Category Archives: Buyers

Home Inspections – What Home Buyers Need to Know

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Recently, a local Realtor and Home Inspector have been in the news as a Buyer has claimed that they have bought an “unlivable” home (full CBC News Story here) and the aggrieved Buyer is claiming against the Realtor and Home Inspector in small claims court.  From my reading of the story and documents (as presented by CBC) there are obviously some salient points that have been downplayed or glossed over:

a)      The Buyer bought the home “sight unseen”

b)      The Home Inspection (as posted by CBC) noted:

  1. Damaged, rotten windows with moisture damage
  2. Old galvanized piping
  3. The house was 80+ years old
  4. The home inspector was unable to access the crawl space
  5. Major cracking in the ceiling
  6. Damaged sinks and freeze vulnerable piping
  7. Missing baseboard heaters
  8. Major electrical issues requiring further inspection

So the question that comes to my legal mind given these facts is “would a reasonable person think they were buying a home without major flaws?”. Obviously there are many more facts to this story which will be uncovered in the course of the court proceedings on this matter.

Whenever I discuss home inspections with Buyers I always stress that home inspections are like going to see a doctor at a walk-in clinic; Home Inspectors are generalists, they have a broad base of knowledge, but they are not specialists. The take home message for Realtors is that if there are “issues” that are discovered in a home inspection, Realtors should ensure that their clients are directed toward professionals (plumbers, engineers, roofers, ect…) who are in the best position to assess the magnitude of the problem and provide a realistic cost of repair.

home inspection

Buying Foreclosure Properties in Kelowna, British Columbia

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By: Peter Borszcz, Real Estate Lawyer, Pihl Law Corporation

Irrespective of economic conditions, foreclosure properties are often viewed as a “deal” for the savvy real estate investor. However, courts in British Columbia have a duty to ensure that foreclosure properties are being sold as close to their fair market value as possible. Usually this means ensuring that a property is marketed with a REALTOR on the MLS system.  Here are some key points for Home Buyers to remember when they are buying foreclosure properties in Kelowna and other parts of British Columbia:

1.      Offer is Subject to Court Approval.

Buying a foreclosure starts much like any other real estate deal, except that often you are negotiating with the Bank, the Bank’s Realtors, and the Bank’s Lawyers. This means that offers must be open for acceptance for longer periods of time to allow the institution’s foreclosure committee time to consider your offer.  Unlike a regular real estate deal, just because your offer has been accepted does not mean that “You Have a Deal”.

All deals are subject to court approval. This means that a judge (or master) must approve the terms and conditions which have been agreed to by the bank. The judge will be ensuring that the current home owner has been given proper notice of the proceeding and that they have not “paid out” or redeemed their mortgage prior to the Court Date.

A Buyer should keep in mind that a judge has absolute discretion in her courtroom and success in court can never be guaranteed. The outcome will vary depending on whether the application by the lender for sale of the property is uncontested, contested by the home owner, or if there is multiple offers presented in court.

2.      No Other Subject Conditions

The offer which is presented to the Court (and the Lender) must not contain any subject conditions for the benefit of the Buyer. In most real estate transactions, subject conditions allow time for a Buyer to perform due diligence on the property they are purchasing while binding the Seller to the deal (for example: obtain a home inspection). In a traditional real estate deal, if an issue is discovered (ie; a leaking roof) after the deal signed but prior to subject removal, the Buyer will have an opportunity to re-negotiate with the Seller and will not be legally obligated to complete in the face of the new information.

In foreclosure transactions, the Buyer must do all due diligence prior to knowing if their offer will be acceptable to the bank or the court. This means that a Buyer is faced with a dilemma: a) potentially spend thousands of dollars on home inspection costs, appraisal fees, and other consultants only to have the property purchased by another party on court day; or b) buy an “as-is” property without proper due diligence which may have many costly unforeseen complications.

Financing is one area in foreclosure transactions that cannot be overlooked. Once the court approves the offer, the Buyer is legally obligated to complete the transaction and pay the Purchase Price. Buyers must ensure that their mortgage brokers have received an unconditional approval from their lender prior to proceeding to Court.

3.      Property Purchased “As-Is”

In a standard residential real estate transaction, the Seller provides a Property Disclosure Statement which provides the Buyer with a modest amount of disclosure on the condition of the premises.

One of the key differences between a foreclosure purchase and most residential real estate transactions is that the Buyer is purchasing the property “As-Is”. In a foreclosure, the seller (Lender) explicitly is making no representations or warranties about the Property and there is no Property Disclosure Statement which is provided (or it is simply blank).

When a Buyer is purchasing a property in “As-Is” condition, the onus is on the Buyer (caveat emptor) to ensure that the property meets the Buyer’s needs. Commonly foreclosure properties have issues including: non-compliance with bylaws, illegal activity, squatters, no occupancy certificates, unhealthy conditions (mold), and very poor maintenance.

The Buyer needs to understand that the condition of the premises may change dramatically between the date of viewing to the date of possession. The Buyer is inheriting all these potential issues, “warts and all”.

4.      Be prepared for Court

Once a Buyer’s initial offer is accepted, the Lender’s lawyers will set down a date in Court for approval of the offer. This initial offer becomes part of the public court filing and other parties may show up in court to present better offers. The Lender’s sole responsibility is to set the date for the chambers hearing, if the initial Buyer wishes to have the option of revising their offer in Court (usually in the face of competing offers) they (together with their agent) should attend in chambers on the date. Buyers are well advised to have their “BEST OFFER” ready on the court date (with an appropriate deposit in the form of a Bank Draft) if there are competing offers.

It is important that any offer presented to the court should contain the correct information as the court will rely on the offer to draft the Order Approving Sale which will be filed in the Land Title Office by the lawyers for the successful Buyer. Care should be taken to ensure: Correct Legal Names of Purchasers; Correct Legal Description of All Property; and Correct Description of Property Interest Acquired (i.e.; Leasehold v. Freehold)

5.      Closing and Possession Issues

Once you are successful in Court and the Court has granted you, as Buyer, an Order Approving Sale, there are still a number of potential complications. At this stage it is important that you are using the services of a Real Estate Lawyer familiar with closing of distressed and foreclosure properties. Obtaining title to your new home is much different in the case of foreclosure property as there is no transfer filed in the Land Title Office and instead the actual Order Approving Sale is reviewed and approved by a Land Title Examiner. If there have been any mistakes in drafting of the order by the Lender’s counsel, the order may be defected by the Land Title Office and the Lender’s counsel only obligation will be to correct the order.

Possession of a foreclosed property is not guaranteed on the Closing Date. A tenant, squatters, or the former owner may be present on the property. In this case the bank is only required to use reasonable efforts to obtain another court order (writ of possession) ordering the property be vacated. This process can take additional time. A Buyer should not rely on timely possession of foreclosure property.

6.      Liability Issues

In summary, Buyers assume a number of additional liabilities when foreclosure property is purchased, including:

a)                Property Damage

b)                Property Non-compliance with law and by-laws

c)                Illegal Activity

d)                Adverse Possession of Premises

e)                Potential Tax Liability (GST and Non-Resident Withholdings)

f)                 Potential Strata Assessment Liabilities

Foreclosure property purchases can represent a good deal for many savy and experienced property investors however, Buyers should carefully enter into these arrangements fully educated on the risks of purchasing foreclosure property.

This paper is based on the lecture provided to at the Okanagan Mainline Real Estate Board annual general meeting on March 6, 2013.

Foreclosure Slides Here!

Written by Kelowna Real Estate Lawyer Peter Borszcz.

Can I have a pet in my new home?

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“Can I bring my (dogs/cats/lizards/emus) to my new home.” is a phone call I get on a weekly basis by Purchasers who want to ensure the furry, fuzzy, and scaly members of their family are welcome in their new home.

Generally there are three sources of law that can impose limitations on the right of a home owner to have domestic pets at their premises. Owners who want to ensure that their pet is permitted in the new home should check the following:

  1. City of Kelowna Zoning and Local Government Bylaws
  2. Statutory Building Schemes and Restrictive Covenants
  3. Strata Bylaws

Local Government Bylaws

The Regional District of Central Okanagan administers dog control and barking bylaws within most areas of the Central Okanagan (RDCO dog control information here). Dog Control Bylaw No.366 limits to a maximum of only 2 dogs allowed per premises, a special kennel license is required for three or more dogs (note: a dog kennel (3 or more dogs) may also require a business license and property zoning must be sufficient – see City of Kelowna Zoning Information here) .

Statutory Building Schemes and Covenants

Statutory Building Scheme and Covenants are land title charges which limit an owners use of the property. Some of these charges will common place limits on the the pets that can be kept on the property. For example most older residential building scheme (common found in Kelowna properties built in the 1970s and 1980s in Glenrosa and Rutland) state that “no more than 2 domestic dogs or cats and no horses, cattle, swine, sheep, or other livestock can be situated on the property”. It is advisable to discuss these matter with your real estate lawyer who can review your land title with you.

Strata Rules and Bylaws on Pets

Buyers with pets who are considering buying into a strata corporation, should ensure they are intimately familiar with the strata rules and bylaws which may limit a Buyer’s ability to keep a pet. Buyers should review these documents carefully as these documents not usually reviewed by lawyers or Realtor (unless they are specifically engaged to).

If a Strata Corporation is using the standard bylaws (and has not amended them), a strata owner must not keep any pets on a strata lot other than one or more of the following:

  • a reasonable number of fish or other small aquarium animals;
  • a reasonable number of small caged mammals;
  • up to two caged birds;
  • one dog or one cat

Strata Corporations can amend these standard bylaws and can restrict: the number of pets, the type, kind, breed or weight of pets, or require the pet to be registered with the Strata Corporation.  The pets which exist at the time the bylaw is passed may continue to live in that strata unit until the pet’s death (they are grandfathered under the old rules).

Written by Peter Borszcz, a Kelowna Real Estate Lawyer and Kelowna Business Lawyer. 

apartment dogs

Understanding a Developer’s Disclosure Statement

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When Homes Buyers enter a show suite for the first time, it can look very impressive and they are often shown marketing materials which can include the layout of some of the units and the amenities which will be present once the development is built. Often a contract is signed and a deposit is made before Buyers have had a chance to fully contemplate their decision.

By law in British Columbia, Purchasers of new development property have a 7 day rescission period to cancel their purchase agreement and have their deposit returned without penalty.

During this 7 day period purchasers should thoughtfully and carefully review their disclosure statement to ensure that the development property meets their expectations.

 

In British Columbia, all new developments which are comprised of five or more units are subject to the Real Estate Development and Marketing Act which governs how a developer can market and sell or lease these development properties. The Act is consumer protection legislation which facilitates disclosure about the development by requiring the Developer to provide a Disclosure Statement to the Buyer which discloses the following:
a) The Background and Experience of the Developer
b) The Purchaser’s Rights of Rescission
c) Permitted Uses of the Development
d) Phasing of the Development
e) Strata Information and Budgets
f) Parking Entitlements
g) Utilities and Services
h) Description of the Land Title
i) Construction and Warranties
j) Local Government Approvals and Finances
k) Handling of Purchaser’s Deposits

It is important that the Buyer’s ensure that their timeline and their intended use of the Property align with the Developer’s disclosure. Buyers should not simply rely on the verbal assertions of sale persons as Developer’s contracts will expressly state that only those representations and warranties made in writing in the contract are binding between the parties.

After a Buyer has had a chance to review the Disclosure Statement on their own, I often find that reviewing the following questions assists most Buyers in their thought processes:

1) Do you have any reservations that the Developer will not complete this project?
2) Is your quality of life going to be impacted if the project is delayed?
3) Why did you purchaser this unit, what made it special?
4) Was there any assurances that you were given by the sale centre staff which prompted you to purchase this unit?
5) If the project does not proceed, how will your life be impacted?
6) Are you aware of the Developer’s termination rights in the contract?
7) Are you aware of the limitations on assignment or covenants respecting the re-marketing of product after it has been purchased?
8) If a part of the project (or amenities) are phased, how will your perceived value of the unit be altered if subsequent phases do not proceed?

In short, a Developer’s Disclosure Statement is very much like a “specifications sheet” and are legally binding representations of the Developer about the nature of the property that you are intending to purchase.

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

Marriage and Name Changes in the Land Title Office

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I heard a wonderful story from a client this week who had decided to propose to his girlfriend after he carried her “over the threshold” in to the new home they had just bought together in Kelowna. The client asked me “When we get married, do we have to file that change with the Land Title Office?”

Steps to Name Changes in the Land Title Office:

  1. Obtain the  original certificate of change of name or marriage certificate from the BC Vital Statistics Agency.
  2. Inform your lender of the change of name, they may require your lawyer to prepare a declaration that you have changed your name.
  3. Once Step 1 & 2 are complete, bring the original document to your lawyer who will verify your identity and will file the legal name change in the Land Title Office.
Will the wrong name on title prevent me from selling or re-mortgaging the property?
It might, identity verification is taken very seriously by Realtors, Mortgage Brokers, and Lawyers in the Province of British Columbia and these professionals will require proof that you have the legal capacity to sell your property.

So, when you legally change your name, it is recommended that you file the change of name in the Land Title Office as set out above.

Written by Peter Borszcz, a Kelowna Real Estate Lawyer and Kelowna Business Lawyer. 

Can I be kicked out of my Mobile Home?

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Recently in Abbotsford, British Columbia, there was a mobile home park where the owners were given notice to vacate the premises as the mobile home park was being re-developed and the headline read “BC Seniors devastated as homes face bulldozer” (see the full story on CBC here). This was particularly tragic as (according to the report) many owners had recently bought their homes for $80,000 and now were only being offered $11,000 as compensation.

Many mobile home owners own their home, however the lands that their home sits on is a “rented pad” and pad rent is paid monthly to the park landlord under a mobile home tenancy agreement. These agreements are administered by the Manufactured Home Park Tenancy Act.

A Landlord has the right under the Act to terminate a tenancy for “landlord’s use of the property”  if:

  1. All permits and approvals are in place to develop the property;
  2. The Landlord intends to proceed in good faith with the re-development;
  3. The Landlord has given the tenant (Mobile Home Owner) at least 12 months notice in the form prescribed by the Act;
  4. With the notice, the Landlord has given the tenant (Mobile Home Owner) compensation equal to 12 months pad rent

If the tenant wishes to dispute the notice, they MUST FILE A DISPUTE WITHIN 15 DAYS of receiving the notice. The form for disputing the notice is (here) and can be filed online.

How do Mobile Home Buyers protect themselves? Without a lease, the mobile home owner only have assurance of possession of the pad for a period of 12 months.  If Mobile Home Owners are looking for further assurances from Park Landlords, they should seek to negotiate a term lease (for example for a period of 3 years as opposed to month to month).

Distressed Sales: Options for Sellers of Distressed Property

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Unfortunately, and often due to a series of unfortunate events, some owners find themselves unable to afford their home and in some cases being forced to sell at a loss. There are a number of different ways for this to occur:

A. Short Sale with Seller Bringing in Cash to Complete

This type of transaction occurs when the proceeds of sale are insufficient to pay the mortgage, commission and fees associated with the property and the Seller is able to access other financial resources to complete the transaction by depositing the shortfall in trust with their lawyer to complete the transaction.

Of all the options for a distressed sale, this options makes the best of a bad situation, there is no foreclosure proceeding and no judgements registered against title or the seller.

B. Short Sale with the Bank Accepting Shortfall of Net Proceeds

Where the Seller is unable to make up the difference on Closing between the net sale proceeds and the mortgage payout and the Seller is in default of their obligations to the Lender, most Lenders will grant of discharge of the mortgage registered on title in exchange for net sale proceeds (less agreed adjustments) in exchange for a consent to personal judgement against the Seller and a reasonable payment plan for the balance.

The option avoids a formal foreclosure proceeding (and it is the Seller that accepts a Buyers offer “subject to being able to clear title”), but Seller agrees to a debt judgement against them and they will continue to have to pay the balance remaining after the sale to the Lender. Often when a mortgage default has proceed to this stage, there is a certificate of pending litigation on title.

C. Court Ordered Sale

As the Bank has proceeded with the foreclosure, at this stage the ability to sell the property  is now subject to Court Approval.  A Buyer’s offer will be subject to Court Approval and other buyers may appear in Court to bid on the property. The Seller is not involved in this transaction and registration in the Land Title Office takes place by filing of a certified copy of the court order granting the property to the Buyer (on payment of the purchase price) [Important: ensure Buyers names are correct on the Court Order!].

D. Lender Owned Property

If the property has proceeded through the entire foreclosure without an offer, the Lender may seek an “Order Absolute” and the Lender will assume ownership of the Property. In this case the Lender is the Seller (as they are the Seller on title) and the transaction proceeds very similarly to a normal real estate transaction (except that Lenders are often very reluctant to provide Property Disclosure Statements).

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

First Time Home Buyers: New Property Transfer Tax Declarations

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When the province announced the new First Time New Home Buyers Rebate associated with the HST rebates, they tightened the definition of “First Time Home Buyer” (see my post here for more information on the rebates). This tighter definition indicates that the government is looking more closely at (ie; auditing) who is a “first time” home buyer. This higher degree of oversight is also supported by recent changes to the Property Transfer Tax Form which required a Buyer to DECLARE the following:

  1. Have you owned an interest in a principal residence (where you lived) anywhere in the world?
  2. Have you ever recieved a British Columbia (BC) first time home buyer’s exemption or refund?
  3. On the date of registration, are you a Canadian citizen or a permanent resident as defined in the Immigration and Refugeee Protection Act (Canada)?
  4. Have you continuously resided in BC for at least one year immediately prior to the date of registration or filed income tax returns as a BC resident during the six year before the date of registration?
See the new form here:

If the Buyer makes a FALSE DECLARATION, the Minister of Finance may charge a penalty equal to DOUBLE THE TAX.

Also, the Buyer MUST qualify as a first time home buyer (above) and the they must purchase a “Qualifying Property”:

  1. Fair Market Value is less than $425,000 (for full exemption)
  2. Land is less than 0.5 hectares in size
  3. Property used as Principal Residence
And, the Buyer MUST actually occupy the home:
  1. Must move into the home within 92 days of the date of registration (unless vacant land, then must move in within 1 year)
  2. Must continually occupy as principal residence for one year from the date of registration.
The form changes and the recent legislative attention to this issue likely will result in greater audit attention to this area. First Time Home Buyers should ensure they meet all the criteria: as a Buyer, with a Qualifying Property, and they plan to Occupy the home for the first year.

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

Agricultural and Farm Property: Special Considerations

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Agricultural and Farm property occupy an interesting segment of the real estate market, as they are often a mix of commercial and residential uses. This means that many of the rules that apply purely to a residential home purchase have limited applicability to agricultural lands.

A. THE 0.5 HECTARE RULE:

There are a number of tax exemptions which do not apply (or have limited applicability) where a property exceeds 0.5 hectares (1.24 acres) in size:

  1. Principal Residence Exemption - this Income Tax Act exception allows exempts capital gains of a primary residence from income, however the total area of a “principal residence” must not exceed 0.5 hectares (1.24 acres) hectares.
  2. Property Transfer Tax (Related Individual) – a transfer of a principal residence from a parent to child, or to a spouse is an exempt transfer for property transfer tax, however (similar to above) the total area of a “principal residence” must not exceed 0.5 hectares (1.24 acres) hectares.
  3. Property Transfer Tax (First Time Home Buyer)  - a transfer of a principal residence to a first time home buyer is an exempt transfer for property transfer tax, however (similar to above) the total area of a “principal residence” must not exceed 0.5 hectares (1.24 acres) hectares.

B. Rural Area Tax Incentives

  1. Agricultural Land Reserve (“ALR”) Tax Exemption - 50% of the assessed value of ALR land is exempt from school tax if the land is classified as a farm or is in the ALR and is vacant, used as a farm or for residential purposes.
  2. Rural B.C. Home Owner Grant - B.C. has a property tax assistance program which reduces the amount of taxes paid on a home. You can claim the additional rural grant of $200 (for a total regular home owner grant of $770) on your principal residence if you live in rural areas of British Columbia and you file your income tax in British Columbia.(Kelowna is considered a rural area)

 C. GST/ HST on Agricultural and Farmlands

The applicability of HST on farmland is complicated by the “mixed” use of most farmland as both residential and commercial use. Generally sales of farm property attract GST/ HST unless there is a specific exemption.

  1. If selling the farm as a business as a going concern to a unrelated third party – GST/HST applies, but GST Election 44 can be applied to have no GST/ HST applied on sale
  2. If selling a hobby farm not used as a business – GST/HST would not apply as you are selling your home and there is no reasonable expectation of a profit from the hobby farming activities.
  3. If selling a personal residence with farm property- that portion of the property that is necessary for the use and enjoyment of the house is exempt from HST.
For Purchasers of farm property, it is important to ensure that:
  • the Purchaser receives tax advice prior to subject removal; and
  • the Purchaser is registered for GST/HST prior to closing

D. Agricultural Land Reserve

The Agricultural Land Reserve in British Columbia limits the non-farm uses of designated property. These restrictions may include what kind of buildings can be erected and whether the lot can be subdivided (including the addition of home site). If you are purchasing a property that has been designated in the ALR, please ensure that your future use of the property is within the uses permitted by the Agricultural Land Commission Act.

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.

First Time Home Buyers: Special Programs

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I must admit, I love watching the HGTV show “Property Virgins“, and seeing the excitement of first time home buyers fulfil their dreams of home ownership is one of the best things about my job.

In British Columbia, real estate prices (compared with much of Canada) are high relative to average income, which increases barriers to first time home owners. In the Okanagan, local professionals like to call this the “sunshine tax” (although “four season paradise tax” would be more appropriate). Thankfully there are some very helpful programs that First Time Home Buyers can use to assist them with their first home purchase.

A. Property Transfer Tax Exemption for First Time Home Buyers

This program exempts First Time Home Buyers from paying BC Property Transfer Tax.

To Qualify for the PTT Exemption a First Time Home Buyer must:

  1. Be a Canadian Citizen or Permanent Resident
  2. Have lived in BC for 12 consecutive months OR filed income tax returns for at least 2 of the last 6 years in BC
  3. Never have owed an interest in a principal residence anywhere in the world; and
  4. Never have previously received a First Time Home Buyers Exemption
If you qualify, on homes valued up to $425,000, a First Time Home Buyer will be exempt from paying Property Transfer Tax (a savings of $6,500 in PTT). The tax exemption diminishes on higher priced homes and is not available on any homes priced over $450,000.
You apply for the exemption at the time of conveyance, and often your lawyer will complete the PTT Return and Exemption application as part of the closing documentation.  There are severe penalties for a false declaration.

B. RRSP First Time Home Buyers Plan

This program allows First Time Home Buyers to “loan themselves” previously claimed RRSP contributions tax free to assist in the purchase of a home.

To Qualify for the RRSP First Time Home Buyers Plan:

  1. You must have entered into a binding agreement to build or buy a home
  2. You intend to occupy your home as a principal residence and be a resident of Canada
  3. You are a first time home buyer
  4. You must not have a “repayable Home Buyers Plan” balance on your tax return
This program will allow you to withdraw up to $25,000 from your RRSP to assist in your home purchase. This is withdrawn at your financial institution immediately prior to closing and you complete form T1036.

C. First Time Buyers New Home Bonus

This is a time limited rebate (introduced with the enhanced HST rebates) for First Time Home Buyers buying new homes (until March 31, 2013 only), to qualify:

  1. You must be eligible for an HST rebate on a new home purchased after April 1, 2012 and Completion must occur before Mar 31, 2013 (ie; transition tax does not apply)
  2. You (and the if a couple, both persons) must be a First Time Home Buyers and BC Residents
  3. The home must be the Buyers Primary Residence
  4. Your Family Income must be less than $150,000 for full rebate (note : the rebate phases out to $0 for income over $200,000)

After closing you will apply to the BC Government which will grant a rebate of 5% of the purchase price of the home (if under 200k) or $10,000 (whichever is greater). The rebate will be a cheque mailed directly out to claimants after the application has been approved.

The best place for First Time Home Buyers to start their new home search is by getting a clear idea of the process, check out my BUYERS PAGE.

Peter Borszcz is a Business and Real Estate Lawyer practising in Kelowna, British Columbia and a shareholder of Pihl Law Corporation.