After subject removal - what now?

You have toured lots of homes and gone through all the negotiations and home inspections, you've signed a contract and gotten your financing approved... now what do I do? 

For home buyers and sellers, this can be a big question, hopefully this blog helps with some answers....

Ask your Realtor to Submit Contract

Once all subjects and conditions are removed from the Contract, only then does the Contract become firm and binding. Once this takes place, it is important that the Buyer requests his or her Realtor to send the Contract over to their lawyer as soon as possible. If available, the Survey Certificate should be attached, if there is no Survey Certificate attached to the Contract, title insurance is often required by the Lender (at an additional cost).

Some clients want a land title review, or they have another legal issue which they want cleared up prior to purchase, if so, please contact your lawyer before subject removal.

Upon receipt of your Contract of Purchase and Sale your file is opened and our law firm contacts you immediately to have our representation of you confirmed and we provide you with a quote for the legal fees to expect in your transaction.

Ask your Mortgage Broker or your Banker to Submit Mortgage Instructions

Whether a conveyancer has 3 days to complete or 3 months, they tend to always be waiting for mortgage instructions. To ensure mortgage instructions are received in a timely fashion the lender should be advised well in advance of closing details such as, Purchase Price, Completion Date (date funds will be advanced), Name of Firm, Lawyer’s Name, address, phone/fax number and email address.

Contact your Lawyer or your Conveyancer

Conveyancers tend to be working on the current month closings and very rarely any further than that in advance. Nevertheless, if a Buyer has questions or concerns they should feel free to call their lawyer or thier conveyancer to ask these questions.  We are here to answer your client's questions and concerns so your client can remain at ease throughout the buying process.

It is important for clients to be available prior to the closing date, as depending on the delivery of information from other parties (ie; getting mortgage instructions), sometimes we are not able to call in our clients to sign documents until just prior to closing.

When you talk to your lawyer or your conveyancer, it is important to have the following information available:

1.    Who will be appearing on title and on mortgage, if applicable (Full legal names and occupations)

2.    Is there anyone who is a First Time Home Buyer (if so, date of birth, SIN number and address for the past two years would be required)

3.    Is GST/HST applicable? Is the Seller a non-resident?

4.    If there is a mortgage, are there any Covenantors/Guarantors (contact information would be required)

5.    Who is the insurance agent? (Contact info required)

6.    Book an Appointment with the Lawyer for signing (or if out-of –town clients process of signing via email/fax will be explained at that time)

Arrange for Home Insurance/ Movers/ Utility Companies etc.

If financing for the subject property is involved, the lender requires your fire insurance coverage to be confirmed by your lawyer prior to registration of Mortgage and disbursement of funds. It is important that insurance is effective at 12:01am on the Completion date, not possession date. The Buyer should arrange thier insurance well in advance of the completion date.

Signing Documents and the Balance of Funds to Complete

Depending on the receipt of information from third parties and the complexity, documents may be signed with the  lawyer anywhere from the day of Closing to 2 weeks prior to completion date depending on the complexity of the file. Prior to signing, your conveyancer will contact you to advise you of the amount of funds necessary to complete your transaction. These funds are usually brought to the appointment by way of bank draft and deposited into the lawyers trust account until the completion date.

Closing Date

Generally, first time clients often think they have to meet with the lawyer on this date to do “something” but in fact, this is the day where the clients, getting ready to move, need to ensure there is a phone nearby and wait for the call from their lawyers office (and their Realtor) advising them that the transfer documents have been registered at the land title office and funds are being transferred. Then, they will need to get in touch with their Realtor to arrange the pick-up of keys so they can start moving in to their new home.

This post was drafted by my real estate paralegal (also called a conveyancer), Terri Lavertu, who assists me as we guide our clients through the process of buying a new home. If your clients have questions, they are welcome to call myself or Terri at 250-762-5434.

HST - Key Points for Realtors

HST will be chargeable on every supply of real property (including mobile homes and floating homes) in Canada. However, Used Residential Housing is an Exempt Supply and therefore resale homes will not be subject to HST (they are not subject to GST either).

Generally the Vendor is liable to the government to collect and remit the HST; However in certain cases the Buyer must remit where either a) the Seller is a Non-Resident or b) the Buyer is a GST/HST registrant.

HST is due and payable on all NEW residential homes with a COMPLETION DATE on or after July 1, 2010 unless the transaction is grandfathered.  A "grandfathered" transaction is one where the contract of purchase and sale was signed prior to November 18, 2009. However, in the event the "grandfathered" contract is assigned to a third party, special rules will determine whether HST is payable. The rules are in place to prevent fraudulent "grandfathering" transactions.

The HST rebate threshold has been increased to include home valued up to $525,000. The government is states that additional rebate makes the purchase of homes (with a value of less than 525k) before of after July 1, 2010, tax neutral. Buyers considering the purchase of homes below the 525k threshold should not purchase prior to July 1, 2010 simply to get a tax break.

The HST rebate threshold also applies to Rental Housing. Therefore investors looking at the condo market to place in the rental pool should be encouraged that the new HST will not effect their purchasing power.

The important take home message is that HST will not be the hyped "big bust" for the BC real estate industry. HST will have very little effect on the majority of BC residential home sales.

Bare Land Strata

In a recent ruling of the Real Estate Council a Realtor in Vancouver was suspend for failing to adequately describe to his client that his property was bare land strata. In this issue of the BC Real Estate Law Blog we discuss the nature of Bare Land Strata and what Realtors should be explaining to clients when they market this type of property.

Bare Land Strata often looks to an uninformed client as if it is free hold property and is defined by the Strata Property Act as a strata plan is shown as horizontal measurements to survey markers (similar to a subdivision plan) and not by reference to walls or floors. Developers have recently favored this style of development as it may allow for variance of  lot sizes (and thereby increased density).

Unlike a stratified apartment style condominium, the common property elements may not me immediately apparent to the Buyer. Even though a Bare Land Strata subdivision may look like any other normal subdivision, it strata fees, rules, regulations, and strata council like other types of strata property. Note, the fees and the services provided by a bare land strata council will vary greatly between developments.

Realtors should ensure they obtain all the required information so their clients can make informed decisions to  purchase. By obtaining the Land Title from BC Online to any property, the Realtor will be able to quickly tell whether they are dealing with strata property. The legal description of property will state the the property is a STRATA LOT. The Realtor can then contact the Strata Council to obtain the bylaws, the minutes, the Form B and Form F, which will disclose to the client those services which are provide by the strata council and the strata fees charged to the property. Some examples of bare land strata communities in the Okanagan include Horizon Drive and Canyon Ridge.

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.

Investors - Assuming a Tenancy

Investors are often looking to buy property which generates rental income. Many investment advisors see property as a key component of the financial portfolios for high net worth individuals.

Realtors should ensure that their investor clients have all the information they need to make a decision on a rental property. In addition to the considerations of resident buyers, investors need to know:
1. The Current Monthly Rent
2. Date Tenancy Commenced.
3. Due Date for Rent.
4. Date of Last Rental Increase.
5. Prepaid Amounts on Deposit.
6. Payment History with the Tenant.
7. Damage/ Complaint History with the Tenant.
8. Obtain a copy of the written tenancy agreement between the parties

When working with investors, the Realtor should add the following clauses to the standard contract of purchase and sale:

A. The Seller represents and warrants to the Buyer that the Residential Tenancy Agreement with ____[Tenant]_________ attached to this Contract is in good standing, and has not been modified or amended by the parties.

B.  The Seller represents and warrants to the Buyer that the rent roll for this property is as follows:
Current Monthly Rent:
Date Tenancy Commenced:
Due Date for Rent:
Date of Last Rental Increase:
Prepaid Amounts on Deposit:

Strata Property Rentals

The applicability of a bylaw restricting the rental of strata property is an area of law which requires the interpretation the Strata Property Act and the Strata Property Regulations.
Generally, a strata corporation may impose bylaws which limit the number of rentals which are permitted in the building. The enforceability of those bylaws (assuming they are properly enacted by the strata council) on owners who wish to rent is the subject of this blog entry.

A. Sometimes Rental Restrictions DO NOT apply to the FIRST BUYER. A owner who has purchased a strata lot from a developer will not be subject to rental restrictions if:
i) a "FORM J" has been filed which has permitted the developer to rent the strata unit purchased by the owner; and,
ii) the time period specified in the "FORM J" has not expired.

A common misconception in the industry is that all "first owners" have an exemption from Rental Restriction Bylaws, this is simply not true. Buyers and Realtors should ensure they obtain a copy of the filed Form J.

B. Rental Restriction Bylaws do not apply immediately if a unit is currently rented at the time the bylaw is passed. If the previously rented unit is VACANT when the bylaw comes into force then, the application of the bylaw to that unit is delayed for ONE YEAR. If the previously rented unit is OCCUPIED when the bylaw comes into force then, the bylaw applies ONE YEAR AFTER the occupying tenant moves out.

The key point here is that upon passage of the bylaw, the rental restriction WILL apply to the owner’s rented unit; it is simply a matter of time. This piece of legislation is simply a mechanism to ensure that tenants will not find themselves “on the street”, but it does little to protect the interest of owners. I strongly advise owners, who are facing a proposed bylaw restricting rentals to rally other owners to their cause prior to the meeting on the issue. Once the bylaw is enacted, you may have no choice but to eventually sell your property.

Execution of Real Estate Contracts

A. Contracts Must be In Writing

Real Estate Contracts, as contracts for the sale of land, are unique in British Columbia law as s.59 of the Law and Equity Act states that “A contract respecting land or a disposition of land is not enforceable unless there is, in a writing signed by the party to be charged or by that party's agent, both an indication that it has been made and a reasonable indication of the subject matter”

In the historical case of McKenzie v. Walsh, the Supreme Court of Canada made it clear that no particular form of contract for the sale of land was required, simply a contract “in writing” (email would likely qualify in 2009), which specifies all fundamental terms including: Parties, Property, and Price.

B. Real Estate Agents are Held to a Higher Standard

But, as the fictitious contract case of Wu points out, a suspension case brought by the Real Estate Council of British Columbia, a Real Estate Agent has a an obligation to ensure that the contracts they are presenting on behalf of their clients are legitimate and well intentioned. Therefore, real estate agents (and lawyers) are held to the standard of an expert vis a vis their clients when drafting and presenting contracts.

C. Witness of Documents is Important for Contracts, Essential for Land Title Documents

Having a real estate contract properly witnessed is a cornerstone of a good contract because it validates the contract with the written evidence of an independent third party who may refute later claims of identity, mistake, duress or undue influence during an action for breach.

On the Closing Date, when a transfer or mortgage is to be registered in the Land Title Office, the Land Title Act applies an higher standard stating there shall be no registration or charge registered in the land title registry unless that charge is witnessed properly by an “officer” (which includes lawyers in the Province of British Columbia). This is a key reason why lawyers are an integral part of every real estate transfer in British Columbia.

D. Special Consideration for Corporate Purchasers

Generally the law in British Columbia states that a corporation that does not exist (ie; because it has yet to be incorporated or it has been dissolved), cannot enter into a valid contract, unless that contract is specifically adopted by the corporation after incorporation. Therefore, if you are dealing with a corporate purchaser it is prudent to ensure (by calling your client’s lawyer) that that corporation is in good standing with the Corporate Registry.

E. Special Consideration for Execution by Power of Attorney

Often, elderly or non-resident clients wish another person (other than their agent) to function as their attorney for the execution of documents. Real Estate Agents should ensure that they have a copy of the valid power of attorney and this power of attorney should be registered in the land title office to ensure its validity on the Closing Date.