Disclosure in BC Residential Real Estate

Seller’s Remorse in Kelowna Real Estate; Can a Seller back-out?

In the last few weeks the Kelowna Real Estate market has seen a dramatic increase in sale activity (see OMREB stats here) and in some sectors of our market (particularly single family homes under 500k) signs of a “Sellers Market” have begun to emerge (see my January post here).

The rather quick shift from a Buyer’s Market earlier in the year to a Seller’s Market has caught some Sellers “off guard” particularly those who did not expect their homes to sell as fast as they did. In the last week I have received a large number of calls (from either the Buyer or Seller) in situations where the Seller wants out of a signed real estate contract.

In most cases, immediately upon signing, a Seller is legally bound to complete the terms of that contract for the Purchase Price (see my post here about what Sellers need to check before closing). The “subject conditions” in the deal are, most often, solely for the benefit of the Buyer and will not allow a Seller to back out once the deal is signed.

If the Seller is unsure about being able to complete the deal as presented they should:

• NOT sign the contract of purchase and sale; or
• ensure that appropriate subject conditions are added to the contract (ie; bank assurance of ability to clear mortgages from title) to the benefit of the Seller.

If a Seller is unsure of their financial payout commitments on closing they should call their mortgage broker PRIOR to listing the property, these financial commitments include: principal, interest, penalties, and other home secured loan products (ie; lines of credit).

Have questions? Selling or Buying a Home? Call Kelowna Real Estate Lawyer Peter Borszcz.

June Kelowna Real Estate Closings: Municipal Property Tax Adjusments

The end of June is “high season” for residential real estate closing. As the school year comes to the close and the weather turns warmer, people want to get the “business of moving” done prior to enjoying summer holidays.

There are a couple of unique considerations for Kelowna Real Estate at this time of year, all of which revolve around the July 2 Municipal Property Tax payment deadline.

Usually:

1. For closings before June – the municipal property tax payment is the responsibility of the new Buyer and the Seller receives a debit at closing based on the estimated bill to be paid (or the assessment if available).
2. For closing after early July  – the municipal property tax payment is the responsibility of the Seller (prior to vacating) and Buyer will receive a debit at closing for the amount already paid.

For closings in June and early July, a couple of key points for Sellers:

1. When you pay your property taxes (at a bank or at the city), ensure that you keep your receipt.
2. For your principal residence, make sure that you claim your Home Owners Grant on your principal residence when you pay your taxes (more info on eligibility here)
3. Depending on the municipality and the timing of the payment, Sellers closing at the end of June may be legally required to holdback an amount of closing to ensure that property taxes have been paid (ensure you have budgeted for this extra temporary cost).

Your Kelowna Real Estate Lawyer will make adjustments such that the Buyer and Seller each “pay” for those expenses which accrue to the property during that time of the year (a per diem adjustment) that each party owns the property being transferred.

The Home Owners Grant that is actually claimed is the amount adjusted for. This can result in some “inequity” in some cases. For example where the Buyer is a Senior buys a property from an Investor and the Seller has already paid the property tax the difference in Home Owner Grant amounts means the Senior may pay an extra $500 in property tax.

These situations may not be entirely avoided but in some cases they can be minimized by talking to your Kelowna Real Estate Lawyer early. For instance (in the example above), we would try to have the Senior Buyer pay the taxes and claim the grant (and debit the Investor Seller) if this was legally possible prior to the municipal tax deadline.

For more information on property taxes, see the local municipal property tax information pages here:

1. For information on Kelowna Property Taxes – click here.
2. For information on West Kelowna Property Taxes – click here.
3. For information on Lake Country Property Taxes – click here.

Written by Kelowna Real Estate Lawyer Peter Borszcz.

 

Strata Depreciation Reports in Kelowna Real Estate.

Under the Strata Property Act, a Contingency Reserve Fund (CRF) is established to pay for extraordinary expenses, but under the Act, the amount in the CRF was established by a formula (which had NO relationship  to the age of the building!) Furthermore, the amount of contribution to the CRF was CAPPED, unless an ¾ vote was obtained to had additional contributions (hard to plan for the future).

There were amendments to the Strata Property Act in 2009 for stratas to commission Strata Depreciation Reports on the policy basis that long term planning and maintenance will prolong the lifecycle of building systems and reduce premature failure.

Now in British Columbia, Strata Corporations (with 5 or more units) are required to commission a Strata Depreciation Report by DEC 13, 2013 or to pass a s.94(3) resolution (with ¾ vote) for an 18 month exemption to this new legislated requirement. Importantly, this does not create a “separate fund” for repairs, but educates the strata council if their current contingency fund is “in line” with expect future costs. Strata Councils are required to update reports every three years

A Strata Depreciation Report includes:

1.  Physical Inventory of Assets
2. Evaluation based on on-site Inspection
3. Repair, Renewal and Maintenance Costs for a 30 year plan
4. Assumptions
5. Three Year Cash Flow Models

Reports Are a MANDATORY attachment to the Strata Form B  with Kelowna Home Buyers receive from their Realtor.

This Form B now must also include:

• The rules of the strata corporation;
• The current budget of the strata corporation;
•  Any rental disclosure statement;
• Current strata depreciation report
• Parking Stall and Storage Locker information;

When reviewing the Strata Depreciation Report, Kelowna Home Buyers should ask:

1. Is the Form B complete (containing current Rules, Budget, Rental Disclosure, and Depreciation Report)
2. Does the Buyer understand the Report?
3. Has the strata deferred its Report obligations under s.94(3)?
4. Does the financial forecast in the Report and the strata budget align?
5. Should anything in the Report be reflected in the Purchase Price when analyzing comparators?

Presentation Slides: Depreciation Reports Presentation (OCT 2013)

Written by Kelowna Real Estate Lawyer Peter Borszcz.

Home Insurance and #Kelowna Real Estate – What is Third Party Liability?

Home Insurance is a requirement of every residential mortgage, however having an effective home insurance policy is a good practice for all homeowners. Under the standard Contract of Purchase and Sale, the BUYER is liable for all RISK in the property as a 12:01am on the CLOSING DATE. The take home point here is that your insurance needs to be in place before the CLOSING DATE. It is a common mistake to delay your policy until a later possession/ moving date thinking that you are not responsible until you get the keys.

There are lots of choices when obtaining home insurance, policies vary in terms of the extent and type of coverage that they provide; Your insurance agent is the best person to advise on everything from a limited specified perils, to a broad form, to a comprehensive policy.

At Pihl Law Corporation, our personal injury litigators know that an important part of any policy is the third party liability insurance. In this portion of the policy, the insurer agrees to indemnify the insured owner for any judgments rendered against them for bodily injury or death arising out of their negligence with respect to the maintenance of their property and activities that may occur on their property, provided the acts or omissions do not fall within specific exceptions within the policy.  The insurance company also agrees to hire a lawyer to defend the property owner when a lawsuit is brought against them.   The insurance company however, only agrees to pay out to the limits of the third party liability insurance.

Most policies typically come with an automatic $1,000,000.00 third party liability limit.  In today’s world, this is probably inadequate and often coverage of up to $5,000,000.00 may be available. Imagine if someone tripped on a loose board on your staircase, and fell down, resulting in a head injury.  Compensation would include general damages for pain and suffering, but also probably the injured person’s past and future loss of income, costs of care, and out of pocket expenses. The value of these claims can be large (our law firm regularly sees claims well in excess of $2,000,000), and if the insurance limits are insufficient to pay the whole of the claim, the home owner will be required to pay any shortfall out of their own pocket (or may be forced to sell their home to pay for the resulting judgment).

Written by Personal Injury Lawyer Penny Pearson at Pihl Law Corporation

Kelowna’s Alberta Connection

My mum’s family is from Edmonton and I had the fortune of going to the University of Alberta in Edmonton for 10 years. Although I enjoyed the great people I met in Alberta, I was always drawn to come back home to Kelowna.

Kelowna Real Estate has a special allure for many Alberta buyers for many good reasons, a few of them include:

1. Kelowna is a days drive and a very quick flight for most Albertans;
2. Kelowna has four wonderful seasons with an early spring and a late fall golf season;
3. Kelowna’s vineyards are the perfect complement to Alberta beef;
4. Kelowna’s beaches are hot in the summer and our mountains are powdery soft in the winter;
5. Kelowna’s real estate is an affordable investment in Canadian real estate that Albertans can enjoy year round;

There are are few important differences between BC real estate and AB real estate that most Albertans should know when they are contemplating a quick hop over to Kelowna:

1. Most of lands in British Columbia are untitled as Crown Lands, where as most Alberta has been surveyed into quarter sections;
2. Real Property Reports or consolidated survey plans are not commonly done on a residential home purchase;
3. Property Transfer Tax is payable on almost every home transaction (1% of the first 200k and 2% of the remainder);
4. Principal residents get a reduction in property taxes, this does not apply to persons who do not reside in BC (or own revenue properties).
5. Condominiums are called Strata Corporations here and Strata Depreciation Reports are very new to BC law (therefore not many strata corporations have done them yet)
6. If you are planning on being a residential landlord, BC Residential Tenancy Act is very tenant friendly, and required that Landlords strictly comply with the legislation.
7. Our land title system has had immediately electronic registration for many years now, and for residential real estate this means files close and money is transferred on the Closing Date with no escrow period.

Written by Kelowna Real Estate Lawyer Peter Borszcz.

 

How fast can I complete my Home Purchase?

As spring is turning into summer, the Kelowna Real Estate Market is heating up with lots of activity. As a consequence of the recent market cycles many Sellers have wisely taken a “Sell First” then buy approach to their home purchase. The result of this is that many “Buyers who have Sold” are looking to purchase immediately and complete as soon as possible, and one of the common questions I am asked is “how much time do you need to get a real estate purchase done?”

For our law office perspective, we have the ability to complete most deals in 24 hours if the Buyer and the Seller are available to attend in person and it is a cash purchase of a fee simple home. We accomplish this by having a law office that is built for real estate sales and purchases whether that is a 25 million dollar development or a 250,000 condo.

An important caveat here, is that there are many third parties to real estate transaction that also need some time to get things in order as well:
1) BANKS and LENDERS – mortgage approvals will take 7-10 days for most transactions (usually during subject removal) and then instruction and funding of mortgage will often take a further 3-5 days for credit unions and major banks and up to 14 days for secondary lenders. For sellers, a payout statement is required to be obtained. Although most institutional lenders will readily provide this within 1-3 business days, if there is a private lender on title their timely cooperation cannot be relied on and extra time will be needed for the Seller’s law firm to obtain a dischard.
2) STRATA CORPORATIONS – forms need to be obtained from strata corporations and it is prudent practice, as a purchaser to always personally review the bylaws and the strata rules. Depending on the strata these documents can take a few days to obtain, and although they can be obtained on a rush, rush documents can be very costly. At least 1 clear week is needed to obtain strata documents without penalty (See Form F Rules Here)
3) INSURANCE COMPANIES – in all cases proof of insurance is a requirement of the mortgage lender and the lawyer is required to obtain an “insurance binder” on behalf of the lender. Most local insurance companies (perhaps accustomed to the speed of our real estate process) usually have binders to our office within an hour or so, however “internet based” or out of province insurers usually are not as responsive.
4) CLIENT AVAILABILITY – surprisingly it is either the Buyer or the Seller who is having difficulty making themselves available to complete the transaction. For Sellers, they are packing their bags and moving on, but they still have to attend at a lawyer’s office to sign the paperwork either on or just before the closing date. For Buyers, who are usually in the middle of packing up their entire household and trying not to forget the pets and kids…. it is important that they remember that the deal is not done until you have the keys and are moving in!

For Realtors, the best advice for a smooth carefree closing is to allow at least 4 full weeks following subject removal to complete a file. It can be done faster, but the probability of encountering a unavoidable delay or perhaps being forced to extend completion will increase if the “closing window” is tight.

Do you have a deal with a quick closing? Happy to talk about how we can help your clients get it done. Blog post written by Kelowna Real Estate Lawyer Peter Borszcz (250-762-5434)

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.