Representation & Warranties

What “Representations and Warranties” Mean

A representation is a statement of fact made at the time the contract is entered into.
A warranty is a stronger promise — that the statement is true now and will still be true on Completion Day.

In Section 6, the seller is doing more than describing the property — they are legally warranting certain facts. If a warranty is untrue, the buyer may have remedies even after possession.

6.1 Seller’s Representations and Warranties – What the Seller Is Promising

(a) Legal Right to Sell

The seller is warranting that they have the legal authority to sell the property.

Why this matters to your client:

• If the seller does not actually have authority (estate issues, POA limits, missing parties), the deal may collapse or be challenged.

• This is why authority and capacity must be confirmed before an offer is written.
  
  

REALTORS® review title and identification to confirm who appears to be the registered owner and who is signing the contract. They do not determine or guarantee legal authority. Their role is to recognize potential authority issues, explain the risk to the client, and require proper documentation or legal review before proceeding. 

(b) Non-Resident Status (Income Tax Act – Canada)

The seller is warranting that they are not a non-resident for Canadian income tax purposes.

Why this matters:

• If this warranty is wrong, the buyer may face withholding obligations.

• Lawyers may refuse to release funds.

• CRA exposure can arise after completion.
  
  

REALTORS® do not determine residency status.
If there is any uncertainty, the seller must obtain legal or accounting advice, and the contract wording must reflect reality.

(c) Ownership of Included Goods

The seller is warranting that no one else has rights to the included attached or unattached goods.

Common risk areas:

• furnace or HWT rentals

• alarm or security contracts

• water softeners

• solar panels or other equipment leases
  
  

Why this matters:
If the seller does not own what they are promising, the buyer may inherit unexpected contracts or costs.

Best practice is to ask directly, get written confirmation, and exclude or disclose anything that is leased.

(d) Compliance With Land Use Bylaws and Restrictive Covenants

The seller is warranting that the current use of the land and buildings complies with:

• municipal land use bylaws

• restrictive covenants registered on title, ensure you check and confirm these registrations on the title before proceeding.
  
  

Why this matters:

• Buyers often assume compliance without understanding zoning or covenant limits.

• Intended future use may not be permitted, even if current use appears acceptable.
  
  

Municipal bylaws change. REALTORS® should not confirm compliance — legal review is appropriate where risk exists.

(e) Location of Buildings and Improvements

The seller is warranting that buildings and improvements:

• are located on the land

• are not encroaching onto easements, rights-of-way, or neighbouring lands
  unless there is a registered agreement or written municipal approval. 

• comply with restrictive covenants and bylaws, or are lawful non-conforming buildings
  
  

Why this matters:
This warranty is often given without an up-to-date RPR, which creates risk.

If an encroachment or non-compliance is later discovered:

• the buyer may have legal remedies and the seller may have financial consequneces

• the seller may be exposed

• REALTORS® may be questioned about why the risk wasn’t flagged and risks exposure also
  
  

If a seller cannot confidently warrant location or compliance, this section must be reviewed and potentially amended.

(f) Disclosure of Known Material Latent Defects

The seller is warranting that any known material latent defects have been disclosed in writing.

A material latent defect:

• is not discoverable through a reasonable inspection

• materially affects use or value

• is costly or serious in nature
  
  

Why this matters:
Proving seller knowledge is difficult. Buyers rely heavily on:

• inspections

• written disclosures

• clear questions and written answers
  
  

This clause does not replace inspections — it reinforces the need for them.

(g) Government Notices and Permits

The seller is warranting that any known:

• government notices

• stop orders

• lack of permits for development
  
  

have been disclosed in writing.

Important limitation:
The seller is not required to provide copies of permits unless the buyer asks for them in the contract.

If permits matter to the buyer, they must be specifically requested.

What Happens If a Seller Cannot Warrant These Items

If a seller cannot honestly make one or more of these warranties:

• that clause must be discussed

• wording may need to be crossed out or modified

• legal advice should be recommended
  
  

Leaving warranties in place when the seller cannot stand behind them exposes the seller — and creates downstream disputes.

6.2 Survival of Representations and Warranties

The contract confirms that:

• these warranties are true on Completion Day

• they survive completion

• legal action may be brought later, subject to the Limitations Act (Alberta)
  
  

This means:

• possession does not end risk

• issues may surface years later

• sellers often underestimate long-term exposure
  
  

REALTOR® Responsibilities in Section 6

REALTORS® are expected to:

• understand what the seller is warranting

• identify risk areas early

• ensure clients do not promise what they cannot confirm

• recommend legal or professional advice where appropriate
  
  

REALTORS® do not:

• verify compliance

• determine tax residency

• certify permits or bylaws

• provide legal advice
  
  

Key Takeaways for Clients

• Representations and warranties are legal promises, not boilerplate

• They allocate risk long after possession

• Unverified assumptions are dangerous

• Clear disclosure and early clarification prevent lawsuits later