And Then There Were Clauses – Ont. Real Estate Association

Ontario Real Estate Association by Sue Gargiulo
OREA develops standard forms that form the basis for a binding agreement between a buyer and seller. Sometimes, these forms are not enough, so clauses are created. For 2012, the Standard Forms Committee revised two standard clauses and created five new clauses involving renewable energy (or green energy).

The Law Society of Upper Canada requested that OREA revise the standard balance of completion clauses (DEP/PAY-1: A Further Sum of and DEP/PAY-2: Balance of Purchase Price) of problems with counterfeit cheques and bank drafts. The Law Society explained that limiting the method of payment for completion of the transaction would help resolve this problem.

The committee revised the clauses accordingly, and read as follows: [the underlined portions reflect the revisions]

DEP/PAY-1: A Further Sum of

The Buyer agrees to pay a further sum of _____ ($_____), subject to adjustments, to the Seller on completion of this transaction, with funds drawn on a lawyer’s trust account in the form of a bank draft, certified cheque or wire transfer using the Large Value Transfer System.

DEP/PAY-2: Balance of Purchase Price

The Buyer agrees to pay the balance of the purchase price, subject to adjustments, to the Seller on completion of this transaction, with funds drawn on a lawyer’s trust account in the form of a bank draft, certified cheque or wire transfer using the Large Value Transfer System.

The new Green Energy clauses are:

  • GREEN-1: Condition – MicroFIT Contract
  • GREEN-2: Acknowledgement – MicroFIT Contract
  • GREEN-3: Decommissioning Renewable Energy Facility
  • GREEN-4: Renewable Energy Projects
  • GREEN-5: Wind Turbines – Warranty

The first two clauses deals with the microFIT stream of the provincial government’s Feed-In Tariff program for renewable energy generation, launched in September 2009. The program is operated by the Ontario Power Authority (OPA).

MicroFIT is designed to encourage homeowners and businesses to generate renewable energy with projects of 10 kilowatts or less. Homeowners and businesses must apply to the OPA to participate in the program. For more information, go to http://microfit.powerauthority.on.ca.

Clause GREEN-1 provides the buyer with the opportunity to review the terms of an existing microFIT contract on the property, if applicable. Clause GREEN-2 confirms the buyer has reviewed the microFIT contract, if applicable.

The balance of the clauses confirms/warrants the following:

•  GREEN-3 – confirms that the buyer understands he/she may be responsible for decommissioning the renewable energy installation at expense of the property owner

•  GREEN 4 – confirms that the buyer is aware of proposed or existing renewable energy projects in the area

•  GREEN 5 – warrants that the seller is not aware of any renewable energy projects for the immediate area

Clause GREEN-5 can be altered to reference solar energy collectors.

Green energy is a complicated topic. REALTORS® must be prepared to create specific clauses to deal with unique circumstances as they arise. In addition, REALTORS® should be aware that renewable energy installations can affect the insurability of a property, and clauses may be required to verify the insurability of the property.

For More Information

The clauses are posted in the Members Only section of OREA’s website (www.orea.com).

6 thoughts on “And Then There Were Clauses – Ont. Real Estate Association

  1. • GREEN-3 – confirms that the buyer understands he/she may be responsible for decommissioning the renewable energy installation at expense of the property owner

    Now if that doesn’t put the nail in the coffin of a deal, unless it is to as unwary a person as the ones that signed the turbine leases.

    No doubt the local and provincial governments will be happy to know they are not responsible for decommissioning costs of up to $100,000 for a turbine!

  2. Liability insurance is a huge issue, lets say the property owner is a farmer who has leased his land to industrial turbines.
    That farmer has a liability insurance policy to cover his farming operation.
    However, that policy does not cover turbine liability, there is no farm liability policy that covers industrial turbines for farm owners, non what’s or ever.
    That means that if the land owner gets faced with law suits regarding those turbines, then he has to pay the outcome from his life savings.

    This means that if the realtor sells this property with the condition that the buyer would be able to get insurance for the property in question, that this deal will always fall thru. It will never close.
    The other thing banks should consider before giving the financing to buy this property is that, it states in the mortgage documents that the borrower has proper insurance in place, including fire insurance and liability insurance, but he can’t do that if the land has industrial turbines on it.

    This means that the bank will be on the hook for the liability after the land owner goes broke as a result of the liability claims, because the bank holds the mortgage in that case.

    If I was the financial institution, I would never finance something that can’t get insured, that would simply be reckless behavior from any financial institution.
    And I would as bank never allow, for any borrower to sign for such encumbering contract without getting written approval from the mortgage holder first.

  3. “If I was the financial institution, I would never…”

    Unless they can write the loans, make the fees, sell the loan for a quick profit and get the heck out of town.
    Sub-prime mortgage fiasco ring a bell?

    • Insurance companies have provided lots of IWT project financing so why wouldn’t they also provide liability insurance for IWTs?
      Unless ,as you mentioned, they sell the loans and get out of town fast.

  4. You try it, be a landowner, farmer, and cover industrial wind turbines on your farm liability policy.
    I did try it, I couldn’t get it done.

    • With the IWT flying debris issues it’s now quite obvious why liability insurance can’t be obtained.

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