Q. We are in the process of purchasing a new home and had signed the Agreement of Purchase and Sale back in November with a closing date coming up later in February. Our real estate agent supplied the Agreement to our lawyer in January and, almost immediately, our lawyer phoned us and stated that the requisition date had been missed (it was back in November) and this could pose a potential problem. What is this date and why is it important?
A. The requisition date is a formally chosen and stated date in the contract that sets out the day on which the lawyer must perform their due diligence on the property to make sure that the title to the property is clear, that the present owners are free of any judgments and there are no liens or encumbrances (a mortgage is an encumbrance) that cannot be removed from the title.
This date is usually set a couple of weeks from the final closing date. In the normal course of events, your lawyer would most likely uncover an existing mortgage registered against the title of the property but most likely not see anything else out of the ordinary.
However, this requisition period is the time in which your lawyer may uncover other problems with the title to the property such as a construction lien (which must be removed before the transfer) or potential judgments against the owner(s). I have personally discovered in this ‘homework phase’ that the vendor had an outstanding civil judgment filed against them with the Sheriff, which was greater than the value of the property they were selling. This led to the entire transaction being cancelled because the vendor couldn’t provide valid and clear title to the property.
The problem with your situation is that if your lawyer proceeds to do their due diligence on the property and they find a problem, if they have missed the requisition date through no fault of your own or theirs, the vendor may be in a position to back out of the transaction and claim the agreement null and void as they are unable or unwilling to rectify the problem that was not addressed in the appropriate time frame.
Let’s hope your lawyer doesn’t uncover any problems as to the title of the property after the missed requisition date because then you are dealing with a whole different can of worms.