The following is a selection of links for legal information related to the purchase and selling of real estate.

Buying & Closing Costs

Legal Costs

Legal costs for a purchase with a mortgage usually range from $750 - $1000 regardless of whether the buyer retains the services of a Lawyer or Notary Public. It is important for the buyer to understand what is or is not included in a quote and what might be added as additional charges. Costs that are usually included in a quote are professional fees, land title search and registration fees and miscellaneous office disbursements. GST and PST are usually added to fees and disbursements as with other services and products.

Third-Party Closing Costs

These costs are usually quoted separately from “Legal Costs” as they vary from one transaction to another. For example, the lawyer or notary will need to obtain a Municipal tax certificate, the cost of which varies from $25 to $50 depending on the municipality. Similarly the lawyer or notary will obtain an insurance binder showing loss payable to the lender, the cost of which varies but usually ranges from $25 to $35. Finally, for strata title property, the lawyer or notary will require a Form F stating there are no arrears in maintenance fees, the cost of which varies but usually ranges from $25 to $35. The Strata Corporation may also charge a “Move-In” fee which usually ranges from $50 to $200.

Many lenders will require the lawyer or notary to obtain on behalf of the buyer a Survey Certificate, Title Insurance or Western Law Societies Conveyancing Protocol. A Survey Certificate is used by the lender to ensure that the buildings on the property do not encroach on adjoining property or into “set backs”. If a Survey Certificate is not available lenders may accept Title Insurance or the Western Law Societies Conveyancing Protocol. Title Insurance and Western Law Societies Conveyancing Protocol provide insurance to protect the lender from any encroachments that would have been identified by a survey certificate. Title Insurance has some additional coverage that may be important to a buyer. The cost for a new Survey Certificate or Title Insurance for mortgages less than $500,000 usually ranges from $200 to $250. In the event of a subsequent refinancing an owner may need to buy a new Title Insurance policy. Most law firms will charge only a nominal fee for the Western Law Societies Conveyancing Protocol. It is important to review with your lawyer or notary the appropriateness of each product to your situation.

Closing Adjustments

Closing adjustments cover a number of items including municipal taxes, municipal water and sewer fees, strata maintenance fees, rent and security deposits.
Strata fees are charged and paid monthly on the first day of each month. The monthly strata fees will be pro rated between the buyer and the seller, with the buyer reimbursing the seller based on the number of days between the date of adjustments agreed to in the Contract of Purchase and Sale and the last day of the month.
Rent is adjusted on a similar basis with the buyer receiving a credit for a portion of the rent. In the case of a continuing tenancy, the buyer will receive a credit for the security deposit with accrued interest as the buyer will be responsible for reimbursing the correct amount when the tenant vacates at a later date.

Municipal property taxes will also be adjusted. Property taxes are based on a calendar year. Some municipalities such as Vancouver provide for an advance payment in February with the balance due and owing usually at the beginning of July. Other municipalities do not have an advance tax payment but the full years taxes are payable usually at the beginning of July.

The adjustment between buyer and seller will therefore vary depending on the time of year of closing of the transaction and the municipality in which the property is located. The tax adjustment is one of the more complicated adjustments to understand but it is based on the parties being responsible for any costs associated with the property only for the period of time in which they are in possession.

These adjustments are set out in a document normally referred to as the Statement of Adjustments. The Statement of Adjustments sets out the buyers total costs and identifies the sources of funds to pay these costs. The sources of funds will include the initial down payments pursuant to the Contract of Purchase and Sale, the Mortgage proceeds, any credits in terms of rent, tax or other adjustments. The final line item on the Statement of Adjustments will identify the amount of money required to complete the transaction. The balance required to complete will need to be delivered by certified cheque or bank draft payable in trust to the lawyer or notary firm.

 

The Closing Process

To help alleviate the stress of buying it is important to understand the closing process step by step:

Step 1

Retain the services of a lawyer or notary. You should retain your lawyer or notary as soon as you have an accepted Contract of Purchase and Sale and have removed all subjects. Ask your other professional advisors for a referral.

Step 2

Your lawyer or notary will need to gather information from you including how you wish to hold title to the property if you are buying with your spouse or partner. Don’t hesitate to contact your lawyer or notary if you have not heard from them at least 3 – 4 weeks before the closing. Most couples hold title as “joint tenants” which conceptually means that the couple jointly owns a 100% as opposed to “tenants-in-common” which means that the couple each owns 50%.

Step 3

Your lawyer or notary conducts a title search and obtains tax information and any additional information necessary to prepare Statement of Adjustments. If you are taking a more your lawyer or notary will need to obtain and insurance binder with “loss payable” to your lender.

Step 4

Your lawyer or notary prepares closing documents including title transfer, mortgage, property transfer tax forms and Statement of Adjustments. Your lawyer or notary will forward the seller’s closing documents to the seller’s lawyer or notary for execution.

Step 5

1 - 3 days before closing is when you usually meet with your lawyer or notary to sign documents and deliver the balance of the down payment or equity. the balance of funds will need to be paid to your lawyer or notary by certified cheque, bank draft or inter-bank transfer. If your funds are invested ensure that they will be available for deposit in advance of closing.

Step 6

Your lawyer or notary will register the transfer and mortgage documents, arrange for the seller’s lawyer or notary to pick up funds and notify you that the purchase has completed.

Step 7

Normally you receive the house keys directly from your realtor on the Possession Date as set out in the Contract of Purchase and Sale.

Step 8

Move in and enjoy your new home!

 

 

Property Transfer Tax

The Property Transfer Tax is a tax payable to the Provincial Government by purchasers of real estate. The tax applies to all types of real estate, whether residential, commercial or industrial.

The amount of the Property Transfer Tax is 1% on the first $200,000.00 of the property's fair market value and 2% on the remaining fair market value.

For example, if the fair market value of the property is $200,000.00, the tax payable would be $2,000.00 (1% of $200,000.00). If the fair market value of the property is $250,000.00, the tax payable would be $3,000.00 (1% on the first $200,000.00 = $2,000.00 and 2% on the remaining $50,000.00 = $1,000.00).

"Fair Market Value" is best described as the price that would be paid for a property on the open market (which is usually the actual purchase price paid for the property). If the transfer of property is taking place without the exchange of money, the fair market value must be the fair value of the property if same was sold on the open market. In some situations, the fair market value is determined by the recent Assessment received from the Assessment Office.

There are a number of exemptions available to purchasers so that the tax is not payable. The most common is the exemption for "First Time Home Buyers". To qualify for an exemption to the Property Purchase Tax as a First Time Home Buyer, the following criteria must be met:

•  Purchaser must never have owned an interest in a principal residence anywhere in the world at any time;
•  Purchaser must be a citizen of or a permanent resident of Canada and have resided in B.C. for at least one year prior to the purchase or have filed two income tax returns as a British Columbia resident within the last 6 years;
•  To obtain full exemption, the purchase price must not exceed $425,000.00. A partial exemption is available for homes between $425,000.00 and $450,000.00 (see formula below);
•  Purchaser must move into the property within ninety-two days after registration of the purchase of the property and reside in the property for at least one year;
•  Pro rata exemption where property exceeds .5 hectares or a portion of the property is not residential (i.e. commercial lofts) - purchase price of entire property must not exceed the price limitations.

To calculate the amount of tax payable on homes between $425,000.00 and $450,000.00, use the following formula:

Amount of PTT X ($450,000.00 - Purchase Price)
$25,000.00

For example, assume a house is being purchased for $445,000.00. Normal Property Transfer Tax would be $6,900.00 (i.e. 1% on the first $200,000.00 and 2% on remainder). Using the formula:

$6,900.00 X ($450,000.00 - $445,000.00)
$25,000.00

= $1,380.00

Subtract $1,380.00 from $6,900.00 leaving $5,520.00 as the amount owing for the Property Transfer Tax.
Other exemptions exist as well, such as a transfer of a principal residence between family members. For details on this and other exemptions, go to http://www.rev.gov.bc.ca/RPT/ and pick the "Property Transfer Tax" button located on the right hand side on this screen.

Property Transfer Tax should not be confused with Property Tax. The Property Transfer Tax is a onetime tax paid to the Provincial Government by purchasers of real estate. The Property Tax is the tax paid on an annual basis to the local City/Municipality.

Please remember that the Property Transfer Tax Act may frequently change along with the exemptions for payment of this Tax.

 

 

Non-Resdient Buyers

Welcome to British Columbia. Non-residents can own property in British Columbia but there are some important considerations.

Mortgage qualifications in Canada are different for non-resident buyers than for Resident Buyers. Non-resident buyers should consult with a lender or mortgage broker to understand the qualifications for a non-resident buyer. Non-resident buyers will need to open a Canadian bank account and will need to do so in person with identification acceptable to the lender.

Non-resident buyers do not need to be present in B.C. to execute closing documents. A number of lawyer and notary firms, including Bell Alliance, utilize technology to streamline the closing process for non-resident buyers. Documents can be forwarded electronically and executed in front of a lawyer or notary in most foreign jurisdictions. It is important to make arrangements for the transfer of monies well in advance of closing.

Non-Resident Buyers should also consult with a Canadian tax professional to discuss tax treatment both during the period of property ownership and on disposition. A non-resident owner of rental property will be subject to a 25% withholding of taxes on the gross rental income. Administrative rules require that the owner or agent remit these amounts to the Canada Revenue Agency. An non-resident owner may file a special form to have the withholding taxes reduced which essentially treats the non-resident as a resident with respect to the rental income. This form needs to be filed before January 1st of each year. For further information please refer to the Guide for Electing Under Section 216.

 

 

First-Time Buyers

Congratulations, you have made the decision to buy your first home. We want to help make the process as easy and understandable as possible. We’ve included on this page some information that is of particular importance to First Time Buyers.

My number one recommendation to First Time Buyers is to make sure you create your team of professional advisors including your realtor, mortgage broker, lender and lawyer or notary.

First Time Buyers are usually looking for answers to the following questions:

•  Do I qualify for an exemption under the provincial Property Transfer Tax?
•  Can I take money out of my RRSP under the federal Home Buyers’ Plan?
•  What are my Closing Costs and adjustments going to be?
•  I’m buying a new condo, can I claim a GST rebate?
• I have a binding Contract of Purchase and Sale and been approved for a mortgage, what is the process when dealing with a lawyer or notary?

Home Buyer's Plan

The Home Buyers’ Plan is available to “first time buyers”. Unlike the Property Transfer Act, a purchaser can qualify as a “first time buyer” more than once if they or their spouse have not owned a principal residence for approximately four years. The Home Buyer’s Program allows a first time buyer to withdraw up to $20,000 without paying tax on the withdrawn amount. The home being purchased must be a principal residence, can be existing or being built and the RRSP must be repaid within 15 years with minimum payments of 1/15th of the withdraw amount.