Buying a home can be stressful, especially if it is your first time. There are a lot of steps involved and many terms are used that may be unfamiliar at first. This could raise a lot of questions such as:
We will try to answer those questions (and many more) here. If you cannot find the answer you are looking for, you can always call, email or come see us and we would be happy to answer your questions.
The first step is to choose the right home. You can get lucky and fall in love with the first place you see, or it might take you a while to find the right home. It will help if you can make a list of must-have criteria for your new home.
If you tell your realtor what your criteria are, they can help find the right home for you.
Once you have found the right place, the next step is to make an offer to buy it. If you are paying cash and you are familiar with the property or buying bare land, you might make an unconditional offer. This means that once the offer is accepted by the seller, you will need to pay the deposit (if applicable) and you will not be able to back out of the deal.
If your offer is unconditional, you can skip to the next step.
Most of the time, however, buyers will make a conditional offer, which contains various conditions that must be satisfied before you pay the deposit and the contract becomes “firm”. The conditions are commonly called “subjects” and satisfying those conditions is commonly called “subject removal”.
Usually, each subject will have a “subject removal date”. This is the deadline when all the subjects must be removed. If they are not removed by that date, the offer becomes void and the seller is then free to sell the property to someone else.
Below, you will find descriptions of the most common subjects found in real estate contracts, along with examples.
If you are financing your purchase (i.e. getting a mortgage), you should make sure that your bank will approve the financing before you put the deposit down.
The bank will normally want to see a copy of the contract and they will assess the value of the property and check your credit score.
They may also ask for your employment information, pay stubs, and T4s. If you meet their requirements, you will be approved for financing.
Example:
Subject to the Buyer arranging financing at current interest rates with terms and conditions suitable to themselves on or before March 8, 2020. This condition is for the sole benefit of the Buyer.
Before putting a deposit down and committing to buy a home, you should make sure that there are no detectable defects with the property.
You can hire a property inspector to ensure that all the appliances are running properly, there are no problems with the plumbing or electrical fixtures, there are no infestations or mold issues, etc.
The inspector will put together a home inspection report detailing any concerns they may have about the quality of the property.
Example:
Subject to the Buyer, on or before March 8th, 2020, at the Buyer’s expense, obtaining and approving an inspection report against any defects whose cumulative cost of repair exceeds $2000.00 and which reasonably may adversely affect the property’s use or value. The Seller will allow access to the property for this purpose on reasonable notice. This condition is for the sole benefit of the Buyer.
The title search of a property will tell you who the current registered owners are and if there are any registered liens, judgments, mortgages, covenants, easements, rights-of-way or legal notations registered against the property.
The purpose of this review is to make sure that there is nothing on the title that will interfere with your plans for the property.
For example, if you are planning to build or use the property in a different way than its current use (e.g. build a workshop or a chicken coup on a residential property), it is important to review any registered covenants to make sure they will not interfere with your plans.
Example:
Subject to the Buyer, on or before March 8th, 2020, searching and approving title to the property against the presence of any charge or other feature, whether registered or pending, that reasonably may affect the property’s use or value. This condition is for the sole benefit of the Buyer.
This is only applicable if you are buying a strata property such as a townhouse, an apartment, or a bare land strata property (a detached home that is part of a strata).
You will want to make sure that the strata corporation is financially healthy, and that the rules of the strata do not interfere with your lifestyle.
For example, if you have pets, you may want to check if the strata rules have restrictions on on the type, size, and number of pets you can keep in your home.
Example:
Subject to the Buyer, on or before March 8th, 2020, receiving and approving the following documents with respect to information that reasonably may adversely affect the use or value of the strata lot, including any bylaw, item of repair or maintenance, special levy, judgment or other liability, whether actual or potential:
A Form ‘‘B’’ Information Certificate from the strata corporation, attaching the strata corporation’s rules, current budget, the developer’s Rental Disclosure Statement (if any), and the most recent depreciation report obtained by the strata corporation (if any);
A copy of the registered strata plan, any amendments to the strata plan, and any resolutions dealing with changes to common property;
The current bylaws and financial statements of the strata corporation, and any section to which the strata corporation lot belongs;
The minutes of any meeting held between the period from January 1st, 2018 to February 29th, 2020, by the strata council, and by the members in annual or special general meetings, and by the members or the executive of any section to which the strata lot belongs; and
The current insurance cover note explaining the strata corporation’s insurance coverage and deductibles.
Immediately upon acceptance of this offer or counter-offer, the Seller will authorize the Buyer’s agent, to request, at the Buyer’s expense, complete copies of the documents listed above from the strata corporation or other source and to immediately, upon receipt, deliver the documents to the Buyer (or the Buyer’s agent).
This condition is for the sole benefit of the Buyer.
If you are getting a mortgage, the bank will require that the property has fire insurance. Some properties cannot be insured by all insurance companies, particularly if they have wood-burning stoves, antiquated electrical wiring, or are in an area that is prone to forest fires.
Getting approval for fire insurance before you put your deposit down is always a good idea.
Strata properties usually already have insurance, so this may not be necessary if you are buying an apartment or a townhouse.
If you are buying a detached home, then you will need to set up insurance on your own.
Example:
This offer is subject to the Buyer obtaining approval for fire/property insurance, on terms and at rates satisfactory to the Buyer, on or before March 8th, 2020.
This condition is for the sole benefit of the Buyer.
Once you have satisfied all the conditions (subjects) in the contract, the next step is to sign an addendum (attachment) to the contract that states that you are now removing all subjects.
This means that you are 100% committed to buying this property. Usually, this is when you will pay the deposit.
When subjects are removed and the deposit is paid, the contract becomes “firm” and you will be unable to back out of the deal unless you are willing to lose your deposit.
Once the contract becomes firm, you will then need to choose a notary or lawyer to represent you in your purchase.
Your realtor may suggest someone, but you are free to choose whoever you like. Some properties can be complicated to deal with and not all legal professionals can do all properties (e.g. leasehold property).
If you are not sure if your notary or lawyer can deal with the property you are buying, it is best to call them to confirm in advance.
Once you have chosen your legal representative, you can tell your realtor and the realtor will send them a copy of the contract.
If you are getting a mortgage, the bank will require that the property has fire insurance. If you are buying an apartment or a townhouse, the building most likely has fire insurance already, paid for by the strata corporation.
If you are buying a detached home, you will need to set up fire insurance on your own. You can now buy fire insurance online, but most buyers will go to a local insurance office of their choice and set it up there.
You will need to tell your legal representative where you are buying your fire insurance from.
Once we receive a copy of the contract, we will contact you to confirm that you want us to represent you, book an appointment to sign the closing documents, and will request the following information:
The first step of document preparation involves gathering documents and information, including:
The next step is to prepare and assemble the documents for the mortgage and transfer of title.
This includes:
An Engagement Letter
This confirms that we are representing you and outlines our responsibilities.
The Property Transfer Form (Form A)
This is used to register the new owners of the property.
The Property Transfer Tax Form
This is required for every transfer of property in British Columbia. It includes information about the buyers (dates of birth, SIN numbers, previous addresses) information about the property (legal description, size, and number of improvements or buildings on the property, and whether the buildings are residential or commercial), how much transfer tax you are paying, and whether you qualify for any transfer tax exemptions.
Subdivision or Strata Plan
This is used to confirm that the property that we are preparing to transfer is the same property you viewed.
Documents required for the mortgage
This can be as little as two or three documents, but can sometimes be more depending on which bank you are using and whether you have already signed some mortgage documents at the bank.
Statement of Adjustments
This is the breakdown of all the costs of the purchase and how those costs are being paid. Adjustments are made here for recurring property-related expenses such as property taxes, utilities, strata fees (if applicable), and rent (if the property is tenanted). The buyer is only responsible for these expenses as of the Adjustment Date. Any expenses that have been or will be paid are pro-rated.
For more information about the Statement of Adjustments and/or the Adjustment Date, see below.
Once the documents are ready, you will meet with us to sign them. We will go through and explain each document and answer all of your questions.
Usually, this is also the time where you will deliver the funds required to complete the purchase.
The funds must be in the form of a certified cheque, bank draft, or wire transfer from your bank. E-transfers, personal cheques, cash, and credit cards are not accepted.
You will also need to bring two pieces of identification, with at least one being government-issued, unexpired photo identification. See below for more information on what types of identification are accepted.
Some documents also need to be signed by the seller. These documents will be sent to their legal representative’s office and must be returned to us on or before the completion date.
Once we have the funds required to complete the purchase and all the documents signed, we can register the transfer and the mortgage with the land title office, making your ownership of the property (and the mortgage) official.
After the transfer completes, we need to make sure that any mortgages, judgements or liens that were previously on the title have been properly removed.
Once that has been done, we report back to you and provide you with a copy of the State of Title Certificate (official document from the land title office confirming the change of ownership), and the file is closed.
When you come to our office to sign documents for your purchase, we will need to confirm your identity.
Typically, we will need two pieces of ID: a primary piece and a secondary piece.
Your primary piece must be government-issued, unexpired photo identification. We cannot accept employment badges or cards, even if your employer is a government agency.
The most common forms of primary ID provided are:
We will also need a secondary piece of ID. The most common forms of secondary ID are:
Title Search
A title search is a document that is obtained from the Land Title Office that shows the current state of title for a property in British Columbia.
It will show the current registered owner(s), any registered mortgages, liens, or judgements, and any registered easements, covenants, rights-of-way or legal notations.
Other things may appear on a title search, but these are the most common.
Mortgages, liens, judgements (financial encumbrances)
If you see these charges on the title, that means that the registered owners owe money to somebody else, and the property has been used as security for that debt.
When you purchase a property, these debts will be paid from the seller’s sale proceeds, and you will be receiving a “clear title”, meaning a title free of the seller’s financial encumbrances (the seller’s debts that are secured against the property).
Easements
An easement is a legal term that is used when one property (typically a neighbouring property) has legally authorized access to another property for a particular purpose (e.g. your water supply comes from a well located on a neighbour’s property).
Covenants
A covenant is typically used to restrict the use of the property in a certain way, or to require the owners of the property to do something (e.g. restricting whether livestock can be raised on the property, or if owners must maintain a roadway crossing the property).
Rights-of-way
Rights-of-way are used to give another person or entity access to a property.
It is quite normal to see rights-of-way for utilities such as BC Hydro, Fortis, and Telus, so they can install, maintain and repair equipment that may be located on your property (e.g. power lines, gas lines, phone lines).
Legal Notations
Legal notations are used to let people know something about the status of the property.
For example, there may be a legal notation stating that the property is part of the Agricultural Land Reserve, or that the property has an easement over another property, or that the property has a permit for development.
This information may be important to prospective buyers, particularly if they intend to subdivide or build on the property.
State of Title Certificate
A State of Title Certificate is a more formal-looking title search. This is not a deed to your home. British Columbia’s land title system is not a deed system.
This means that you do not need to retain any documentation (other than valid ID) to prove your ownership or to sell the property.
This information is stored at the Land Title and Survey Authority of British Columbia, formerly known as the Land Title Office.
The information you will find on a State of Title Certificate will be the same as what you will find on a title search.
Parcel Abstract Report
A Parcel Abstract Report is essentially a title search, but for properties located on First Nations leasehold land.
If you are getting a mortgage, and your lender is an institutional lender (bank or credit union), then we can act for both you and your lender at the same time.
The lender will need to send us “mortgage instructions” that tell us how the mortgage documents should be prepared, and what the requirements are to receive the funds.
Mortgage requirements often include:
If you are getting a mortgage from a private lender, then the mortgage instructions will be sent to a separate lawyer or notary to prepare the mortgage for them.
We can still witness you sign the documents, but we cannot act for both you and a private lender at the same time.
Because the transaction requires legal services from two separate places, your total legal costs will be higher than if your mortgage was with an institutional lender (bank or credit union).
If you are getting a mortgage, your lender will normally require proof of fire insurance, in the form of an insurance binder.
An insurance binder is a document from your insurance provider that proves that the property has fire insurance, that the property is adequately insured for its value, and that the lender is the first loss payee (first to be compensated) if the property is destroyed.
When two or more people own a property together, they can be registered as “joint tenants” or “tenants in common”. Joint tenancy comes with rights of survivorship, whereas a tenancy in common does not.
Joint tenancy means that each owner on the title has an equal interest in the property and that the owners have “survivorship rights”.
For example, if there are two people on title, then each would have 1/2 ownership of the title. If there are three people, each person has 1/3.
Survivorship rights mean that if one owner dies, the remaining owners are entitled to the deceased’s person’s share of the property.
For example, if a husband and wife own a property together as joint tenants and the husband dies, then the wife gets the property automatically. The wife does not need to wait for a grant of probate or rely on her husband’s Will.
She can go see a notary or lawyer and they can remove the husband’s name from the title by registering his death certificate with the appropriate registry.
Tenancy in Common means that each owner has a separate undivided share of the property and if an owner dies, their share of the property goes to their estate rather than the other owners on title.
There is a lot more flexibility with regards to how much of the property each owner has.
For example, you can have one owner with 80% ownership and the other with 20%.
Also, tenants in common do not have the right of survivorship. If you own 80% of the property and you pass away, your 80% goes to your estate and will be distributed in accordance with your Will.
Your share does not automatically go to the other owner(s) on the title as it would under a joint tenancy.
When your contract to purchase a property is being prepared, you will be asked to choose a completion date, an adjustment date, and a possession date.
This is the most important day. The completion day is the day that you become the registered owner of the property. It is the day that the title is transferred to you, and money is transferred to the seller.
If you are getting fire insurance, this is also the day that your insurance policy should take effect.
If you are selling your home and buying a property at the same time, the completion date for your sale must be on or before the completion date for your purchase.
This is important because we will likely need funds from your sale to complete your purchase.
The adjustment date is the day you become financially responsible for the property (e.g. property taxes, utilities, strata fees, etc.).
For example, when we adjust for the annual property taxes we use the adjustment date to determine how much of the annual property taxes each party is responsible for.
Usually, the adjustment date is the same as the possession date.
The possession date is the day you can physically take possession of the property and move in.
Typically, the possession date is one or two days after the completion date, but it can be any date that the buyer and seller agree on.
Property Transfer Tax is paid to the provincial government on almost every transfer of property in British Columbia. How much you pay depends on the value of the property.
If the purchase price is $2,000,000 or less, you will pay 1% on the first $200,000, and 2% on the balance.
Example 1
If the purchase price is $450,000, you will pay a total of $7,000 in transfer tax (1% on the first $200,000 = $2,000; and, 2% on the remaining $250,000 = $5000).
If the purchase price is more than $2,000,000, then you have to pay 3% on any amount over $2,000,000.
Example 1
If the purchase price is $2,350,000, you will pay a total of $48,500 in transfer tax (1% on the first $200,000 = $2000; 2% on the next $1,800,000 = $36,000; 3% on the remaining $350,000 = $10,500).
If the purchase price is more than $3,000,000, then you must pay an additional 2% on any amount over $3,000,000.
Example 1
If the purchase price is $4,200,000, you will pay a total of $128,000 in transfer tax (1% on the first $200,000 = $2000; 2% on the next $1,800,000 = $36,000; 3% on the remaining $2,200,000 = $66,000; and an additional 2% on $1,200,000 = $24,000).
In some situations, you may not have to pay Property Transfer Tax when purchasing a property.
This is called an “exemption”. Several exemptions may be available depending on the situation. The most common exemptions are listed below.
If you have never owned a property before and the purchase price of the property is under $500,000, then you may not have to pay any transfer tax.
To qualify for the exemption, the following requirements must be met:
If you have owned a property before, but never lived in that property as your principal residence, then you may still qualify for the exemption.
If the purchase price is over $500,000 but under $525,000, or if the property is larger than 1.24 acres, then you may qualify for a partial exemption.
If you are a first-time home buyer but your co-owner is not (e.g. your spouse previously owned a home), then your share of the property may still be exempt from transfer tax.
If you are buying a brand-new home and the price is less than $750,000, you may be exempt from paying property transfer tax. To qualify for the exemption, the following requirements must be met:
If the purchase price is over $750,000 but under $800,000, or if the property is larger than 1.24 acres, then you may qualify for a partial exemption.
If you are moving into the property but your co-owner is not (e.g. your parents are going on the title to help obtain financing but they will continue to live at their own house), then your share of the property may still be exempt from transfer tax.
If you are buying a property from a:
Then you may not have to pay any transfer tax. To qualify for the exemption, the following requirements must be met:
If the property is not entirely residential (e.g. partially farmland) or if the property is larger than 1.24 acres, then you may qualify for a partial exemption.
The Statement of Adjustments is the breakdown of all the costs of the purchase and shows how those costs are being paid.
Adjustments are also made here for recurring property-related expenses such as property taxes, utilities, strata fees, and rent (if the property is tenanted).
The buyer is only responsible for these recurring expenses as of the Adjustment Date. The expenses are referred to as “debits” and the funds used to pay the expenses are called “credits”.
Some examples of debits are:
Some examples of credits are:
When buying a strata property (e.g. townhouse, condominium, bare land strata, etc.), there will be numerous “strata documents” involved in your purchase.
You might review certain strata documents when making a decision whether to purchase the property or not, such as the strata rules and bylaws, the minutes from previous strata council meetings, and possibly a strata property disclosure statement. While these documents are important, they are not required by your notary or lawyer when closing your purchase.
There are two strata documents typically required to close a purchase: the Form F and Form B. These documents and their purpose are explained below.
A strata Form F is a “Certificate of Payment”. It is issued by the strata corporation and confirms that there are no fees, fines, or levies owed against an individual unit in a strata property.
A Form F is required for any transfer of strata property in BC. If you are purchasing a townhouse or an apartment, we will need to obtain a Form F before we can complete your purchase.
A strata Form B is also called an “Information Certificate”. It is issued by the strata council (or property management company) and provides financial information about the strata unit and the strata as a whole.
It will show how much money the strata corporation has, how much the strata fees are on an individual unit, and if there are any strata levies.
Most of the time, when you are making an offer to purchase a property, you will make a conditional offer, which contains various conditions that must be satisfied before you pay the deposit and the contract becomes “firm”.
The conditions are commonly called “subjects”, and satisfying those conditions is commonly called “subject removal”. Usually, each subject will have a “subject removal date”.
This is the deadline when all the conditions must be satisfied. If they are not satisfied by that date, the offer becomes void and the seller is then free to sell the property to someone else
Once you have satisfied all the conditions (subjects) in the contract, the next step is to sign an addendum (attachment) to the contract that states that you are now removing all subjects.
This means that you are 100% committed to buying this property. Usually, this is the time that you will pay the deposit.
When subjects are removed and the deposit is paid, the contract becomes “firm” and you will be unable to back out of the deal unless you are willing to lose your deposit.
We do not make GST determinations, meaning we do not decide whether the purchase is GST applicable or not. There are certain situations where GST is normally exempt, or normally applicable, which will be discussed below.
If you are uncertain whether GST applies to your purchase, you should contact an accountant.
If you are buying a used (not brand-new) residential property, then you should not have to pay GST on your purchase price.
If you are buying a brand-new home, an extensively renovated home, commercial property, farmland, or land from an individual or company that is part of their business activity (e.g. they subdivided the land to sell the divided lots), then you will probably have to pay GST on the purchase price.
There are other types of purchases where GST may or may not apply, but these are the most common.
The amount of GST is 5% and will be paid in addition to the purchase price unless the contract states that the purchase price includes GST.
If you are purchasing a property that is both residential and non-residential, then you may only have to pay GST on the non-residential portion of the property.
If GST applies to your purchase and the price is less than $450,000, then you may be eligible for a partial rebate of the GST. To qualify, the property must become your principal residence.
If you are purchasing from a builder, the rebate will usually be assigned to the builder, who will claim the rebate on your behalf. If this is the case, you will receive a credit equal to the amount of the rebate on your statement of adjustments. This means you only pay the net GST after the rebate is applied, instead of the full amount of GST.
If GST applies to your purchase, you will normally have to pay it in addition to the purchase price to the Seller. The Seller will then remit the GST to the Canada Revenue Agency.
If you do not want to pay the tax at the time of purchase, you can choose to self-assess and self-remit the GST at a later date. If you intend to do this, you must obtain a GST number and consent from the Seller.
When you are getting a collateral mortgage, the specific terms of your mortgage (e.g. amount you are borrowing, interest rate, payment amount, etc.) will not appear on the land title registration documents for the mortgage.
Instead of the actual amount you are borrowing, it will show a higher amount (and a higher interest rate), representing the maximum amount that the bank may lend you in the future using your home as security.
A higher interest rate is registered in case the interest rates rise by the time you need to borrow again.
The purpose of registering it this way is to allow you to borrow more money in the future and use your home as security without having to refinance your home. The purpose of a collateral mortgage is to make future borrowing easier and less costly.
Example 1
You are purchasing a house for $750,000. You have over $400,000 saved up, so you get a mortgage for only $350,000, at an interest rate of 2.99%.
Your mortgage registration documents, however, show the mortgage amount as $750,000, and the interest rate as “prime + 10%”.
A few years from now, you decide to do some renovations and you need to borrow more money from the bank.
Instead of requiring you to refinance your home, the bank does a new appraisal, a credit check, and they lend you the extra money you need, using your home as security for the new loan.
In a conventional or standard mortgage, the actual terms of your mortgage are shown on the registration forms for the land title office. If you are borrowing $350,000 at an interest of 2.99%, that is what you will see on those registration documents.
In British Columbia, the sellers are responsible for paying all realtor fees from the sale proceeds, unless a different arrangement has been made in advance.
On rare occasions, the buyer will pay the realtor fees. This can happen when the buyers have a realtor, but the sellers do not.
In most cases, however, the seller will pay both realtors.
Title insurance provides coverage for losses relating to the title of the property, including defects, unregistered interests, by-law violations, outstanding municipal utility charges, fraud, forgery and more.
Most lenders require title insurance when you are getting a mortgage, and expect you to pay for it.
Many buyers will choose to add an owner-policy when purchasing a lender-policy due to its reduced cost.
For more information, please visit: https://www.stewart.ca/residentialownerpolicy
