Hot water heaters and the headaches they cause realtors

I would never have thought that a  hot water heater could turn out to be such a problem in  real estate transactions but I’ve had three different colleagues recently tell me about the headaches they’ve caused in their deals. And they all involved the question of whether a hot water heater has been rented or not.

In the first situation, the realtor’s clients were adamant that they owned the hot water heater, and would have sworn an affidavit saying so.

But it turned out they didn’t.

For months after the deal closed, the buyers paid the costs of renting the hot water heater before they finally realized it was supposed to be included. They complained to our realtor’s governing body, RECO, and the realtor was disciplined for failing to verify ownership.

But it’s not always easy to verify whether a hot water heater is owned or not.

I had a colleague mention today that she had clients who also say they own their hot water heater. She asked for my advice as to how she should deal with the situation. They said they’d never received a bill for rental in the several years they’d owned the property. They also claimed they’d checked with all the companies that rent hot water heaters and no one has a record of a rental at that address.

But as I asked her more questions, it turned out the property has been rented for all those years, so the tenant actually paid the heating bills. Which means there may or may not have been a charge for a rental; they have no way of knowing. And what if they missed calling the company that actually rented that equipment?

There’s nothing in writing to protect my colleague if she tells prospective buyers the hot water heater is owned if it turns out they’re mistaken or if their inquiries didn’t go far enough. If she relies only on their word, and it turns out to be wrong, she could end up being disciplined as happened in the first situation I mentioned. As we used to say when I was a lawyer, a verbal statement isn’t worth the paper it’s printed on.

My advice to her was to tell her clients she needs to see a copy of the most recent Enbridge bill to see if there’s any mention of a rental on it or not. If it isn’t mentioned, I think she needs to tell the buyer’s agent that it doesn’t appear on the bill as a rental and that her clients say they own it, but that she can’t verify ownership because she doesn’t have anything in writing to prove it.

There is still a rule of law in this province called Caveat Emptor, but the buyer can’t “beware” if they don’t know so that’s one where I think full disclosure of the problem is the best course of action.

The reason it’s important is because if the sellers are renting the hot water heater, the company handling the rental has to be notified before the sale closes, or there can be huge penalties.

And if the buyers think the hot water tank is owned and it isn’t, the seller may end up having to purchase the equipment so that it can be transferred free and clear of any encumbrances–and that can work out to thousands of dollars.

What about a rent-to-own situation?  Yes, there will be a monthly rental fee which should be disclosed in the listing, but the realtor also has to indicate in the listing that the hot water heater is a rent-to-own and not just a rental because there can be all kinds of complications in a rent-to-own.

In the third and final situation, my colleague was dealing with a situation in which a rent-to-own hot water heater was wrongly referred to as a rental in the listing. But it was a rent-to-own, and was actually registered against title. The fact of that registration can cause problems later if the buyer doesn’t make the payments or doesn’t want to buy out the contract.

I suggested my colleague talk to the seller’s lawyer and get advice on how to deal with an amendment to the Agreement of Purchase and Sale that would protect her client, the buyer. But that’s another situation where if my eagle-eyed colleague hadn’t caught the problem, the realtor’s error in listing the hot water heater as a rental instead of a rent-to-own could have been a serious one.

If you own a hot water heater, or on a rent-to-own contract, provide your realtor with documentation to support, and don’t be offended if he or she says they need more than your word. All your realtor is trying to do is keep both of you out of hot water.

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