When you assume…

After several months of trying, John Sellerski finally signs an agreement to sell his home by allowing Susan Buyaranandan to assume his existing mortgage with TD Bank. On closing, Sellerski’s lawyer contacts TD Bank to get a written release so that Sellerski will no longer be “on the hook” for this mortgage. The bank, having no incentive to release Sellerski, will probably deny the request.

As a result, Sellerski will have no choice but to close the transaction while remaining liable for the mortgage, even though it has been transferred to Buyaranandan. If Buyaranandan ever defaults under this mortgage, the bank has every right to come after Sellerski.

How to avoid this? If the offer signed by both parties contains only a standard clause making it a condition that Buyaranandan assumes Sellerski’s mortgage, be sure to add a provision making the offer also conditional on Sellerski getting a release from the bank for that mortgage. That additional non-standard clause will also protect Sellerski’s interests.