Closing on an Ontario house in winter: what if the buyer finds a burst pipe at the final walkthrough?

The details: it depends on how bad the damage is. Under the standard OREA Agreement of Purchase and Sale used in most Ontario deals, the property stays at the seller's risk until closing. If the damage is substantial, the buyer can choose to terminate and get the deposit back, or take the seller's insurance proceeds and close. If it's minor, the usual fixes are a seller repair before closing, a holdback between the lawyers, or a price reduction. Whatever you agree, put it in a signed amendment, and buyers shouldn't refuse to close on their own; call your lawyer first.

Why it happens in winter

By a winter closing, many sellers have already moved out. The heat gets turned down too low, nobody checks the house for a few days, a pipe on an outside wall freezes. When the buyer comes in a day or two before closing, there's water on the floor.

That's exactly what the final walkthrough is for. The standard form doesn't include it on its own; most agreements add a clause giving the buyer one or more visits before closing, and the number is negotiable. Check yours.

How it usually gets handled

Whether damage counts as substantial, and whether the buyer can walk away, is for your lawyer to decide based on your agreement.

What Yifei has seen

On one house Yifei handled, the home inspection turned up a crack a few inches long in the main water pipe up top. He had a licensed plumber out that day, with an invoice and warranty, and passed both to the buyer's agent. His advice: have the plumbing receipts ready, because they'll come up at the inspection and again at the walkthrough.

For a final walkthrough, Yifei went in alone in the morning, checked every wall for damage and photographed what he saw. Don't treat the walkthrough as a formality: run the taps, look at the ceilings and corners. It's much easier than arguing after closing.

Sellers: before a winter closing

• Leave the heat on after you move out, set high enough that pipes won't freeze.
• Have someone check a vacant house regularly; many policies require it.
• Disconnect hoses from outdoor taps and shut the indoor valves.
• If something bursts, shut off the main valve, call a licensed plumber, and notify your insurer, agent and lawyer right away.

Buyers: if you find a leak at the walkthrough

1. Take photos and video, note the time.
2. Call your agent on the spot.
3. Call your lawyer the same day. Don't decide on your own not to close.
4. Call your insurance broker and confirm your policy starts on closing day as planned.
5. Put whatever you agree (repair, holdback, credit or a new date) in a signed amendment.

Frequently asked questions

When is the final walkthrough usually done?

Usually a day or two before closing, after the seller has moved out. In winter, book it in daylight so you can see water marks in the corners.

Will the seller's insurance cover a frozen pipe?

It depends on the policy. Many policies have conditions for vacant homes, and a freeze-up where nobody checked the house or the heat was off may be denied. Ask your insurance broker.

Want to talk through your own closing?

Tell me about your situation and I'll tell you straight what I'd do. Reach Yifei (RE/MAX) at efay.ai.

Sources

• Real Estate Council of Ontario (RECO), protecting buyers when a property is damaged after the offer: https://www.reco.on.ca/news/when-the-property-is-damaged-after-the-offer-three-ways-to-protect-your-buyer-client
• Court of Appeal for Ontario, 2020 ONCA 522 (quotes the standard APS insurance clause): https://www.ontariocourts.ca/decisions/2020/2020ONCA0522.htm
• Court of Appeal for Ontario, 2022 ONCA 464 (whether water damage is substantial is decided on the facts): https://www.ontariocourts.ca/decisions/2022/2022ONCA0464.htm