Title InsuranceTitle InsuranceHow to buy a home can be confusing. To help you better understand the process of buying a home, we have compiled our clients’ most frequently asked questions. If you need more information about buying a home, you can also download the booklet “Important Information for Home Buyers/Sellers” in adobe pdf format by clicking here.
Do I need a written Contract?
Generally speaking a contract respecting land is not enforceable if it is not in writing. Therefore, if you wish to rely on your right to enforce a Contract ensure that your Contract is in writing. Before signing the Contract you should consult your Notary or realtor. Once the Contract has been signed by all parties, no changes can be made without both the Buyer and Seller’s consent. Hiring a Notary or realtor to prepare or review the Contract is one way to ensure that your interests will be protected.
Subject to Clause
A subject to clause is a condition written into the Contract form. The Buyer intends that the purchase will be “subject to” certain events happening. For example, the Buyer may request a building inspection or mortgage financing approval before being bound to the Contract. A subject to clause allows you to escape the contract, should all the conditions not be met before the deadline.
Problems naturally occur when there are existing tenants, and the Buyer expects vacant possession on the Completion Date. Many Buyers, unaware sign a Contract that makes provision for existing tenants and later discover that the existing tenants plan on remaining in the property after the completion of the purchase. Therefore, a Buyer should consider situations such as existing tenants when having the Contract prepared. The first step is to find out what kind of tenancy is in place.
There are generally two types of tenancies, a “fixed term tenancy” where the tenant signs a rental agreement to rent the property with a specific start and end date or a “periodic tenancy” (the tenant rents the property from month to month). In a fixed term tenancy the landlord or the tenant cannot end the tenancy without a written agreement of both parties. If a periodic tenancy exists (month to month) and the Buyer or a close family member of the Buyer, in good faith, plans on moving into the property, the Buyer can request that the Seller give the tenant 60 days legal written notice to vacate. Written notice under the Residential Tenancy Act of BC cannot be given until ALL conditions in the Contract have been satisfied and are remove in writing.
Alternatively, the Buyer can take possession of the property with the tenants in place. But know that the Buyer will be taking on the responsibilities of handing the vacating of the tenant.
Choosing a Notary
How do you judge a Notary or lawyer’s experience? There is no simple answer to this, but there are some basic questions you can ask that will help you assess experience and knowledge. Here are a few key questions to ask:
- How long have you been practicing real estate law and is this your primary focus?
- What are your fees, and are they firm quotations or simply estimates? (When obtaining a quote ensure the quote includes the disbursements as well as applicable taxes).
- When it comes to signing documentation, who will I meet?
- Ask other people in the community (word of mouth).
Make sure that you take the time to flesh out the answers as much as possible. Don’t rely on words such as “expert” or “specialist” as these words are often used loosely as advertising gimmicks. Once you have armed yourself with this basic information, compare your notes and make your decision.
Buyer’s Notary Responsibilities
Briefly, the Notary’s job is to ensure that you purchase the correct property, free and clear of all financial encumbrances subject only to your new mortgage. A Notary will normally provide you with a copy of the subdivision plan and all non-financial charges. Some non-financial charges that may be registered on title to the property are easements, restrictive covenants or statutory rights-of-ways in favour of utility companies. The Notary will also:
- Determine whether there is a valid and enforceable contract;
- Search title and confirm the nature of all encumbrances registered against the property;
- Conduct a tax search and obtain utility information (water/sewer and garbage rates);
- Arrange withholding tax or a clearance certificate when the Seller is a non-resident;
- Draft the transfer to be registered in the Land Title Office in order to transfer ownership;
- Prepare all other relevant conveyance and mortgage documents including the Property Transfer Tax Return, and Statement of Adjustments;
- Meet with the Buyer to review and sign the documentation. (Your appointment to sign the documents will usually take place during the last week before the closing date. You should advise your Notary if you are going to be away during this time);
- Arrange to have the purchase proceeds placed in trust;
- Conduct pre and post registration searches; register the transfer and mortgage and apply for a State of Title Certificate; and
- Arrange for the undertakings with respect to the discharge of the Seller’s mortgage loan or other encumbrances from the Seller’s Notary.
Additional steps are required if you are buying a strata or a new home in the course of construction.
What should I do once I select a Notary to represent me?
Contact your Notary as soon as possible so that the necessary information can be provided to complete your file. Also, don’t assume your Notary will know every single thing about your file or what is happening. With so many lines of communication, the Seller’s Notary to Buyer’s Notary, Seller’s real estate agent to Seller’s Notary the possibilities’ for one line of communication to falter is always there.
The most important thing is for you to ensure that the lines of communication are open on your side. If your realtor or anyone else contacts you about anything to do with the transaction, simply call your Notary and pass on the information that you have received. What may seem to be fairly straightforward might have important legal ramifications down the road.
When can I expect to meet with my Notary?
You will meet with your real estate Notary prior to the completion date. Typically, it is approximately 2 to 3 days prior to the completion date but the timing will depend on when your Notary receives your Contract of Purchase and Sale and your mortgage instructions from your lender. You should try to give your Notary as much time as possible and a good rule of thumb is “two weeks” which generally gives your Notary enough time to review your contract, receive the mortgage instructions from your lender and complete everything that is required to get your deal closed on time.
Buyer and Seller Costs – Who Pays What?
In British Columbia, most contracts stipulate that the Seller will bear all costs associated with clearing the title. For example, the Seller’s Notary will make arrangements to have all financial charges paid out and discharged from the title. The Buyer will typically bear all costs associated with having the property transferred into his or her name and preparation of a new mortgage loan. As well, the Buyer will be responsible for some or all of the following taxes: Goods and Services Tax, General Property Transfer Tax, and Provincial Sales Tax.
When do I deliver the balance of the Purchase Price?
Plan on having your balance to complete ready for at least two business days prior to the completion date. Your balance to complete will include your down payment and normal adjustments. Typical adjustments are water, sewer and garbage; annual property taxes, title insurance and your Notary’s legal fees and disbursements. The Notary will advise of the exact amount you need to complete once your file has been finalized and is ready for signing. Your balance to complete will be required to be paid by bank draft payable to your Notary in trust.
General Property Transfer Tax
General Property Transfer Tax is a Provincial Tax and should not be confused with annual property taxes. With some exceptions, General Property Transfer Tax is payable where there is a transfer of real property. The tax is charged at a rate of:
- 1% on the first $200,000
- 2% on the portion of the fair market value greater than $200,000 up to and including $2,000,000
- 3% on the portion of the fair market value greater than $2,000,000.
If you’re a foreign entity or taxable trustee and the residential property is located in the Greater Vancouver Regional District, you also pay the 15% additional property transfer tax on the fair market value of your proportionate share. Your proportionate share is the percentage of interest you are registering on the title with the Land Title Office. Use the tax calculator under the Resource tab.
The tax is collected by the Land Title Office when the transfer is submitted for registration in the Land Title Office. There may be an exemption or reduction from the tax if you qualify as a First-Time Home Buyer or are purchasing a qualifying newly built home.
First Time Home Buyers Exemption
This is an exemption or reduction from the General Property Transfer Tax. In order to qualify for the First Time Home Buyer’s Program exemption– which will save you all or part of the General Property Transfer Tax.
- the purchase price must be under $500,000 (There is only a partial exemption if the purchase price is from $500,000 up to $525,000 based on a sliding scale);
- the property must not be in excess of 1.24 acres (If the property is in excess of 1.24 acres you may still qualify for a partial exemption);
- You must have resided in BC for at least one year immediately prior to the date you register the property or have filed 2 income tax returns as a BC resident during the 6 years prior to the registration date;
- You must be a Canadian citizen or a permanent resident as defined by the Immigration and Refugee Protection Act (Canada);
- You must not have owned an interest in a principal residence at anywhere in the world at any time; and
- You must move into the home within 92 days of the date you register title to the land;
The above is not intended to replace the First Time Home Buyers Instruction Guide issued by the provincial government. Please refer to the guide at the following link.
What is the Newly Built Home Exemption?
The newly Built Home Exemption reduces or eliminates the amount of General Property Transfer Tax you pay when you purchase a newly built home with a fair market value of $750,000 or less. To qualify the Buyer:
- Must be an individual (i.e. not a corporation);
- Be a Canadian citizen or permanent resident;
- Must occupy and use the property as his or her principal residence for one year following the date of registration of the purchase at the Land Title Office; and
- The Property purchased must not exceed 1.24 acres;
If you don’t qualify because you are not a Canadian citizen or permanent resident, but you become one within 12 months of when the property is registered at the Land Title Office, you may apply for a refund of the tax. You may still qualify for a partial exemption if the property has a fair market value greater than $750,000 but less than $800,000 and/or the property is larger than 0.5 hectares.
The above is not intended to replace the Newly Built Home Instruction Guide issued by the provincial government.
Do I pay Goods and Services Tax (GST) on my purchase?
Used Residential Property – GST is payable on the sale of real property unless an exemption applies. The main exemption occurs if the property has been previously occupied as a residence. This exemption is usually referred to as the exemption for the sale of used residential property.
New or Substantially Renovated Home – GST may be payable on residential property if you are buying a new house or a substantially renovated home (made new). It is, therefore, important for the Buyer to make inquiries from the Seller to determine if GST is payable.
In certain circumstances, a Buyer may recover some of the GST paid on a new or substantially renovated home. A qualifying home includes mobile homes (including modular home). You may be eligible if you are buying the home for use as your (or your relations) primary residence. In addition, the purchase price of the lands and buildings cannot be more than $350,000. If the purchase price of the lands and buildings exceed $350,000 but is less than $450,00 you may still qualify for a partial rebate. There is no eligible rebate if the purchase price is $450,000 or higher.
The amount of the rebate is 36% of the GST paid up to a maximum amount of $6,300. Use the tax calculator under the Resource tab.
What is “Home Warranty Insurance?
As of July 1, 1999, residential builders applying for building permits to construct a new home for sale are required to provide third-party warranty insurance, unless, specifically exempted from this requirement. Owner-built homes, factory-built homes such as modular homes, and purpose-built rental housing (built for rental purposes) are among a few of the exemptions.
Home Warranty Insurance providers can only be provided by insurance companies authorized the Financial Institutions Commission and that meet the requirements set out in the Homeowner Protection Act of British Columbia.
Mandatory Warranty Coverage must be for a period of at least two years for defects in materials and labor, for at least five years for defects in the building envelope resulting in water penetration, and at least 10 years for structural defects.
It may be wise to have a qualified home inspector or engineer examine the property before the various parts of the warranty expire, e.g. 2, 5 and 10 years for the mandatory warranty, because problems that arise after the warranty period are generally the Buyer’s responsibility. One exception is that items the builder repaired or replaced during the warranty period are warranted for an additional period of time from the date the repairs were completed.
Residential Strata (Condo)?
When you buy a residential strata lot, you acquire space that is often bound by walls, floors, and ceilings. The owners own their individual strata lots and together own the common property and common assets as a strata corporation. In some circumstances, you also buy a parking stall. In a bare land unit, you buy an interest in the actual land and anything built on it.
Living in a strata is not the same as renting an apartment or owning a home which is not part of a strata corporation. Strata living requires owners and residents to follow the Strata Property Act, regulations and the strata corporation’s bylaws and rules.
The strata corporation is made up of all the strata owners. Strata Lot owners responsibilities include approving an annual budget and electing a strata council. The strata council may be assisted by a strata manager or the strata corporation may be self-managed.
It is up to the strata owners, residents and strata council to ensure compliance with strata legislation, bylaws and rules and resolve disputes.
What Is a Form F (Certificate of Payment)?
The Buyer’s Notary must obtain a Form F (Certificate of Payment) from the strata corporation confirming that all strata corporation assessments are paid in full by the Seller. This certificate is valid for only 60 days. It must be filed in the Land Title Office along with the transfer of an estate in fee simple and other documents.
A survey is a document prepared by a British Columbia Land Surveyor. A location survey certificate is the most common type of survey, This document typically shows the location of the buildings (does not include fences) on the property. An up-to-date location survey certificate will determine if there are any encroachments onto a neighboring property or from another property; whether there are any encroachments onto easement or right-of-way areas; and whether there is non-compliance with setbacks required under local zoning by-laws. A survey of this type does not normally confirm property boundaries.
Is an Appraisal and a Building Inspection the same thing?
A property appraisal is often confused with a building inspection; however, they are actually two different things.
A property appraisal is simply an estimate of a property’s market value. It is carried out by a professional who is trained in appraisal techniques and familiar with the local market. An appraisal is used by the mortgage company to determine the amount of the mortgage they are willing to lend you.
Building inspections are designed to disclose defects in the property that could materially affect its safety, livability, or resale value. Many home buyers desiring to save the money for a good home inspection have spent enormous amount of money repairing items that a good home inspector would have discovered. Before choosing a building inspector for your home, you should review the ‘Building Inspections’ section in the downloadable booklet, Important Information for Home Buyers found on this website under resources.
What is a WETT Inspection and do I need one?
A WETT Inspection, which stands for Wood Energy Technology Transfer, includes a thorough inspection of all wood burning appliances such as stoves and open fireplaces, by a certified WETT Inspector.
Given the potential threat these technologies pose to the well-being and health of those in the home, a WETT specialty inspection can give you the peace of mind you need when buying or selling a home and can also be a requirement when obtaining fire insurance.
An inspection for the wood burning technologies in your home is important for a number of reasons. With wood burning appliances the potential for harmful pollutants to be released into your home as well as combustible materials to ignite is increased, so it is important that these appliances are regularly inspected and properly maintained. If you are purchasing a home that already includes one of these wood burning appliances WETT specialty inspections are now being required as a part of the home insuring process. An Insurance Company will normally require homes using these wood burning appliances to be examined by a WETT Certified Inspector before agreeing to insure the property.
If purchasing an older home that includes any of these wood-burning appliances, a WETT inspection is an absolute necessity. Cottages often include wood-burning appliances, and often the installation of these features is not in compliance with WETT standards. An inspection will be able to tell you whether or not these appliances are operating optimally, are in good structural condition, and that they are burning in a way that does not compromise your health and safety.
What is included in a WETT Inspection?
A WETT specialty inspection is an inspection that must be conducted by an inspector who is WETT certified. A building home inspector is not necessarily WETT Certified. While a typical home inspection includes a visual inspection of the fireplace, chimney and hearth, a WETT specialty inspection conducted by a WETT certified inspector includes an inspection of ALL the elements of any wood burning technologies in the home to make sure that they are installed correctly and are installed in compliance to building codes and regulations. Normally the WETT inspection includes a visit to the roof to examine the chimney for any potential structural or ventilation issues.
The WETT Inspection should include an examination of the wood stove, flue pipe, chimney and wood-burning fireplace. A WETT inspector should look at the positioning of the system and its distance in relation to any combustible materials. If there is a problem with the function of the technology in the home, it is important that the individual you employ is a licensed WETT inspector.
Title Insurance is a unique form of insurance. It protects the lender and the homeowner against a number of undetected or unknown risks related to the property’s title or ownership. Unlike life insurance or home insurance, purchasing a buyer’s policy of title insurance is paid only once at the time of closing and coverage is valid for the entire time you own your home.
Briefly, in British Columbia, Title Insurance is used most frequently in residential conveyancing as an alternative to obtaining an up-to-date survey certificate or to resolve defects revealed by an existing survey certificate prior to closing. For example, existing buildings may violate zoning setback requirements, or may extend onto an adjoining property, easement or right of way; the property owner may be forced to remove the intruding structure. Survey coverage included in a title insurance policy insures the policy holder up to a set amount in the policy against the loss or damage arising, should there ever be forced removal of the structures that existed at the policy date (the policy date normally being the completion date of the transaction).Most Lenders (but not all) will generally insist on a title insurance policy with survey coverage.
In addition to survey coverage, title insurance can cover:
- someone else owns an interest in your title;
- fraud, forgery and false impersonation affecting the validity of your title;
- existing liens against the title including realty tax arrears and municipal utility charges;
- violations of municipal zoning by-laws;
- existing work orders;
- lack of legal access to the property; and
- un-marketability of the land due to adverse matters that would have been revealed by an up-to-date survey
Title Insurance has a low premium that is paid only once at the time of closing. If you choose to use Title Insurance in your transaction your Notary will arrange for same at your request.
There are situations, however, where an up-to-date survey certificate will be required notwithstanding coverage provided by title insurance. For example, when you need to know the location of existing structures in relation to the property lines, should you want to add an addition or other improvements such as a fence or garage.
Home Insurance provides payment to the homeowner in the event of a loss. A loss may be due to damage from fire, theft or natural disasters. Any damage to the property will have an effect on the fair market value of the property, if not repaired. If you finance your home purchase, your lender will generally require you to have home insurance coverage in place. At closing, proof of home insurance required is provided to your Notary. Inadequate insurance or lack of insurance will delay your completion.
Annual Property Taxes
When you own; or lease a property or manufactured home in British Columbia property taxes are paid yearly for each property. The money raised from the property taxes you pay is used to fund local programs and services, such as: Police and fire protection; Emergency rescue services; Road construction and maintenance; Garbage services; Recreation and community centers; Parks; Libraries; Schools, and Hospitals.
Completion Date (Closing Date)
This is the date on which the transfer is submitted for registration in the Land Title Office transferring ownership to the Buyer; The Completion Date should not be a weekend or statutory holiday but a date that the banks and notary and lawyer offices are open.
What Is the Adjustment Date?
The adjustment date is the date that items of a financial nature will be settled between the buyer and seller. The usual items for adjustments are annual property taxes, water rates, and local utilities such as sewer and garbage removal.
The adjustment date is typically a day or two after the completion date and is usually but not always the same date as the possession date.
When can the Buyer move into the property?
The Buyer obtains possession of the property and is given the keys on the Possession Date specified in the Contract.
When Is the Seller Paid?
The Seller is paid the purchase price on the completion date set out in the Contract once the transfer documents are submitted for registration at the land title office. The completion date should not be a weekend or a statutory holiday. It should be a date that the land title office and lenders are open.