A PURCHASER’S GUIDE
TO COMPLETING A HOME PURCHASE
So you have decided to buy a new home. If you don’t know what happens after you sign the Contract you’re not alone. Most purchasers are not aware of the nature of the work actually done by their lawyer to ensure that they obtain title to their new home on the terms that they had agreed to in the Contract.
This Guide has been prepared for you as the purchaser to explain the “conveyance” process and take the mystery out of the documents that your lawyer will present to you for your signature.
I. GATHERING INFORMATION
After receiving instructions from your Realtor, your lawyer’s first step will be to gather information about the property that you have agreed to purchase.
A title search of the property will be ordered by your lawyer from the Land Title Office (the “LTO”). The search will indicate who is the owner of the property and what “charges” are registered against it. Charges may be financial (e.g. a mortgage to be removed by the vendor), or they may be non-financial (e.g. easements, covenants or rights of way). Copies of those charges that are to remain on title will be obtained from the LTO and reviewed with you to ensure that they will not interfere with your intended use of the property.
The relevant subdivision plan, showing the location of the property in relation to adjacent lots, will be ordered from the LTO and reviewed with you to ensure that the property that you have agreed to buy is in fact the property that you intended to buy.
Your lawyer will obtain tax information from the relevant municipal authority to determine the amount of the annual property taxes and whether or not the taxes are up to date. This information is necessary so that an “adjustment” to the purchase price can be made between the vendor and purchaser to ensure that each party pays its fair share of the property taxes.
Your lawyer may also have to order a site survey. A site survey is a line drawing prepared by a licensed surveyor that outlines the boundaries of the property and any structures situated within those property boundaries. A site survey is usually only necessary if the mortgage lender requires confirmation that the structures on the property meet municipal setback requirements and do not encroach on adjacent lots. Even if your mortgage lender does not require a site survey, it is recommended that you obtain one to confirm this information. In some circumstances it may be possible to have the vendor attest to the accuracy of an existing survey, thus saving the cost of the preparation of a new survey. If you will be relying on an existing survey it is a good idea for you or your Realtor to ensure in advance that the existing survey is acceptable to the mortgage lender and that the vendor is in fact willing and able to attest to its accuracy. Title insurance is an alternative to obtaining a site survey.
If you are purchasing a newly constructed home your lawyer will need to gather additional information to ensure that you are protected from builders liens. If you are purchasing a strata lot (i.e., a townhouse or a condominium) your lawyer must obtain additional information to ensure that your interests are protected.
If you require mortgage financing to complete your purchase you should request your mortgage lender to forward the mortgage instructions directly to your lawyer for preparation, signature and registration. A lawyer is prohibited from acting for both the mortgage lender and the borrower in a conveyancing transaction unless the lawyer recommends in writing that each party obtain independent legal representation. Having one lawyer represent both the lender and the borrower for routine residential mortgage transactions is common practice in British Columbia, as it does reduce the legal costs. The alternative is to have a second lawyer act for the mortgage lender alone, which does involve additional legal costs to the purchaser.
The mortgage lender will also require your lawyer to obtain an “insurance binder” as confirmation that insurance coverage on your new home has been arranged, prior to the advance of the mortgage funds. Insurance coverage should be made effective from the earlier of the completion date and the date that risk passes to the purchaser. You should contact your lawyer or insurance broker if you have any questions about placing insurance coverage on your new home.
Your lawyer will also need personal information about you, including your full legal name, occupation, address, and whether or not you are eligible for an exemption from Property Transfer Tax.
II. PREPARATION OF THE DOCUMENTS
After your lawyer has gathered the necessary information, the next step is to prepare the documentation required to complete the conveyance of the property and, if applicable, the registration of the mortgage. InBritish Columbia, the standard form Contract of Purchase andSale(the “Contract”) stipulates that it is the purchaser’s responsibility to prepare all the documentation to complete the transaction. This means that your lawyer will prepare all the documentation required, at your expense.
For signature by the vendor, your lawyer will prepare a Form A Transfer (the “Transfer”), a Vendor’s Statement of Adjustments, documents concerning the applicability of GST to the particular sale and documents concerning the vendor’s residency. The Transfer, when registered in the LTO, transfers title in the property from vendor to purchaser. The Vendor’s Statement of Adjustments sets out all of the financial adjustments to be made between you and the vendor, and establishes the exact amount the vendor is entitled to receive from you to complete the transaction.
Next, your lawyer will prepare documents for your signature, including the Purchaser’s Statement of Adjustments, a Property Transfer Tax Return and, if required, a Form B Mortgage (the “Mortgage”).
The Purchaser’s Statement of Adjustments sets out the exact amount of money your lawyer will require from you to complete the transaction. Items adjusted on the Statement of Adjustments include the municipal property taxes, municipal utility levies and strata fees. The Purchaser’s Statement of Adjustments will also include other expenses associated with the purchase of a home, such as legal fees, the cost of a survey, and Property Transfer Tax.
Property Transfer Tax (“PTT”) is a provincial tax that applies to most transfers of real estate inBritish Columbia. Unless the transaction is exempt, tax is levied at 1% on the first $200,000.00 of the fair market value of the property, and 2% on the balance. The most common exemptions from PTT are for certain transfers for specified related individuals and for eligible “first-time home buyers”. You should contact your lawyer if you have questions about whether or not you are eligible for an exemption from PTT.
III. SIGNING THE DOCUMENTS
After the vendor’s documents have been prepared, your lawyer will send them to the vendor’s lawyer for signature by the vendor. It is at this time that undertakings are arranged between your lawyer and the vendor’s lawyer. Undertakings are relied upon by real estate lawyers to ensure that upon receipt of the net sale proceeds from your lawyer, the vendor’s lawyer undertakes (i.e., promises or guarantees) to immediately pay out any financial charges that are registered against the property.
Finally, your lawyer’s office will contact you to arrange a meeting so that you and your lawyer can review and sign the necessary documents. Prior to the completion date it will be necessary for you to bring to your lawyer’s office the funds required to add to the mortgage proceeds to complete the transaction. The Law Society of British Columbia requires that these funds be in the form of a certified cheque or a bank draft, made payable to your lawyer - in trust.
IV. REGISTRATION AND COMPLETION
On the completion date, as specified in the Contract, your lawyer will attend to the registration of the Transfer, the Mortgage, the Property Transfer Tax Return, as well as any other necessary documents in the LTO. The registration procedures followed by your lawyer on the completion day are designed to ensure that, at the end of the day, you will be the registered owner of the property, subject only to your lender's mortgage, those charges that are to remain on title, and any existing charges that are to be removed from title by the vendor’s lawyer subsequent to the completion date.
After receiving confirmation that the Transfer and Mortgage have been registered, your lawyer will advise the mortgage lender that it has a valid charge on the property and, at that time, the lender will advance the mortgage funds to your lawyer. Upon receipt of the mortgage proceeds, your lawyer will combine those funds with the amount brought in by you and send the total amount, less any monies payable to Realtors or other designated parties, to the vendor’s lawyer on their undertaking to remove those charges that are not to remain on title.
The final step of the transaction is complete when you take possession of the property. Actual possession of the property will be granted to you on the possession date, as specified in the Contract.
V. FINAL REPORTING
After the completion of the transaction your lawyer will report to you in writing. The only task then remaining for your lawyer is to obtain a State ofTitle Certificate(“STC”) for the property. The STC is ordered by your lawyers from the LTO immediately after the vendor’s lawyers have confirmed that the charges to be removed from title have, in fact, been removed from title. The STC is then issued by the LTO, showing you as the registered owner of the property, subject to your lender’s mortgage and any other charges that are to remain on title. Upon receipt of the STC your lawyer will forward a copy to your mortgage lender and a copy to you. Your lawyer will then close his or her file.
The foregoing is a guide to a typical residential conveyance. The information provided does not apply to every situation, and is not intended to be a substitute for specific legal advice from your lawyer.