What Happens If Your Possession Date Is Delayed in Alberta?

What Happens If Your Possession Date Is Delayed in Alberta?

Short answer: a delayed possession date can create legal and financial consequences, but the outcome depends on why possession is delayed and what the purchase contract says.

In Alberta, possession day is usually also the closing day. That means the buyer is expected to provide closing funds, the seller is expected to transfer the property, and the seller is expected to give possession according to the contract.

If possession is delayed, the issue is usually whether the delay was caused by:

• the buyer;

• the seller;

• the lender;

• a title or registration issue;

• an unresolved Real Property Report or compliance issue;

• a last-minute closing dispute; or

• an agreement between the parties to extend the closing date.

The important point is simple:

A delayed possession date is not just a moving inconvenience. It can become a contract issue.

What Is the Possession Date?

The possession date is the date set in the purchase agreement for the buyer to take possession of the property.

In a typical Alberta residential real estate transaction, possession usually happens after:

• the buyer signs closing documents;

• the buyer’s mortgage funds are advanced;

• the buyer provides the remaining closing funds;

• the buyer’s lawyer sends funds to the seller’s lawyer;

• the seller’s lawyer confirms the transaction can close;

• title transfer documents are handled; and

• keys are released to the buyer.

Possession does not always happen first thing in the morning.

Even if the possession date is correct, keys may not be released until later in the day.

A Short Delay Is Different From a Failed Closing

Not every delay means someone has breached the contract.

Some delays are short and administrative.

For example:

• mortgage funds arrive later than expected;

• the lender has a funding delay;

• lawyers are waiting for final documents;

• wire transfers or bank drafts take time;

• payout statements are delayed;

• title registration steps are pending;

• the seller’s lawyer is waiting for undertakings; or

• keys are released later in the afternoon.

Those problems may be frustrating, but they do not always mean the deal has collapsed.

A more serious problem arises when one party is not ready, willing and able to close by the required deadline.

Common Reasons Possession Is Delayed

Possession can be delayed for many reasons.

Common examples include:

• the buyer’s mortgage funds are late;

• the buyer does not have enough closing funds;

• the buyer has not signed documents;

• the lender has not satisfied funding conditions;

• the seller has not moved out;

• the seller cannot provide vacant possession;

• title has an unexpected mortgage, lien, caveat or writ;

• a discharge statement is delayed;

• a Real Property Report or compliance issue remains unresolved;

• an encroachment problem appears;

• the seller has not provided required documents;

• the buyer and seller are disputing repairs or included items;

• the property is damaged before possession;

• a co-owner or spouse has not signed; or

• one side is trying to change the deal at the last minute.

The legal consequence depends on the cause of the delay.

If the Buyer Causes the Delay

If the buyer is not ready to close on the possession date, the buyer may be in breach of the purchase agreement.

This can happen if the buyer:

• cannot get mortgage funding;

• removed financing conditions too early;

• does not provide the down payment;

• is short on closing costs;

• fails to sign documents in time;

• cannot satisfy lender conditions;

• is relying on a home sale that did not close; or

• simply cannot provide the purchase funds.

If the buyer cannot close, the seller may be able to claim remedies under the contract.

Those remedies may include:

• refusing to release possession;

• keeping the deposit;

• terminating the agreement;

• reselling the property;

• claiming damages;

• claiming carrying costs;

• claiming legal costs; or

• in some cases, seeking specific performance.

In Bowlen v. Digger Excavating (1983) Ltd., the buyer was not ready with the funds required to close, and the seller was entitled to terminate while time remained of the essence.

The practical rule is simple:

If the buyer causes the delay, the deposit and the deal may be at risk.

If the Seller Causes the Delay

If the seller is not ready to close, the buyer may have remedies.

This can happen if the seller:

• refuses to sign closing documents;

• cannot provide title;

• cannot discharge a mortgage or lien;

• fails to provide required documents;

• does not move out;

• cannot provide vacant possession;

• fails to provide agreed RPR or compliance documents;

• tries to cancel the deal after conditions are removed;

• refuses to release keys;

• leaves tenants or occupants in the property; or

• attempts to sell to someone else.

A seller who causes a possession delay may be in breach of the purchase agreement.

Depending on the circumstances, the buyer may be able to seek:

• an extension;

• compensation for moving or storage costs;

• temporary accommodation costs;

• a holdback;

• damages;

• return of the deposit;

• completion of the sale;

• or, in some cases, specific performance.

The buyer’s position is usually stronger if the buyer can prove they were ready, willing and able to close.

The practical point is this:

If the seller delays possession, the buyer should preserve proof that the buyer was ready to complete.

What If Mortgage Funds Are Late?

Mortgage funding delays are one of the most common possession day problems.

A buyer may have mortgage approval but still not have funds advanced on time.

This can happen if:

• the lender has not sent instructions;

• insurance confirmation is missing;

• the buyer did not sign early enough;

• the down payment funds are delayed;

• the lender needs updated documents;

• the appraisal created issues;

• the lender has not completed final review;

• there are banking delays; or

• the closing falls on a Friday or before a long weekend.

A mortgage approval is not the same thing as funded mortgage money.

If the seller’s lawyer has not received closing funds, keys may not be released.

The practical rule is simple:

Do not assume possession can happen until funds have actually arrived.

What If the Seller Has Not Moved Out?

If the contract requires vacant possession and the seller has not moved out, that can be a serious issue.

Possible problems include:

• the seller is still living in the property;

• tenants have not vacated;

• personal belongings remain;

• the garage or storage areas are not empty;

• keys are not available;

• access codes or garage controls are missing; or

• the property cannot be occupied by the buyer.

If vacant possession is required, the buyer may have remedies.

Possible solutions may include:

• a short extension;

• a holdback;

• compensation for moving, hotel or storage costs;

• a written occupancy agreement;

• delayed closing;

• termination in serious cases; or

• a damages claim.

The buyer should not try to resolve this informally at the door.

The practical rule is simple:

If the seller has not moved out, contact the real estate lawyer immediately.

What If There Is a Title Problem?

Possession may be delayed because the seller cannot provide title as required.

Examples include:

• an old mortgage remains on title;

• a lien appears;

• a caveat must be discharged;

• a writ affects the seller;

• a co-owner will not sign;

• required spousal consent is missing;

• an estate or power of attorney issue appears;

• title does not match the purchase contract;

• an encroachment or easement issue arises; or

• a required discharge is delayed.

A title issue does not always mean the deal is over.

Sometimes the seller can fix the problem with more time.

In some cases, the buyer may need to give the seller a reasonable opportunity to cure the title issue before treating the contract as terminated. In Mullen v. Sumarlidason, the court considered whether the seller had been given a reasonable opportunity to remedy an imperfect title issue.

The practical point is this:

A title problem should be addressed carefully before either side declares the deal dead.

What If an RPR or Compliance Issue Delays Possession?

Real Property Report and municipal compliance issues can delay closing if the purchase contract requires the seller to provide them.

A delay may arise because:

• the RPR is missing;

• the RPR is outdated;

• municipal compliance has not been obtained;

• an encroachment appears;

• a deck, garage or fence is non-compliant;

• a structure is too close to a property line;

• a permit issue appears; or

• the buyer’s lender requires the issue to be resolved.

Some RPR issues can be handled with:

• an updated RPR;

• municipal compliance;

• title insurance;

• an encroachment agreement;

• a holdback;

• removal of the offending structure;

• an extension; or

• a negotiated price adjustment.

But if the contract requires the seller to provide certain documents or resolve certain problems, the seller may not be able to ignore the issue.

In 1613185 Alberta Ltd v 837757 Alberta Ltd, the seller could not rely on the buyer’s failure to tender funds where the seller had not provided documents required under the agreement.

The practical rule is simple:

If closing is delayed by missing documents, the contract should be reviewed before blame is assigned.

What If the Property Is Damaged Before Possession?

Sometimes possession is delayed because the property is damaged before closing.

Examples include:

• a flood;

• fire damage;

• vandalism;

• storm damage;

• broken appliances;

• burst pipes;

• sewer backup;

• missing fixtures;

• damage caused during move-out; or

• damage discovered during a final walkthrough.

The buyer should document the issue immediately.

Possible solutions may include:

• repair before possession;

• a holdback;

• insurance involvement;

• price adjustment;

• delayed closing;

• compensation;

• or, in serious cases, termination.

The purchase contract will usually guide who bears the risk and what must happen next.

The practical point is this:

If damage is discovered before keys are released, raise it immediately through the lawyers.

What If the Parties Agree to Extend Possession?

The parties can usually agree to extend the possession date.

But the extension should be in writing.

A written amendment should address:

• the new possession date;

• whether time remains of the essence;

• whether compensation is payable;

• who pays extra carrying costs;

• whether the buyer can occupy before closing;

• whether a holdback applies;

• whether the deposit changes;

• whether mortgage funding remains available; and

• whether any conditions are added or removed.

Verbal extensions can create confusion.

The practical rule is simple:

If possession is extended, document the extension clearly.

What Does “Time Is of the Essence” Mean?

Many Alberta real estate contracts say time is of the essence.

This means deadlines are important.

If the possession date is also the closing date, failing to close on that date can have serious consequences.

But time-of-the-essence issues can become complicated if:

• one party caused the delay;

• one party was not ready to close;

• the parties agreed to extend;

• one side waived strict compliance;

• both sides continued negotiating after the deadline;

• required documents were missing; or

• the contract required notice before termination.

In H&C S Holdings PTE Ltd v Pengrowth Energy Corporation, the Alberta Court of Appeal confirmed that the contract wording matters when determining whether a seller could terminate after the buyer failed to close.

The practical point is this:

Possession deadlines matter, but the contract and the parties’ conduct still matter too.

Can the Seller Charge the Buyer for a Late Closing?

Possibly.

If the buyer causes the delay, the seller may seek compensation for losses caused by the late closing.

Those losses may include:

• mortgage interest;

• property taxes;

• insurance;

• utilities;

• condominium fees;

• moving expenses;

• storage costs;

• bridge financing costs;

• legal costs;

• additional real estate costs; or

• other expenses caused by the delay.

Sometimes the parties agree that the buyer may close late if the buyer pays the seller’s carrying costs.

That agreement should be in writing.

Can the Buyer Claim Costs From the Seller?

Possibly.

If the seller causes the possession delay, the buyer may claim losses caused by the delay.

Those losses may include:

• moving cancellation fees;

• storage costs;

• hotel or temporary accommodation;

• bridge financing costs;

• increased mortgage costs;

• utility transfer costs;

• inspection or reinspection costs;

• legal fees related to the delay;

• additional rent; or

• other documented expenses.

The buyer must be able to prove the losses.

The buyer should keep receipts, invoices and communications.

The practical point is simple:

If you want compensation for a delayed possession, document the costs as they happen.

Can the Deal Be Terminated Because Possession Is Delayed?

Possibly, but not always.

Whether delay justifies termination depends on:

• the contract;

• how long the delay is;

• who caused the delay;

• whether time is of the essence;

• whether the breach is serious;

• whether the problem can be cured quickly;

• whether notice is required;

• whether the non-delaying party was ready to close; and

• whether the parties continued to treat the contract as alive.

A minor delay may justify compensation or a short extension.

A serious refusal or inability to close may justify termination and damages.

The practical rule is simple:

Do not assume every delay gives you the right to walk away.

What If Keys Are Released Late in the Day?

A late key release on possession day is common.

If funds arrive and the transaction closes later in the afternoon, the buyer may receive keys later than expected.

That may be inconvenient, especially if movers are waiting.

But a same-day delay is not always a legal breach.

It depends on:

• the contractual possession time;

• whether funds were received on time;

• whether keys were released within a reasonable time;

• whether any party caused the delay;

• and whether the buyer suffered actual loss.

The practical rule is simple:

Do not schedule movers based on an assumption that keys will be available first thing in the morning.

What If the Buyer Needs to Move in Before Closing?

This should be handled very carefully.

Early occupancy before closing can create risk for both sides.

Issues may include:

• insurance;

• damage to the property;

• rent or occupancy fees;

• utilities;

• liability;

• failure to close after move-in;

• possession without title transfer;

• security deposits;

• responsibility for repairs; and

• what happens if the transaction collapses.

If early possession is allowed, it should be documented in a written agreement.

The practical point is this:

Do not move in before closing without a written agreement.

What If the Seller Wants to Stay After Closing?

Sometimes the seller asks to remain in the property after closing.

This may happen because:

• the seller’s new home is not ready;

• movers are delayed;

• a new purchase has not closed;

• the seller needs a few extra days;

• illness or family issues arise; or

• the parties negotiated a rent-back arrangement.

This should not be handled casually.

A post-closing occupancy agreement should address:

• rent or occupancy fees;

• security deposit;

• insurance;

• utilities;

• damage;

• liability;

• move-out deadline;

• access;

• what happens if the seller does not leave; and

• whether funds are held back.

The practical rule is simple:

If the seller stays after closing, get the terms in writing.

What Should Buyers Do If Possession Is Delayed?

If you are the buyer, take practical steps immediately.

You should:

• contact your real estate lawyer;

• confirm whether closing funds have been received;

• confirm whether your lender funded;

• ask whether the seller’s lawyer has provided closing documents;

• confirm whether keys are being held and why;

• keep mover and storage receipts;

• document hotel or temporary accommodation costs;

• avoid direct confrontation at the property;

• preserve communications with realtors and lawyers;

• do not agree to changes without written confirmation; and

• ask whether a holdback or extension is appropriate.

The buyer should also stay available by phone and email.

Many possession delays are solved quickly if the issue is addressed right away.

What Should Sellers Do If Possession Is Delayed?

If you are the seller, you should also act carefully.

You should:

• confirm whether the buyer’s funds have arrived;

• confirm whether your lawyer has everything needed to close;

• make sure all required documents are signed;

• ensure payout statements are ready;

• provide keys as agreed;

• maintain insurance until closing;

• keep the property secure;

• document any buyer-caused delay;

• avoid releasing possession before advised to do so; and

• do not make informal side agreements without written confirmation.

If the buyer cannot close, the seller should review the contract before deciding whether to extend, terminate, keep the deposit or claim damages.

Common Mistakes to Avoid

There are several common mistakes people make when possession is delayed.

Do not assume the deal is automatically cancelled. A delay may be fixable.

Do not assume the deposit is automatically forfeited. The contract and cause of delay matter.

Do not rely on verbal extensions. Changes to closing or possession should be in writing.

Do not move in before closing without written terms. Early occupancy can create risk.

Do not release keys too early. Sellers should usually wait for confirmation from their lawyer.

Do not ignore moving, storage or accommodation costs. Keep receipts and records.

Do not wait to raise serious issues. Last-minute problems should be addressed immediately.

What This Means Practically

Three rules are worth remembering.

A delayed possession date is not always a failed transaction. Many delays are caused by funding, title, document or timing issues that can be fixed.

The cause of the delay matters. Buyer-caused delay, seller-caused delay and third-party delay can lead to different consequences.

The contract controls the outcome. Possession time, closing obligations, default clauses, RPR requirements, time-of-the-essence language and written amendments all matter.

Speak With an Alberta Real Estate Lawyer

If your possession date is delayed in Alberta, the key issue is identifying the cause of the delay and protecting your position under the purchase agreement.

A proper review should consider:

• the purchase contract;

• the possession date and time;

• whether time is of the essence;

• whether the buyer was ready to close;

• whether the seller was ready to close;

• whether closing funds were available;

• whether title documents were complete;

• whether RPR or compliance issues exist;

• whether vacant possession was available;

• whether an extension or holdback is appropriate;

• what losses were caused by the delay; and

• whether termination, completion or compensation is the right remedy.

This article provides general information about delayed possession dates in Alberta. Possession disputes are fact-specific and depend on the purchase agreement, the parties’ conduct and the circumstances of the closing.

Berjak Law

10080 Jasper Avenue, Suite 301
Edmonton, Alberta

780-879-0200