LEGAL ASPECTS OF BUYING & SELLING PROPERTY

General Information

It is normal practice that after executing the Contract of Purchase and Sale, your real estate agent will ask for the name of a lawyer to act on your behalf to complete the transaction.

The main function of the Seller’s lawyer is to clear title of any claims against the property not agreed to by the Buyer and also to make certain that all funds due to the Seller are received by the Seller. The primary duties of the lawyer representing the Buyer are to prepare all legal documentation, and ensure that the Buyer obtains title to the property free of all claims except those, which have been agreed to by the Buyer.

It is recommended that you contact your lawyer as soon as possible to discuss steps which the lawyer will be taking and those matters, which are left to your responsibility. The lawyer should also be able to provide you with an estimate of legal fees and other costs to allow you to accurately budget for the entire transaction. It is important to keep your lawyer fully informed of all developments concerning the transaction, in an effort to avoid possible problems should they arise.

Real Estate Agents

Your Realtor is an extremely important, and we believe essential part of your purchase of property. They possess the knowledge of the market and the expertise required in negotiating the terms of sale.

In British Columbia Realtors can work with parties involved in a real estate transaction as agent for the Seller, the Buyer, both or without an agency relationship. Upon commencing a working arrangement with a Realtor you can expect the Realtor to make it clear in what capacity they are working with you. As your agent they must exercise care, skill and loyalty and protect your negotiating position.

We have included a link to a number of Victoria Real Estate Companies and to websites for local Realtors for your convenience.

The Contract of Purchase

The Contract of Purchase and Sale is an extremely important document. Its purpose is to define the contractual obligations of the parties. It is critical that this contract contain all matters important to the parties and that the parties have professional assistance when preparing this document.

The normal method of drafting the contract involves the Buyer preparing the contract and then presenting it to the Seller for acceptance. In most cases the Buyer’s Realtor will prepare the contract and then present it to the Seller’s Realtor and the Seller. If the Seller accepts the contract within the time allowed and without alteration by applying his or her signature to the document, then a binding contract is formed.

In order for the Contract of Purchase of Sale to be enforceable, it must be certain with respect to material points such as: price; legal description of the property; names and signatures of Buyers and Sellers (i.e. all registered owners of the property); and the completion date (the date upon which the purchase funds are to be paid to the Seller and the ownership transferred to the Buyers). What is considered a material point depends upon the circumstances of each transaction.

All purchasers should be aware that it is up to them to investigate what it is that they are buying. Therefore, prior to signing the Contract of Purchase and Sale, Buyers should be made aware of any matters which remain on the title to the property (right of way, easements, etc.) and if this information is not available at that time, then it is recommended that a “subject to” clause be inserted which allows time to obtain this information and receive advice with respect to it.

The payment of the purchase price usually begins with the deposit provided by the Buyer upon creation of the Contract of Purchase and Sale and the balance of the price is, in most cases, paid at the completion date. The deposit is normally held in trust by the Realtor and the balance of the funds required by the Buyer to complete the transaction (including any costs and adjustments) is normally paid to the Buyer’s lawyer in trust just prior to the completion date.

If the Buyer requires a mortgage to complete the purchase, then it is imperative that a “subject to” clause or condition precedent be included in the Contract of Purchase that allows the Buyer sufficient time to receive mortgage approval from a financial institution. The financial institution will require a copy of the Contract of Purchase and Sale and will normally perform an appraisal of the property. If you would like information from some local Mortgage Brokers we have this connection.

It is recommended practice to also include in the Contract of Purchase and Sale a “subject to” clause that provides the Buyer with an opportunity to have the home inspected by a professional house inspection service.

We must stress the importance of including within the Contract of Purchase and Sale any warranties or representations that you consider to be important or that you wish to rely upon.

Any “subject to” clauses included in the Contract of Purchase and Sale must be dealt with during the time specified and removed in writing once satisfied. It is normal practice that the Realtors involved in the transaction prepare the amendments to the Contract of Purchase and Sale, which remove these condition precedents. Once all “subject to’s” have been removed then the lawyers for the Buyer and Seller prepare the documentation to complete the transaction.

Our Land Title System

We are fortunate in British Columbia to have a great land title system. It is based upon the “Torrens System” (originally developed by a person named Robert Torrens in Australia) where registration provides an “indefeasible title” (i.e. conclusive evidence of ownership). The main advantage of the system to some other jurisdictions is that we do not have to worry about historical investigations or past defects in the chain of title. We can rely upon the title information that will be shown at the Land Title Office regarding the property being purchased. British Columbia is divided into several land title districts. The Land Title Office located in Victoria deals with properties located on Vancouver Island and the Gulf Islands. Our firm’s computer system is connected to the Land Title Offices to allow us to conduct an immediate search of title. We also have an agent located at the Victoria Land Title Office to assist us with obtaining copies of documents to be reviewed (for example: right of ways, easements, buildings schemes, subdivision plans) and processing registration of transfer documentation.

Completion of the Purchase and Sale

The main function of the lawyers involved is to ensure that the parties receive what they bargained for under the purchase and sale contract. The Buyer’s lawyer ensures that the Buyer obtains title to the property free of all charges except those which may have been agreed to by the Buyer, and the Seller’s lawyer is to clear title of any charges against the property that must be removed and to ensure the Seller receives all funds due to the Seller.

The lawyer for the Buyer investigates those matters, which can affect the title to the property (e.g. Land Title Registry and Property Tax Department records). The Buyer’s lawyer then prepares the documentation necessary to transfer ownership of the property and a statement of adjustments, which is provided to the Seller’s lawyer for review and execution by the Seller. If the Buyer is obtaining a mortgage, then in most cases, the Buyer’s lawyer also prepares the mortgage documentation for the financial institution. If this is the case, then the Buyer will be asked by the lawyer to sign a conflict of interest letter which prevents the lawyer from being involved in any subsequent dispute if one occurs between the financial institution and the Buyers.

If there are charges on title to the property which are to be cleared by the Seller’s lawyer, then the Buyer’s lawyer provides the purchase funds to the Seller’s lawyer upon the condition that he or she pay out and discharge these charges from title.

In many cases the financial institutions when providing mortgage instructions request the Buyer’s lawyer to obtain a survey certificate (a drawing prepared by a surveyor showing the distances between the foundation walls and the property lines). In the event that the Seller is unable to provide an existing survey certificate, then this is a cost, which the Buyer must incur. Even if the Buyer is not obtaining a mortgage, it is often a good idea to have a survey certificate, and this should be discussed with your lawyer.

It is the Buyer’s own responsibility to arrange fire insurance, establish accounts for utilities and make arrangements for keys. It is recommended that the Buyer discuss in advance with the realtors and the lawyer what matters they should be dealing with prior to the completion date.

NOTE

The foregoing information is only intended to be of general nature and is not intended to be comprehensive. Each property transaction is unique and obviously it is important that the parties have good communication with their advisors (realtor, lawyer, bankers) in order to ensure they are fully advised.

It is the goal of MULLIN DEMEO to provide a level of service that will ensure clients are fully satisfied with our service and remain long term clients. If you have any questions with regard to the process of buying and selling property or if you would like information regarding costs, then we would welcome your call at this time.