A typical Real Estate transaction would commence with the submission of an offer by the would-be Purchaser (who we will just call the “Purchaser” going forward). The offer is a legal document usually prepared by the Purchaser’s realtor after a fair bit of research into comparative home prices and taking into consideration a number of other factors. The Real Estate Council of Alberta has a standard form used by Alberta based Realtors and it contains certain standard and really important terms. The offer typically is not binding until the purchaser waives certain conditions the most important and common being the financing condition. The purpose of the conditions is to ensure that the Purchaser is entitled to his/her/their deposit back if the condition is not met or they do not waive it by a certain date aptly referred to as “condition day”.
There is no legal requirement to procure the services of a Realtor but in my experience it almost always makes the process easier and smoother for the parties because Realtors have specialized training and access to tools that not even I as a Real Estate Lawyer has and that is saying something. And if the reasons above are not enough to convince purchasers to utilize the services of a Realtor wait for it – the Realtor acting for the purchaser is usually paid by the Seller so there is no out of pocket cost for the purchaser but I digress.
There is typically a little bit of back and forth between the parties ( Purchaser(s) and Seller(s) ) often about the price, renovation, appliances, Real Property Report(RPR)/Title Insurance before a firm Purchase Contract is signed by the parties. The Real Estate Lawyer ( which I hope will be me after this write-up) usually does not get involved until after the parties have signed the purchase contract and therein lies the first big problem. We cannot help with reviewing the contract and protecting your interests so it is a very good idea to do a little bit of research beforehand or retain a Realtor who can ensure the standard clauses are contained therein and your interests are protected.
One of the common issues that come up is the refusal of the Seller to provide an up to date and compliant RPR and I cannot stress enough the importance of an RPR. It provides proof that the structures on the property are compliant with all the city regulations and removes the risk of additional expenses down the line as a result of encroachment etc. Some Sellers will offer to pay for Title Insurance in lieu of providing an RPR but I would advise any purchasers to insist on receiving the RPR even at the risk of scuttling the deal unless of course, they are willing to assume any risks associated with foregoing it.
If the new home purchase is financed with a new mortgage loan the Purchaser’s Lawyer will typically act for both the purchaser and the Lender so the Purchaser has to provide the lawyer’s details to both the Seller(usually the builder for new-builds) and the bank so the Seller can have their Lawyer send the Purchaser’s Lawyer a trust letter with the closing documents and the lender can send the Purchaser’s Lawyer “instructions”.
Once the Purchaser’s Lawyer receives said instructions it is their responsibility to prepare the purchase documents which will at the very least include filled out mortgage forms based on the Lender’s standard forms and an Affidavit of value plus a lot of other boring but really important documents I wouldn’t want to bore you with. Suffice it to say the Purchaserusually has to sign a whole lot of documents and it’s not just because Real Estate Lawyers want to make the process stressful but because Real Estate transactions are high value/high risk and all parties need to take steps to protect their interests.
The Purchaser’s Lawyer would then identify the Purchaser and provide the Purchaser with the details for the required Home Insurance as well as the amount of the shortfall. If the Transaction is closed according to the Western Protocol, the Purchaser’s Lawyer would usually receive the purchase funds on the closing date, send the entire cash to close to the Seller’s Solicitor, and submit a document registration request with the Transfer of Land and Mortgage for Registration.
If the property is a new build condominium or the closing is not according to the Western Protocol the Purchaser’s Lawyer would have to receive the Transfer documents well in advance of closing and register same before providing the cash to close to the Seller’s Solicitor but this is all sorted out between the Lawyers acting for the parties.
In the course of the contracting and signing stage clients will usually come across all sorts of mind-boggling and unfamiliar terms which I will now try to explain :
Closing Date – is the date when the transaction is supposed to conclude and is usually the date when the purchaser gets possession of the Property.
Condition Date/Day – the date by which all conditions must have been met or waived by the purchaser failing which the transaction terminates and the purchaser is entitled to a refund of his deposit.
Conditional Offer – is an Offer to Purchase that has a Subject To Clause in it.
Condo Bylaws – are basically the rules and regulations which bind the owners of the Condo. For instance, the Condo Bylaws may include pet, parking and other restrictions.
Condo Documents – are the various documents a Buyer should receive and review in respect of the purchase of a Condo and include such items as the Condo Bylaws and budget.
Condo Fees – are a monthly amount that each Condominium owner pays to the Condominium Corporation, generally based on the size of their unit. The funds are usually used by the Condominium Corporation for such things as snow clearing, building insurance, grounds maintenance, and reserve fund.
Condominium (“Condo”) – is a form of home ownership where the buyer owns the interior of their property but share other property such as the exterior, driveways, hallways, and landscaping communally with the other owners.
Deposit – is the total amount of money that the purchaser deposits with the Seller’s Real Estate Company to show a willingness to proceed with the purchase.
Easement – is a charge on the land that allows some third-party rights on, over or under it. They can be used to secure the right of utility companies to access/maintain their gas and water lines etc.
Encumbrance – this usually refers to all interest registered on title and would include all mortgage, caveats, liens etc.
Interest Adjustment Date – is the date from which interest will start to accrue on the Mortgage amount.
Interest on Cash to Close – is interest payable by the purchaser to the Seller because the Cash to Close was not paid or releasable to the Seller on the Closing Date. The amount of interest payable is based on the number of day interest is required, the cash to close and the terms of the purchase contract.
Joint Tenants or Joint Tenancy – is one way two or more people can register the title to Real Estate. If the Property is held as “Joint Tenants”, then when one of the Joint Tenants dies, his/her/their interest in the Property automatically passes to the remaining Joint Tenant(s). This is a common means for a couple to own Property so that when one of them dies, the deceased’s interest in the Property goes to the remaining person. The alternative to Joint Tenancy is Tenants in common where each co-owner holds ownership individually and their interest is specified as a percentage of the value of the property.
Land Title Office – is an Alberta Government agency that maintains a registry of all interest in Land for Alberta.
Legal Description – is the unique description of the Property contained on the Certificate of Title as assigned by the Alberta Government
Lot – this is the land that forms the subject matter of the Real Estate Transaction ie the entire land on which the house or condo is built.
Maturity Date – this is the date on which the mortgage term expires and by which the Purchaser has to either, renew, refinance or repay the balance of the mortgage loan.
Mortgage Broker – is an individual who acts for purchasers and helps them to secure Financing. They typically work with multiple Lenders and are able to rate shop on behalf of the Lender but they are paid by the lender so there is usually no out-of-pocket cost to the purchaser for the use of their services.
Mortgage Insurance – is a one-time insurance premium paid by the Purchaser to an Insurance Company like Canada Mortgage and Housing Corporation to protect the Lender from the risk of default. In Canada, it is compulsory for purchasers proceeding with a down payment of less than 20% to purchase Mortgage Insurance.
Mortgagee – this is the Lender.
Mortgagor – this is the Purchaser who finances a purchase using a mortgage loan.
Municipality –this is the City, Village or County in which the Property is located.
Non-permitted Encumbrance – this is a registered interest in Land which would affect the Purchaser’s interest in the property and that the Seller’s Lawyer would usually undertake to discharge.
Possession Date – is the date in the Contract that the Seller has agreed to give physical possession of the Property to the Purchaser.
Property Taxes – are an annual levy on the Property which is set based on the value of the property and payable to the Municipality. Some municipalities have programs in place that allow property owners to pay by monthly installments but you usually have to individually opt in since the default is a one-time annual bill.
Protocol Closing – is a process using the Western Conveyancing Protocol that allows the purchaser to secure possession of the Property and the Seller to receive the Sale Proceeds a BEFORE Title is registered in the name of the purchaser or the Mortgage is registered.
Real Property Report (RPR) – is a report prepared by a Land Surveyor which determines the boundaries of the Lot being purchased and the exact dimensions/locations of any structures on the Lot. It is generally the Seller’s obligation to provide the Buyer with a Real Property Report with valid compliance stamp and to ensure that there have been no structural changes after the RPR was prepared.
Statement of Adjustments – is the statement prepared by the Seller’s Lawyer setting out the various credits/debits that exist between the parties and specifying the balance required to close the transaction.
Shortfall – the amount of money the purchaser is required to provide to his lawyers in order to close the transaction.
Term – the length of time for which the Lender has agreed to finance the purchase. It typically ranges from 1 – 5 years.
Title Insurance – is insurance which the purchaser usually purchases to cover any defects in title and it covers both the purchaser and the Lender but the specifics are dependent on the terms contained on the face of the policy.
Transfer Documents – the documents typically prepared in a Real Estate Transaction.
Transfer of Land – is a document prepared by the Sellers Lawyer, executed by the Seller and sent to the Purchaser’s Lawyer for filing at the Land Title Office to document the transfer of title from the Seller to the Purchaser.
Undertakings – refers to the promises made between Lawyers and an example is the undertaking to discharge all non-permitted encumbrances. The breach of an undertaking is a serious infraction and would usually result in disciplinary action against the offending lawyer.
Waiver of Conditions – is generally a document prepared by the Buyer’s Realtor waiving one or all of the conditions.
Walk Through – is usually carried out by both parties on a date scheduled in the contract to identify deficiencies and other issues. For new builds, the builder would usually be entitled to remedy the same but for other cases, the Purchaser’s Lawyers would hold back a certain sum of money to ensure that the issues are remedied.
Western Conveyancing Protocol – is an arrangement between the Law Societies of Western Canada that allows Lawyers, who agree to be bound by the Western Conveyancing Protocol to proceed with completing a sale without the Transfer of Land being registered.
If you would like legal assistance with your real estate transaction please contact us by sending an email to email@example.com or by calling (587) 288-5856.