Category Archives: First Time Home Buyers

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. 

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.

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.

First Time New Home Buyers Bonus

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Together with the budget announcement on February 20, 2012, the BC Government introduced a new First Time Home Buyers Bonus which is payable as an income tax credit. This is especially good news for condo developers who have inventory below $450,000.

Who Qualifies? To be eligible a BUYER must meet all of the following:

  1. Contract signed AFTER Feb 21, 2012
  2. Completion BEFORE Mar 31, 2013
  3. HST is payable on the New Home (WFN lands do not qualify)
  4. First Time Home Buyers
  5. BC Residents
  6. Home is Buyer’s Primary Residence
  7. Family Income Less than $150,000 for full rebate (phase out to $0 at 200k)

How Much?

  • 5% of the purchase price of the home (if under 200k) or $10,000 (whichever is greater)

How to Apply?

Proviso: This information here has not yet become law and is based on the discussion papers published by the Government of British Columbia. These rules may change as the legislation progresses through the BC legislature.

Peter Borszcz is a Real Estate Lawyer and Business Lawyer practicing in Kelowna, BC and a shareholder in the law firm of PIHL Law Corporation.

Saving Your Client Money in a Real Estate Transaction

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This weeks blog post is definitely not legal advice, however growing up in the Real Estate industry for the past 34 years, there are definitely a few ways I have discovered that both Realtors and Lawyers can add value to their clients transaction:

Negotiate from a position of strength – in short, ensure that your client has done everything they can do to help a deal move forward. This includes obvious things like obtaining a pre-approval and limiting subject conditions only to “bare essential items” (like title review, strata docs, home inspection, financing). However, taking this to the next level means having this discussion with your client:

    1. What is the BEST outcome if the deal does NOT go through? And
    2. What is the WORST outcome if the deal does NOT go through?
These two questions very quickly get to the heart of your client’s motivation.

Setting good dates – everyone wants to close at the end of the month, this means that you client is just one of many people needing services from lawyers, movers, strata companies. The best advice here is to remove subject conditions at least 30 days prior to closing, and have closing occur on the “off-weeks” during a month (ie; those weeks that do not contain the 15th or 30th).

    Knowing the Local Area – there are many areas in the Central Okanagan where housing costs will be dramatically different for a number of reasons that are not immediately apparent from the listing, for example:

      1. Are you too far from a fire hydrant/ protection area to obtain cost effective fire insurance (Some parts of the Upper Mission)?
      2. Does the area you are in have such poor water quality which will necessitate you bringing in outside sources (ie; Glenmore – Ellison Irrigation District)?
      3. Does the smaller municipality mean that you property taxes are going to be markedly higher (ie; Lake Country, Peachland)

    Search out Hidden Costs

      1. Get a good home inspection, but then get a follow-up expert inspection if anything substantive arises (ie; roof, foundation, building envelope/ water, electrical, plumbing).
      2. Get to know your strata council – everyone reads strata docs, this is standard. However don’t be afraid to take the extra step of calling the Strata Council President, you’d be surprised what doesn’t make it into the minutes.

    Who Should be on Title?

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    When buying a house, you must decide whose name will go on title. Will you be the sole owner? Should you be on title at all? Will you and your spouse go on title together? If so, will you be joint tenants or tenants in common? What about your children?
    What is the difference between Joint Tenancy and Tenancy in Common?
    Joint Tenancy means that two or more people own property in equal undivided portions, with an equal right to use the whole property. When one joint tenant dies, the property is transferred to the surviving joint tenant immediately before the moment of death. This means the property does not become a part of the estate of the person who died and the property will not be subject to probate fees, will not be taxed as a part of the estate and will not be distributed among the beneficiaries of the estate.
    Joint tenancy is generally preferred for most spouses.
    If two or more people own property as a Tenancy in Common, it does not have to be divided equally. Tenants in Common can own different proportions of the property, for example ¼ and ¾, and they can sell or mortgage their portion as they please. If one tenant in common dies, that person’s share of the property becomes a part of the deceased’s estate. It is subject to probate fees and it will be distributed to the beneficiaries of the deceased’s estate. As you can imagine, property can be a difficult thing to “distribute”.
    Tenants is generally preferred for blended families and other unique arrangements (like a shared vacation cottage).
    Can I hold title in only one name, excluding my spouse or common law partner?
    Having title in your name does not always mean you are the only one with an interest in the property. If you are in a relationship and have been living together for at least two years, your partner may have a claim to part of the property even though they are not on title.
    If you are a self-employed professional, you want to protect your assets from any business creditors. Some people attempt to protect their assets by placing title in their spouse’s name or have title held by a holding company.  This protection is not absolute and most bank will require a spouse to, at the very least be a Guarantor or Covenanter on the Mortgage.
    What about going on title with my Adult Child ?
    If you are thinking of holding a property in joint tenancy with an Adult Child for estate planning purposes, you should consult a lawyer. There can be many unintended consequences and pitfalls for such an arrangement. For example:
    -loss of control: you cannot sell or mortgage without the consent of the child
    -taxes: there may be capitals gains consequences for the parent or the child
    -property transfer tax: depending on whether the property is a principal residence, you may have to pay property transfer tax
    -creditors: the property will be at risk to claims by the child’s creditors
    -uncertainty: it is possible that you may not be successful in creating a joint tenancy if the child does not live in the house. The joint tenancy may be unintentionally severed by a number of events.

    Property Transfer Tax: First Time Home Buyers

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    First time home buyers get an exemptions from paying the property transfer tax and this “tax break” can save FTHB thousands of dollars. However, First Time Home Buyers need to carefully ensure that they qualify for this tax savings. Persons claiming a FTHB credit are regularly audited by the PTT Office.

    The Criteria to Qualify are as follows;

    Purchaser must:
    a)  be a Canadian Citizen, or a permanent resident as determined by Immigration Canada,
    b) have lived in British Columbia for 12 consecutive months immediately before the date
    you register the property, or you have filed 2 income tax returns as a British Columbia
    resident during the 6 years before the date you register the property,
    c) never owned an interest in land anywhere in the world at anytime,
    and
    d) you have never received a first time home buyers’ exemption or refund.

    The Property you purchase must also qualify as follows:
    a) the price must be less than $425,000
    b) the land must be less than 0.5 hectares (1.24 acres), and
    c)  the property will only be used as your principal residence.

    Importantly, if you sell the property or acquire a new principal residence within 12 months of purchase, you will lose the exemption and the Province will demand for the tax to be paid.

    More information here:
    http://www.sbr.gov.bc.ca/documents_library/brochures/firsttimehomebuyer.pdf

    The Story of a Collapsing Deal

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    (based on real life events)

    At the end of August 2010, Dave and Jane were buying their first home. Nervous about finding the “right” home for themselves and their two kids they look at property after property. Finally, at the beginning of August 2010, the house at 3245 McLeod Road came up for $375,000. It was the right price, close the schools, and close to Dave’s work at the Gorman Mill. The Seller, John, had been anxious to sell for a long time, and needed to simply walk away from the home, his credit union mortgage was $355,000 and he needed a fresh start in a new town. Both parties were anxious to see the deal get done.

    They came into see Peter, their real estate lawyer on August 22, 2010 and at that meeting they signed all the documents. He explained the process to them, including if the “what ifs” happen, and how the court process worked. Although there was only a very small chance these bad things would happen he wanted them to be armed with knowledge.

    Dave and Jane were very excited and they booked their moving truck for September 1, 2010 (their Possession Date) and they have picked out paint colors for their daughter’s new bedroom and began to plan their lives in their new home.

    On August 31, a series of unfortunate events occurred. First, the Land Title Office (which is electronic) went “offline” and no land title transfers were permitted to be registered at the end of the month. Closing was delayed, but not to worry the contract had been drafted to allow for this hiccup.

    Then, on September 1, with the moving truck in the driveway, the Vendor’s lawyer “discovered” that they had an “IRD” penalty (of $21,000) on their mortgage and now the Vendor (John) did not have enough money to “payout” the mortgage on title. The Vendor (John) could not complete and could not fulfill the promise he made to give the “title free and clear of all encumbrances”. Dave and Jane had already moved out of their rental house and they were now homeless, forced to live in a motel. The moving company (for a small ransom) placed all their belongings in storage.

    Crestfallen, Dave and Jane came to see Peter and Eric (a real estate litigator in the same firm) to ask what to do, they had remembered that part of their prior meeting dealing with the “what ifs” in real estate. The two lawyers explained that Dave and Jane could sue for damages or specific performance to get their dream home and they immediately started to put pressure on the Vendor to complete by “tendering” a “ready, willing and able to complete” letter, placing a caveat on the property title, and commencing legal proceedings.

    Within 3 weeks there was a very happy ending, the Vendor was able to negotiate with the bank, and to avoid a lawsuit paid the additional costs (including legal fees) for Dave and Jane.

    The moral of this story: For buyers, hope for the best, be prepared for the worst. For Realtors, ensure your sellers can clear title prior to signing the deal, or, at least, place a “subject to the seller ensuring they can clear title” so that you have pointed out the issue to them.

    Foreclosures

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    The roller coaster real estate market has brought with it many “non-traditional” deals for Realtors. Foreclosures have become more common (about 6% of LISTED properties in the OMREB, and much less common than in the United States) many Realtors have asked questions on how to sell these distressed properties.

    The first sign that a property may be in foreclosure (aside from the lawn sign!) is that a Certificate of Pending Litigation may appear on title.

    The Steps in a Foreclosure action in British Columbia are as follows:
    1. Default
    2. Demand for Payment
    3. Filing of Petition
    4. Order Nisi (final order, usually with time for Redemption (~ 6 m)
    5. After Redemption Period, either:
    5a. Order for Conduct of Sale (special circumstances), OR
    5b. Order Absolute of Foreclosure

    A Buyer can make an Offer at any stage of this process and therefore it is important for parties to ensure they are dealing with the party (either the Seller or the Lender) with “Conduct of Sale”.

    In the event that a party wishes to submit a competing bid, the original contract of purchase and sale will be attached to the Lender’s affidavit and this is a public document that can be found by searching the Court Registry in BC.

    Where a Lender has obtained an “Order for Conduct of Sale” the Lender’s Realtor will be required to attached a Schedule “A” to any proposed Contract of Purchase and Sale which generally states the following terms and conditions:
    1. Court Approval of the Offer is required After Subject Removal
    2. Court will have full discretion, the lender will not advocate for the buyer
    3. Other Offers May be Entertained
    4. Title Transfer by Vesting Order of Court
    5. Lender makes no Warranties as to: Title, Condition of Premises, Environmental Condition

    Buying a foreclosure in B.C. can be an unpredictable ride. For those investors familiar with the process, some “deals” may be had but generally, as the Court often has fair market value property appraisals, foreclosures in B.C. are not a panacea of “good bargains”.

    First Time Home Buyers should not view the foreclosure market as a good way to buy their first home. The inherent uncertainty in the process, the “as-is” nature of the home, and the higher acquisition costs mean that most First Time Home Buyers are better off buying non-distressed property on their first foray into home ownership.