Bob Aaron email@example.com
When homeowners agree to sell but neglect to note the property’s heating and cooling system is rented, chances are they will eventually have to buy out the rental contract.
That’s what happened in October, 2016, when Edward Yip agreed to buy a house in Richmond Hill, from Noorullah and Zahra Behboodi, for $2,175,000. Some appliances were listed as being included in the purchase. No fixtures were excluded in the contract.
The buyer only discovered that the sellers did not own the HVAC equipment after the agreement was signed and his lawyer did a title search.
A warranty clause in the purchase agreement stated that any contractual rights survived the closing of the transaction, and were binding on all parties. The sale contract was never amended to say the HVAC system was subject to a registered lien in favour of Enercare — the owner of the equipment.
On closing, the Behboodis delivered to Yip a standard bill of sale transferring ownership of the appliances and the fixtures. But it contained the handwritten words “except HVAC.” The bill of sale did not match the terms of the purchase and sale agreement.
When Yip notified the sellers that he would close “under protest,” the sellers refused to close unless the notification was withdrawn. He reluctantly withdrew the notice.
After closing, Yip sued the Behboodis for the cost of buying out the HVAC rental from Enercare. The case was heard in Newmarket Small Claims Court in December, 2018, and the court’s decision was released in March last year.
In an extremely detailed ruling of more than 9,300 words and 28 pages, deputy judge Abraham Davis ruled in favour of the buyer.
Davis noted that the sellers were fully aware that the HVAC system was subject to a rental agreement.
The judge awarded Yip damages of $17,488.27 for the HVAC system buyout, as well as five chandeliers the sellers had removed — contrary to the terms of the agreement.
Unhappy with the decision, the Behboodis appealed to the Ontario Superior Court. Justice Gregory Mulligan dismissed their appeal this past February, and awarded the buyer costs of $3,500.
[Yip v. Behboodi,  O.J. No. 1388]
Both sides had to pay lawyers for two court appearances, but clearly a matter of principle was at stake for Yip. Nevertheless, the case does provide a number of lessons to future buyers and sellers:
When sellers list their properties for sale, whether it’s a house or a condominium, the listing agreement should be very clear about what appliances and fixtures are included and which ones are rentals.
Sellers who remove attached fixtures, such as chandeliers, which are not excluded from a sale agreement are at risk of having to compensate the buyers for their value.
Particular care should be taken to clarify whether the hot water tank and HVAC systems are rentals or included in the purchase price without extra payment.
A buyer who is faced with having to pay for a rental appliance in similar circumstances cannot refuse to close but can sue the seller afterwards for damages.