REAL ESTATE SELLING YOUR HOME

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1 Introduction Congratulations on the sale of your home. Selling a home is a major decision and we would like to assist you with the legal requirements. In the event that you choose RDM Lawyers, you can be sure that the legal work will be carried out with a high standard of care and professionalism. Our services are designed to ensure that your transaction will be processed and managed in the most practical and efficient manner possible. We know it is important to keep you informed and to answer all your questions. The information provided in this document is not intended to be legal advice but rather to provide answers to a number of questions that we are commonly asked. If you have others, please call us and one of our lawyers or experienced staff will be glad to help you. What is the Contract of Purchase & Sale and How Can it be Amended? The Contract of Purchase and Sale (which we will refer to throughout as the Contract ), formerly called an Interim Agreement, is the legally binding Contract which should set out in written form all the terms of the transaction. All warranties, representations, inclusions and exclusions should be fully recorded. Amendments can be achieved by written agreement (usually prepared by the Real Estate Agent on an amendment or addendum form) or by an exchange of letters between lawyers. It is a good idea to consult us before signing any document which could be a significant amendment to the Contract. What are Representations and Warranties? Every Contract contains some statements by the Vendor that certain circumstances exist at the time of signing of the Contract. A common example is the warranty that a home has no urea formaldehyde foam insulation or a representation that a septic tank is in good working order. If it should turn out that a statement of this nature was not true when it was made then the Vendor could be liable to the Purchaser for the cost of correcting the situation. Liability could arise even if the problem is discovered after closing. However, liability does not arise if the problem first occurred after closing, provided the existence of same was not hidden by the Vendor. Completion Date This is the date legal title passes. It need not be the 1st, 15th or 30th of the month. It can be any day except the weekend or a statutory holiday. The completion date is also commonly referred to as the closing date and we will be using these two phrases interchangeably. 1

2 Adjustment Date This is the date for determining the adjustment between the Vendor and Purchaser of items such as municipal property taxes and utilities. This date usually is the same as the possession date. Possession Date The date on which the Purchaser is entitled to have possession of the property is called the possession date. It can be, but need not be, the same date as the completion date. How are the Mortgage Arrangements Finalized? It is your responsibility to complete the arrangements for any new mortgage you may require to complete your purchase and to ensure that the lender sends legal instructions to your lawyer. You have the right to request that your financial institution send these instructions to the lawyer you intend to use for your purchase. You should be aware that having the same lawyer represent you in the purchase and the lender in respect of the mortgage can result in substantial savings of legal fees and disbursements. If you have any questions relating to the mortgage application or require information concerning the transaction, we will be glad to assist you. Please keep us informed on the finalization of your mortgage arrangements. Once we receive the mortgage instructions from the lender we will make all necessary contacts with the lender and arrange to obtain the mortgage proceeds in time for the completion of your purchase. The arrangements should be made so that where possible the mortgage lender has granted approval at least 14 days prior to completion or by subject removal date. It is important for you to carefully assess your financial needs in determining the mortgage amount. It is possible that the mortgage advance could be reduced by the amount of any insurance fee, a holdback for interest to the end of the current month or a holdback related to municipal taxes. Check with your mortgage officer to ensure that you arrange for adequate financing. What are Disbursements and How Much Will They Be? A disbursement is any expense related to your purchase which we pay or incur on your behalf. You reimburse us at the time of completion of your purchase for these costs as incurred. Here are some examples of disbursements which we usually incur: a) fees payable to the Provincial Government for registration costs of transfers (the document which conveys title from the Vendor to the Purchaser) and mortgages; b) fees or charges payable to municipal government agencies in searching for arrears of realty taxes, liens, and where appropriate strata maintenance fees and levies; c) disbursements at the Land Titles Office to obtain copies of plans and other registered instruments; 2

3 d) confirmation of insurance and insurance binder. We will happily discuss in detail both fees and disbursements and help you plan a budget for these legal expenses. What Taxes Must Be Paid As Part of Your Purchase? The Purchaser must pay a registration tax to the BC Government called Property Transfer Tax. This tax is levied every time a property is purchased and is assessed at the rate of 1 % of the first $200, of the purchase price and 2% of the balance, if any, over $200, For example, if your home costs $250, the calculation would be: $200, % = $2, $ 50, % = $1, Total Tax = $3, These Property Transfer Taxes are paid at the time of registration of title into your name and will be included as an adjustment in the Statement of Adjustments we prepare. If you are a first time purchaser and meet additional criteria you may be exempt from the Property Transfer Tax. We would be pleased to review with you your potential entitlement to the exemption. The Property Transfer Tax should not be confused with municipal property taxes which are payable every year by the registered owner. We will adjust for municipal property taxes between you and the Vendor. Goods and Services Tax In the majority of cases no GST is payable on the purchase of used residential real estate. There are certain exceptions to this general rule and we would be pleased to discuss these with you if you so desire. The Contract for newly constructed homes may specify that the GST is included in the purchase price. This would mean there is no additional GST payable since it has already been incorporated into the purchase price. The builder also generally specifies in the Contract that the Purchaser assigns any rebate directly to the builder. If the Contract for the purchase of a new home or other taxable supply does not include the GST in the purchase price then the Purchaser will be responsible for paying an additional 5% over and above the purchase price and will, in most circumstances, be entitled to claim a rebate. We strongly recommend that you review the GST issue with us or your accountant for all purchases where the responsibility for the payment of GST is in doubt. 3

4 When Do You Bring in the Balance of Your Down Payment? The exact amount of money required to complete the transaction will be determined a few days prior to closing. The amount depends on the adjustments to the purchase price for items such as municipal taxes, Property Transfer Tax, GST, legal fees, mortgage interest and the amount of the advance to us by a new mortgage lender. We try to get all the relevant figures as soon as possible and advise you of the single amount required. We arrange to pick up any mortgage advance ourselves. The monies required to complete should be provided by way of a certified cheque or bank draft made payable to RDM Lawyers In Trust and should be brought in when you attend to sign the necessary documents. You will also be asked to bring in a personal cheque for the Property Transfer Tax. Is a Site Survey Necessary? A site survey is a detailed plan which shows the boundaries of a property, the location of the buildings and any other unusual features. If you are buying a newly constructed home a survey will generally be available from the builder. The Vendor of an existing home must supply a survey only if the contract specifically requires that a survey be provided. The age of the survey is important. New additions may create significant boundary problems, but may not be shown on outdated surveys. If you want to be certain about the dimensions of the lot or of any buildings or of the location of any right-of-ways or easements then you can arrange for a survey of the property by a BC Land Surveyor. We can not be responsible for any problems which would have been uncovered if an up to date survey had been made. The cost of a survey for residential properties is about $ If you are placing a mortgage on the property, a recent site survey is usually required by the mortgage lender. A number of lenders will also accept title insurance in lieu of a survey. Most lending institutions would be satisfied with a survey which is less than 10 years old provided there are no material changes to the structures, such as an obvious extension to a building, or a change in the dimensions of the property. If you know of any changes of that nature, let us know right away. What Should You Do About Utilities Which Service the Property? In advance of the completion date; you must contact the offices of any utilities servicing the property to arrange for the service to be continued. These include hydro, gas, fuel oil, telephone and cable TV. How Much Insurance Do You Need? Insurance on the property you are buying should be arranged with your insurance agent well in advance of the completion date. The proper name and address of every mortgage lender must be shown on the policy. We will need written proof that you have arranged this insurance prior to closing. Most lenders require that the property be insured for its full insurable value. Please supply us with the name of your insurer and instruct your insurer to forward to us, prior to the completion date, an insurance binder confirming coverage effective as of the completion date. 4

5 Title Searches As part of our service we conduct a total of 3 searches at the Land Titles Office. In the event we are instructed to do so by you, with the initial search we would secure relevant pages or extracts of all documents registered against title including restrictive covenants, building schemes, and land use contracts, as these may contain important restrictions on the use of your property. We also obtain a copy of the legal lot plan. In the event we are instructed to do so, the documents referred to above are reviewed by us and where necessary will be discussed with you at or before closing. The final searches occur immediately before and after registration to ensure no new charges appear on title. Builders Liens For newly constructed homes we arrange for the holdback of a portion of the purchase price to protect you against liens registered against the property by unpaid tradespeople or suppliers. According to current provincial legislation, a purchaser is entitled to holdback part (usually 10% of the construction value) of the purchase price for 55 days after the date of substantial completion of the house. Generally, the 55 day period starts to run from the date an occupancy permit is issued by the municipality. We will conduct a title search on the 56th day and if no liens have been registered the funds will be released to the Vendor. In the event there are liens, the funds will be used to pay these out or will be paid into court. Provided the legal holdback is made in relation to your purchase you cannot be held legally responsible to pay any liens in excess of the holdback amount, although you may incur additional expenses related to any court procedures which may be commenced. Does Your Intended Use Comply with Current Zoning of the Property? Zoning is likely to be an important issue where the property is in a mixed use area rather than an exclusively residential area. It is your responsibility prior to entering into the Contract, to either on your own, or with the assistance of your real estate agent, ascertain the present zoning of the property and to ensure that your intended use of the property complies with such zoning. Do You Have The Right to Inspect the Property Prior to Closing? You do not have the right to inspect prior to closing unless it is specifically written into the Contract. Where the Vendor is required to carry out specific repairs or other work prior to closing, the Contract should provide for a right to inspect such work. When Do You Get Your Keys? The Contract will provide for a time on the possession date when the Vendor must deliver vacant possession of the property to you. Usually the realtors will confirm the successful closing of the transaction then coordinate the exchange of keys at or prior to the time of possession. For newly constructed homes, keys are generally available from the real estate agent or directly from the builder. 5

6 What if the House is Damaged When You Move In? If the property is damaged by more than reasonable wear and tear and occurred after the viewing date set out in the Contract, then you may claim reimbursement from the Vendor for the repairs. Any damage which occurred prior to the signing of the Contract, and which the Vendor did not conceal from you is your own responsibility. If problems do arise we will write to the Vendor s lawyer to try and have them resolved. If this is not successful then additional legal action may be taken and additional legal costs will be incurred by you for that purpose. We will discuss all details and costs with you if such an event arises. What Documentation Will You Receive After the Closing? We will report to you in two stages. Immediately following registration we will report confirming registration of the transfer and mortgages and will enclose one copy of the mortgage documents as registered together with a copy of the legal lot plan and copies, if we are instructed to do so, of any documents registered against the title for your records. On receiving a State of Title Certificate from the Land Titles Office, which usually is provided within 6 weeks of registration, we will provide our final report enclosing a copy of the State of Title Certificate for your records. Both of these reports should be kept in safe keeping. Sale of Existing Home We would be pleased to assist you with the sale of your existing residence. We will arrange to review the sale documents with you, arrange for the discharges of any mortgages and arrange to obtain the balance of funds for use in the new purchase. Any Questions? It is important to understand that the answers that we have provided are general in nature. If you have any specific questions relating to your particular circumstances or transaction, please do not hesitate to contact us. The information provided in this document is not intended to be legal advice but rather to provide answers to a number of questions that we are commonly asked. If you have other questions, please call us and one of our lawyers or experienced staff will be happy to help you RDM Lawyers. All Rights Reserved. Reproduction in whole or in part without permission is strictly prohibited. 6