Saving Your Client Money in a Real Estate Transaction

This weeks blog post is definitely not legal advice, however growing up in the Real Estate industry for the past 34 years, there are definitely a few ways I have discovered that both Realtors and Lawyers can add value to their clients transaction:

Negotiate from a position of strength – in short, ensure that your client has done everything they can do to help a deal move forward. This includes obvious things like obtaining a pre-approval and limiting subject conditions only to “bare essential items” (like title review, strata docs, home inspection, financing). However, taking this to the next level means having this discussion with your client:

1. What is the BEST outcome if the deal does NOT go through? And
2. What is the WORST outcome if the deal does NOT go through?

These two questions very quickly get to the heart of your client’s motivation.

Setting good dates – everyone wants to close at the end of the month, this means that you client is just one of many people needing services from lawyers, movers, strata companies. The best advice here is to remove subject conditions at least 30 days prior to closing, and have closing occur on the "off-weeks" during a month (ie; those weeks that do not contain the 15^th or 30^th).

Knowing the Local Area – there are many areas in the Central Okanagan where housing costs will be dramatically different for a number of reasons that are not immediately apparent from the listing, for example:

1. Are you too far from a fire hydrant/ protection area to obtain cost effective fire insurance (Some parts of the Upper Mission)?
2. Does the area you are in have such poor water quality which will necessitate you bringing in outside sources (ie; Glenmore – Ellison Irrigation District)?
3. Does the smaller municipality mean that you property taxes are going to be markedly higher (ie; Lake Country, Peachland)

Search out Hidden Costs

1. Get a good home inspection, but then get a follow-up expert inspection if anything substantive arises (ie; roof, foundation, building envelope/ water, electrical, plumbing).
2. Get to know your strata council – everyone reads strata docs, this is standard. However don’t be afraid to take the extra step of calling the Strata Council President, you’d be surprised what doesn’t make it into the minutes.

Who Should be on Title?

When buying a house, you must decide whose name will go on title. Will you be the sole owner? Should you be on title at all? Will you and your spouse go on title together? If so, will you be joint tenants or tenants in common? What about your children?

What is the difference between Joint Tenancy and Tenancy in Common?

Joint Tenancy means that two or more people own property in equal undivided portions, with an equal right to use the whole property. When one joint tenant dies, the property is transferred to the surviving joint tenant immediately before the moment of death. This means the property does not become a part of the estate of the person who died and the property will not be subject to probate fees, will not be taxed as a part of the estate and will not be distributed among the beneficiaries of the estate.

Joint tenancy is generally preferred for most spouses.

If two or more people own property as a Tenancy in Common, it does not have to be divided equally. Tenants in Common can own different proportions of the property, for example ¼ and ¾, and they can sell or mortgage their portion as they please. If one tenant in common dies, that person’s share of the property becomes a part of the deceased’s estate. It is subject to probate fees and it will be distributed to the beneficiaries of the deceased’s estate. As you can imagine, property can be a difficult thing to “distribute”.

Tenants is generally preferred for blended families and other unique arrangements (like a shared vacation cottage).

Can I hold title in only one name, excluding my spouse or common law partner?

Having title in your name does not always mean you are the only one with an interest in the property. If you are in a relationship and have been living together for at least two years, your partner may have a claim to part of the property even though they are not on title.

If you are a self-employed professional, you want to protect your assets from any business creditors. Some people attempt to protect their assets by placing title in their spouse’s name or have title held by a holding company.  This protection is not absolute and most bank will require a spouse to, at the very least be a Guarantor or Covenanter on the Mortgage.

What about going on title with my Adult Child ?

If you are thinking of holding a property in joint tenancy with an Adult Child for estate planning purposes, you should consult a lawyer. There can be many unintended consequences and pitfalls for such an arrangement. For example:

-loss of control: you cannot sell or mortgage without the consent of the child

-taxes: there may be capitals gains consequences for the parent or the child

-property transfer tax: depending on whether the property is a principal residence, you may have to pay property transfer tax

-creditors: the property will be at risk to claims by the child’s creditors

-uncertainty: it is possible that you may not be successful in creating a joint tenancy if the child does not live in the house. The joint tenancy may be unintentionally severed by a number of events.

Sales of Waterfront Property

Who Owns the Water?

All water in BC is owned by the Crown and strictly regulated. As property lines extend to, but do not include the foreshore, the upland owner has no rights to use or “possess” the water, only a right to access. A license from the Provincial Crown is require to use/ possess.

Waterfront Boundaries Can Change

The Crown owns all property which exists below the high water mark therefore if the high water mark changes, the property boundaries will change. A new survey is required to re-define the property after erosion (loss) or accretion (gain), especially for:

1. Property tax issues
2. Building on property (building envelope)
3. Building on water (dock location)

General Public has a Right of Access to Foreshore.

In Minor v. Van Ewyk, 2008 BCSC 558 the Court said that “the foreshore is open to public use…. The only rights the [land owner] may assert are her common law riparian right to unrestricted access to and from the water frontage, and the right conferred under a “License of Occupation””.

Dock Licenses

As Docks occupy Crown Land, a License is required for a legal dock. A License is a Personal Right and is not transferred with a transfer of the upland. There are Three Types of Dock Licneses commonly found on Okanagan Lake

A. License of Occupation (pre-2008)

B. Specific Permission (non-exclusive)

C. Water Lot Lease (exclusive occupation)

Importantly, unlike other some other lakes in BC, there is no General Permission on Okanagan Lake to build a dock!

The License will often have Limitations, for example:

A. Not to interfere with other rights or navigation (Fixed Impediments)

B. Environmental Covenants

C. Limitations on Use (# of slips/ commercial v. residential)

D. Cannot interfere with Public Access

E. No “non-moorage” purposes, incl.: patios, sundecks, hot tubs, roofs/ gazebos.

Assignment (Sales) of Dock Licenses

As a License is NOT conveyed with land, must be assigned

Suggested Contract Language:

The Seller assigns and the Buyer assumes all right, title and interest to the License of Occupation [or Permission] #19978722 with the Province of British Columbia, a true copy of which is attached to this Contract, for, inter alia, the Dock adjoining the property.

The Seller represents and warrants that the License of Occupation [or Permission] #19978722 is in good standing.”

Important Note: Consent of Province to the assignment often will be required and may be denied

Home Buyer FAQs

Common Home Buyer Questions
By: Peter Borszcz

1. Will this contract force me to buy this home?
A contract is a legally enforceable promise. Therefore, you are obliged to carry out its terms if the contract is firm and binding. However, a contract can be “subject to” the performance of other terms (for example, obtaining a mortgage). Most Realtors draft “subject to” conditions to allow Buyers time to find out more about the home they are buying and to ensure they are able to obtain financing to purchase it.

2. What happens if I can’t get financing or I am not happy with my home inspection?
Usually a Realtor has written in these items as “subject conditions”, if so, you will instruct your Realtor that you are “unable to waive or fulfill” you contract. If you are unable to waive or fulfill a subject condition, your obligation to purchase the home will cease.

3. Why do I have to give a deposit to the Realtor? Will I get it back if I back out of the deal?
A deposit is “earnest money” meaning that it signifies to the Seller how serious you are to proceed with the transaction. Your Deposit is not a “down payment”, as your cash in the deal (in addition to your mortgage) will be paid on the Closing Date. Whether a Deposit is returned depends on the factual situation which caused a deal to collapse (see below), however your Realtor cannot simply return your deposit without first complying with the provisions of the Real Estate Act.

4. If I can’t complete on the Completion Date will that be a problem?
The contract provides that “time is of the essence” this means that the strict timelines in the contract are enforceable by the Court. In the event that you fail to complete “on time” you may be liable for damages (money damages) or specific performance (where the court orders you the complete the deal). If you find out that the original dates will simply not work for you, please let your Realtor and Lawyer know so that they can attempt to obtain an extension for you.

5. If I back out the deal after removing my subject conditions, will I just lose my deposit?
Assuming that the Seller has not misrepresented and is able to complete, generally a Buyer cannot simply “walk away” from their deposit. Should a Buyer fail to complete a firm and binding contract, the Buyer may be liable to the Seller for all of the Seller’s damages including: a) loss of profit, b) interest costs, c) marketing costs, and d) legal fees. In many cases, the amount of the Seller’s damages may exceed the deposit. If you are considering this, please call your lawyer immediately.

6. I really like the bedroom light, how do I know this is included with the house?
Generally, all fixtures are included with the sale of the house. Fixtures are those items that are affixed (ie; attached to) the structure and foundation (eg; chandeliers). Sometime, exactly what “is” and “is not” a fixture has to do with the “degree of attachment” and this can be confusing for both buyers and sellers. Given this confusion, sometimes Sellers remove items (ie; wall shelving) when they move out, so if there is something of importance which you want included with the purchase of you home please let your Realtor know.

7. The property has an “in-law suite”, can I rent it out to other people?
A secondary suite can only be rented in the City of Kelowna or the District of West Kelowna where the property has been zoned “S”. If you require that the suite to be rented to afford to live in the property, we strongly recommend that you inquire with the applicable municipality.

8. If I own the property can I do whatever I want with it?
Although an owner can do many things with a property that a tenant cannot do, your ownership may be subject to restrictions that are found in local statutory building schemes, homeowner’s associations, strata councils, and municipal bylaws. If your purchase of the property is dependant on a change in structure (ie; major renovation) or use (ie; home based business) please discuss this with your Realtor.

9. If my spouse goes on title alone and we separate, will I have no claim to my house?
The Family Relations Act creates an interest in land upon the breakup of a marriage, even if there is no interest noted on the land title (subject to a prenuptial agreement or the Act). The Act allows for filing of an interest in land, upon marriage breakup, in the land title office.

10. A clause on my contract (i.e.; title search or tax advice) is “subject to review by the Buyer’s lawyer [or accountant]” what should I do?
Prior to subject removal, you should take the contract to your lawyer or accountant and discuss your proposed purchase with them. Your Realtor has placed this clause into your contract to ensure that you obtain personalized professional advice in a specialized area (such as tax or a title search).

11. What are my closing costs?
Closing cost vary with each transaction. These include Property Transfer Tax, Municipal Property Tax, Strata Documentation and Adjustment Fees (if applicable), Land Title Office Filing Fees, and Legal Fees. We provide all clients with a quote on Legal Fees and an estimate of the other costs you can expect after we receive your contract, to ensure there are no surprises on closing.

Have another question? We’re happy to help:

Allowing the Buyer to Move In - Terminating an Existing Tenancy

Where there is an existing tenancy and your client wishes to move into the property, the existing tenancy will have to be terminated in accordance with the provisions of the Residential Tenancy Act.

For the new Buyer to move into the property the Seller must file a "Two Month Notice to End Tenancy", Form RTB-32. The sequence of events is:
1. All Subjects must be removed first.
2. Buyer must request the Seller to serve notice in writing.
3. Seller then serves 60 day notice and must immediately pay 1 month rent as compensation.
4. Tenant may then give a 10 notice to move out without penalty.
5. Tenant may dispute note.

Time lines are important here and often get Realtors into trouble. Take into account all the notice period time lines when drafting dates. The 60 days applies only after after the “effective date of notice” [which means the day before rent is payable],

For Example
Notice on Oct 5th
Rent Payable on 1st
Effective Date Oct 31st
Move out Date Dec 31st!


Realtors should add the following language to the standard contract  of purchase and sale when terminating a rental agreement:

A. Upon Subject Removal, the Buyer hereby irrevocably instructs the Seller to terminate the tenancy on the Property.

B. Upon Subject Removal, the Seller shall serve the RTB-32 Form upon the Tenant and pay the Tenant compensation according the Residential Tenancy Act and regulations.

C. Within 48 hours of service of the RTB-32 Form, the Seller shall provide the Buyer with a copy.

Home Inspections

The home inspection industry in British Columbia has grown rapidly in the last 15 years, from fringe service, to mainstream acceptance. What is seldom explained to Buyers is that there a limits to what a home inspection can do.

Most home inspectors are "problem spotters" not "problem solvers or quantifiers". Usually a home inspection will say "I think you have a roof issue" or "you may want to get the deck checked out". Often new buyers will take this advice as something to look into AFTER purchase. This is often a mistake.

If a home inspector spots something, even if the home inspector does not think it is a critical issue, it is best to then look into it further by calling in a qualified expert. Therefore if there a roof issue, get a roofer in to look at the property, if there is a structural issue, get a structural engineer. A few dollars on spend investigating a home purchase is money well spent.

Buyers should also note that there are limits to the liability of home inspectors. Usually the contract you sign with the home inspector limits their liability to problems they can see without moving furniture, ceiling tiles ect....

Buying a Home with Existing Tenants

Buying a home with existing tenants involves a few additional obligations on buyers and sellers as 1) there is another party involved (the tenant), and 2) there are additional provincial laws that appy (the Residential Tenancy Act).

Prior to considering the purchase of a rental property buyers should ensure a) that the suite is a legal suite (as opposed to the commonly marketed "inlaw suite") and b) that there are no strata bylaws which prohibit the rental.

If the new Buyer is planning to Move In to the Property:
**** Ensure the Tenant is given property notice to vacate - the notice can only be given a) once the Purchase Contract is subject free, and b) the tenant must have 60 days from day before the next rental payment date. This means, if rent is due on the 1st for a periodic monthly tenancy, and you give notice to the tenant on April 15th, the tenant does NOT have to move out until June 30 (60 days following April 30, the effective date of notice)

If the Tenant is staying resident on the Property
*** the Buyer should review the residential tenancy agreement to ensure that a) it is valid and enforceable and b) that the rent and damage deposit is properly adjusted on closing (note interest adjustment is required here under the Residential Tenancy Act)

Strata Property

Most people think of condos when they think of strata property, however in British Columbia, strata property can include detached and semi-detached homes, apartments, and even bare land. The Strata Property Act imposes rules on the home owner which regulates the home owners use of the lands. The rules can include pet restrictions, tenancy restriction (ie; no rentals), and age restrictions. Buyers should very carefully review the rules, known as Strata Bylaws, prior to the entering into a binding contract of purchase and sale for strata property. Some key questions to ask:

1) If I have a pet, does the strata corporation allow pets?

2) If there is an age restriction, how does the effect my ability to pass on my unit or have my grandkids stay with me?

3) If I am an investor, are rentals allowed or are they capped at a certain maximum?

4) How old is the building, will there be major repairs upcoming?

5) Does the style of building management mesh with my personality (ie; are you a stickler for the rules or are you lenient)?

6) What do the minutes of the strata meeting disclose about the personality of my neighbours?

At the end of the day, in strata property, “You’re All in This Together”, which means you are signing up for a community living, to varying degrees depending on how the strata is managed. Prior to buying, introduce yourself to the strata council members and find out more about them to see if this strata is right for you.

Freehold vs. Leasehold

At common law, in British Columbia, land tenures can be generally divided into two large catagories, fee simple land and leasehold lands.

Fee simple lands (also called freehold lands) are lands where the owner owns all the property rights associated with thoses lands, except the rights which are reserved for the Crown (for example oil and gas rights). The restrictions on use on freehold land are imposed by the Province and the local municipality.

Leasehold lands are lands where the rights of the owner are limited by the another party, usually a landlord. Long term leases (49 - 99 ys) are commonly found in the Province of British Columbia when land is sold on Native Reserves as the inalienability of native lands, under the Canada Constitution, prohibits Native Reserve being "sold" to anyone except to the Crown. Additional restrictions on the use of leasehold land are found in a LEASE or HEADLEASE document which creates contractual obligations between the Landlord and Tenant.

Property Transfer Tax - First Time Home Buyer Exemption

This exemption is more limited than most first time home buyers realize, its not enough that this is your first home in British Columbia, to qualify you must meet all of the following criteria:

1) Be a Canadian Citizen or Permanent Resident.
2) Must have resided in BC for the last 12 months, and at least 2 of the last 6 tax years.
3) Must never held title to property any where in the world
4) Must not have previously applied for the exemption.

Usually, #2 causes the most problems. For example, if you are a college student in Ontario and you are moving out to British Columbia to start your first job. Upon buying your first home you would not qualify for the FTHB exemption as you have not resided in British Columbia for a sufficient time.

Property Transfer Tax - Related Induvidual Exemption

One of the limited exemptions to paying property transfer tax occurs where the Seller is related to the Buyer. However, for this exemption to apply, the Seller and Buyer must be "vertically related" and the property must be a principal residence.

So, consider the situation where husband is on title and wishes to add his wife to title to their family home for estate planning purposes. Normally, this transfer would be taxed by Property Transfer Tax, however, the exemption applies and no tax is applicable.

If however, an uncle wishes to sell his property to his neice, since they are not vertically related the exemption does not apply, and Property Transfer Tax is payable on a direct transfer from the uncle to the niece.

Similarly, if the property is a rental property, no exemption is available as it is not a principal residence.

Property Transfer Tax

For most out of province buyers, finding out about Property Transfer Tax often comes as an unpleasant shock. Property Transfer Tax is charged on every transfer of freehold title in the Province of British Columbia as is calculated as 1% of the first $200k and 2% of the remainder of the Purchase Price

This means a $300,000 home buyer will pay $4,000.00 in Property Transfer Tax on closing. Similarly, a $600,000 home buyer will pay $10,000.00 in Property Transfer Tax on closing. This tax hit is made even more difficult as banks will not finance this payment.

The tax can be avoided if you qualify for a limited set of exemptions, the two most common are:
a) the first time home buyer exemption; and,
b) the related induvidual exemption.
I will discuss this exemptions in more detail in later posts.

Welcome to the B.C. Real Estate Blog

This blog will attempt to be a valuable resource for Realtors, Buyers, and Sellers of real estate in the Province of British Columbia.