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The Importance of Representations and Warranties
Representations are statements a buyer or seller makes about specific facts. Warranties are contractual promises made to one another regarding the existence or accuracy of specific facts, often relating to the contract.
What do they look like?
Representations and warranties are usually made by the seller. Here are some common examples:
1. Legal right to sell the property
The seller promises they have the legal right to sell the property.
Action: Check the title to ensure the names are correct and accurately spelled. Be aware of issues like estates, corporate sellers, or other legal encumbrances.
2. Residency status for tax purposes
The seller confirms they are not a non-resident for the purposes of the Income Tax Act (Canada).
Action: Make note if you're meeting the seller in person or they are signing the contract from out of country. This can affect the timing of fund transfers, the ability to transfer title, and have tax implications on the buyer...
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