Are rental items like the furnace and water heater transferable when I buy a new house?
When buying a home, you might expect that it comes equipped with all the systems and equipment you need to live comfortably all year long.
But some of these items might be rentals — something you need to take into consideration when making your offer.
Commonly rented items include furnaces, hot water tanks or on-demand water heaters, water softeners, security systems and outdoor propane tanks. Even entire HVAC systems that heat and cool your home may be rented.
To avoid any unpleasant surprises once you take possession after a purchase, you and your sales representative need to do some due diligence before making an offer.
The home’s listing may contain some information about which items in the home are included in the purchase price or are subject to a rental agreement. But it’s always a good idea to ask questions in case something has been missed.
You also need to decide whether you want to assume the contract for ongoing costs of any rental items, if this is even possible under the terms of the rental contract. Or if the seller can instead terminate, or buy out, any existing contracts before you complete the purchase of the home.
Once the rental items have been identified, your representative should ask for a copy of the actual rental contracts so that you can see the particular details for each.
If a contract is not readily available, ask the seller to contact the supplier for the specifics of the contract and provide written confirmation and details. You can also ask for monthly bills, which should show whether the equipment is rented.
The information you receive should include a number of important details, including the monthly carrying costs of the rental item and the length of time remaining on the term.
The documents should also tell you whether the contract can be transferred from the seller to the new owner and if there is a cost to that transfer. As well, they should indicate whether the seller or buyer has an option to either terminate or buy out the agreement and any costs associated with those options.
Once you have gathered all the details about the rental items, you can sit down with your representative to draft an informed offer for the home. Work with your representative to make sure the offer clearly outlines what is included with the purchase of the property and documents all the identified rental items.
If you decide to take over a rental agreement, your offer should include details of the item being transferred as well as reference to the rental or lease agreement. Note that if you take over such an agreement, the company providing the equipment may require you to sign a new contract when you transfer the property title.
Avoid surprises by putting everything in writing so that it is clear to everyone — particularly the buyer and the seller — which items come with the property, and which ones the buyer may or may not take over.
This column is for general information purposes only and is not meant as legal or professional advice on real estate transactions.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.