Why do I need a written Contract?
Generally speaking, in most jurisdictions, 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 the Contract in writing. Before signing the Contract of Purchase and Sale you should consult your Notary or realtor. Once the Contract has been signed by both the Buyer and Seller, no changes can be made without the Seller’s consent. Hiring a Notary to prepare or review the Contract is one way to ensure that your interests will be protected.
What is a Subject to Clause?
A subject to clause is often written into one of the large blank spaces in the Contract form. The Buyer intends that the purchase will be “subject to” certain events happening, such as obtaining a building inspection, mortgage financing, or some other matter. If used properly, a subject to clause will allow you to escape the contract, should all the conditions not be met before the specified deadline.
What factors should I consider when choosing a Notary?
The first issue most people focus on is price, which is WRONG! Price is only one factor, and unless the fee of one Notary or Lawyer is 30% more than another Notary, the fees should be only a minor factor in choosing a Notary.
If you choose a Notary or Lawyer based on his or her fees, you may fail to take into account important factors such as experience and knowledge. It is not when things are going well that you should worry—it is when something goes awry in the process of your transaction! Should this happen, the experience of your Notary or Lawyer is crucial and essential to the successful completion of your transaction.
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 a Notary or Lawyer that will help you assess his or her experience and knowledge. Here are several key questions to ask:
- How many real estate transactions of my type do you do in an average month?
- What are your fees, and are they firm quotations or simply estimates?
- Ask if the quote provided includes the disbursements as well as the applicable GST and PST.
- When it comes to signing documentation, who will I meet with?
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.
What does a Buyer’s Notary do?
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 confirms the nature of all encumbrances registered against the property;
- Conduct a tax search and obtains 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 transferring ownership;
- Prepare all other necessary 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 appropriate undertakings with respect to the discharge of the Seller’s mortgage loan or other financial 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 obtained to start your file. Don’t assume your Notary will know every single thing about the file or what is happening. With so many lines of communication – 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.
What costs am I responsible for?
In British Columbia, most contracts stipulate that the Seller will bears 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 their name and preparation of their 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 need to deliver the balance of the Purchase Price?
Plan on having your funds ready for at least one or two business days prior to the completion date. Your balance to complete will include your down payment, adjustments for water, sewer and garbage; adjustments for annual property taxes, the cost of title insurance if required and your Notary’s legal fees and disbursements. The Notary will advise you of the exact amount you need to complete once your file has been prepared and is ready for signing. Your balance of funds will be required to be paid by way of bank draft or certified cheque 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% additonal property transfer tax on the fair market value of your proportionate share. Your proportionate share is the percentage of interest you are registering on title with the Land Title Office.
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. Please refer to the guide for detailed instructions at the following link.
Do I have to 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.
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 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.
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.
What is a 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.
What is a Survey Certificate?
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. 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 Title Insurance?
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.
What is Home Insurance and do I need it?
Home Insurance provides payment to the homeowner in the event of a loss. 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.
What are 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.
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 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.