,” says Liu angrily.
Liu’s effort of seeking help from his real estate lawyer and the selling agent turns out to be fruitless. Liu’s only option now is to sue in court.
In fact, small claims court has taken similar cases over the past.
Toronto Star has reported a dispute over rental contract of alarm system between a homebuyer and seller. The contract was not listed as a rental item in the home purchase contract, and the buyer denied to have been made aware of the existence of the contract.
The realtor who prepared the contract testified in court that it was his understanding that the buyer would take over the rental contract, but this statement is not supported by contract provisions. The court accepted the buyer’s evidence that he knew nothing about either the contract or the monthly payment for the service, and ruled in favor of the home buyer.
Homebuyers who assume sellers’ contract obligations -- from alarm systems to furnaces -- must be made aware of these contracts at the time of signing home purchase agreement, say leg experts.
Usually a rental furnace or other system will have a sticker on it stating it’s a rental, and the costs will also show up on homeowners’ utility bills. But if the rental agreement is new like in Liu’s case, it is difficult for a buyer to find out.
Sellers should disclose the details of every contract to be assumed by the buyer. Otherwise, they would face an uphill legal battle from buyers like Liu in court.
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