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Understand the Paperwork When Buying a Home

Learn more about your rights and obligations under a standard purchase contract. 

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Buying a home can be stressful. And the amount of paperwork involved can be overwhelming. But it’s important to understand what you’re committing to when you sign legal documents. This can ensure you’ll meet strict deadlines, avoid surprises, and can enforce your legal rights. Here are some documents you'll come across at different stages of the home buying process.

Making an offer

Understand what you’re signing up for

If you find a home you want to buy, the next step is to make a written offer to the seller. In BC, this is typically done using a standard contract of purchase and sale. 

The purchase contract sets out the rights and obligations of both the buyer and the seller. It says who must do what, and by when. Before you sign the offer, read the contract carefully. It may lead to a legally binding contract if the seller accepts your offer. Legally binding means you and the seller must each perform your obligations under the contract (or run the risk of being taken to court).

Learn more about your rights and obligations under a standard purchase contract

If you’re about to make an offer on a home, take a look at our online checklist for new home buyers. It alerts you to some important things you should know before signing the contract of purchase and sale. And it only takes five minutes!

What the seller says

The standard contract says that the seller isn’t making any promises other than what’s written in the contract. This means you generally can’t rely on anything that’s said about the property if it’s not written in the contract. 

Satisfying the conditions of sale

What's involved?

You can attach conditions to your offer. This buys you time to decide whether you want to go through with the sale. If you can’t satisfy the conditions, you can walk away. Here are three documents you may come across during this period.

1. Property condition disclosure statement

The property condition disclosure statement provides information that’s of interest to potential buyers. It’s usually referred to as a PDS. 

Sellers aren’t legally required to complete a PDS. But it’s become standard practice in BC. If your realtor doesn’t mention it, ask them to request one. The seller should include key information about the property that a potential buyer would want to know. For example, is the property connected to a municipal sewer or on a septic system?

Under the law, a seller must tell a buyer about any material latent defects they’re aware of. Sellers usually do this by filling out a PDS. A material latent defect is a problem that can’t be detected by a reasonable inspection of the property. Common examples include: 

  • a history of flooding or insect infestation
  • structural damage to the property
  • underground storage tanks are located on the property
  • problems with the drinking water 

Take what the seller says in the PDS with a grain of salt. As long as a seller is honest, the law doesn’t require that what they’re telling you in the PDS is correct. If you want to know something about the state of the property, look into it independently. 

As well, you cannot rely on anything the seller or their realtor orally says.

Consider incorporating the statements made in the PDS into the purchase contract. That way, the seller is bound by anything they say in the PDS. 

Say a seller honestly believes there’s no termite problem, and they say so in the PDS. After the sale completes, you discover that there actually was an existing termite problem.

Normally, the seller’s honest disclosure would get them off the hook. But, if the PDS formed part of the contract, you could sue for damages. Ask your realtor or lawyer about wording you can use to incorporate the PDS into the contract.

2. Home inspection report

Most buyers get a home inspection before committing to the purchase. Having an expert check the home is the best way to get an honest and informed opinion about its condition. An inspector will visually examine the property and provide you with a home inspection report. They check a building’s systems and structural components such as electrical, plumbing, structure, insulation and ventilation.

Take the time to read the report carefully. Expect a lot of detail — the reports are designed to be comprehensive. All homes have problems, even relatively new ones. Some problems are significant, and others are no big deal. When reading the report, focus on the problems that would make the home unlivable, or would be expensive to repair. 

Make time to attend the inspection with the inspector, so you can hear everything first-hand and ask questions. There’s no substitute for seeing the issues for yourself.

A home inspection can’t guarantee that you’ll uncover every problem. The report must list areas that were not covered by the inspection. For example, an inspector can’t comment on spaces that aren’t reasonably accessible or visible. This means they might not be able to tell you if there’s a defect behind walls, underneath floors, or in an attic. They’re also not required to inspect any evidence of water penetration, condensation and mould.

3. Title search

Having “title” to land simply means that you will be legally recognized as owning it. The Land Title Office keeps an official record of who owns which land in BC. It also keeps a record of any encumbrances that might be registered against the property. These are charges that may restrict how the property can be used, or reduce its value, such as mortgages or easements.

A title search shows who the owner of the home is, and any related encumbrances. Any existing financial charges (such as a mortgage) must be removed by the seller as part of the sale.

Before you commit to buying a home, you should satisfy yourself that you’ll be able to use the property as you intend. This includes finding out about any restrictions on its use. A title search may reveal non-financial charges against the property that restrict how the land can be used. For example, you might not be allowed to build multi-unit dwellings on the land. Under the standard contract, a seller isn’t required to remove these kinds of charges from the property. The restrictions come with the property. 

It’s common for the buyer’s realtor to obtain a title search during the subject removal period. If anything unusual comes up, your realtor should tell you to talk to a lawyer. Once the deal is firm, your lawyer or notary will also do a title search.

Closing the deal

What's involved?

The final document signing usually takes place at the office of your lawyer or notary. This happens on, or a few days before, the “completion date.” Here are six common documents your lawyer or notary might get you to review or sign. 

1. Transfer ownership with a “Form A Transfer”

When someone sells their home in BC, they have to fill out a document called a Form A Transfer. This is filed with the Land Title Office. Then the official record is updated to reflect that you’re the new owner of the property. 

This form is typically prepared by the buyer’s lawyer or notary, but it’s signed by the seller. As the buyer, you should check that:

  • Your name is spelled correctly. The form should show your full legal name. Ask your lawyer or notary what to do if this name differs from the name that appears on your purchase contract. 
  • The form correctly indicates the way you want to hold the land (in joint tenancy or tenancy-in-common). If you’re unsure, ask your lawyer or notary to explain the difference to you.
  • Your address is correct. If you’re moving into your new home, use your new address. This is how you’ll receive important mail related to the property, such as property tax assessments.

2. File taxes with a property transfer tax return

When you buy property, you’re responsible for filing a property transfer tax return with the Land Title Office. You’ll also have to pay any related property transfer taxes. If you don’t do this on time, the Land Title Office may refuse to register you as the new owner of the property.

Typically, the buyer’s lawyer or notary completes the return. They’ll ask you to sign it. They should also tell you how much tax you need to pay. Generally, you give this amount to your lawyer or notary, and they’ll pay it to the Land Title Office on your behalf.

There are some exemptions. Your lawyer or notary can help you figure out whether you need to pay property transfer tax.

3. Calculate how much you owe with a “statement of adjustments”

A statement of adjustments is a document that lays out the financial obligations of the buyer and seller. 

The final line on your statement of adjustment tells you how much you must pay to complete the transaction. The calculation starts with a debit for the purchase price. Adjustments are then made to increase or reduce the amount you still owe (to the seller or to others).

A “debit” is something you must pay for when you close. Debits increase the total amount of money you must pay. Typical debit adjustments include the following:

  • Property transfer tax, goods and services tax (GST) if it applies, lawyer or notary fees.
  • Property taxes. A seller might have already paid an annual bill for property taxes. Some of those taxes might relate to a time when you will own and use the land. The adjustment recognizes that you must pay the seller back for that amount of property tax.
  • Strata fees. Similarly, a seller might have prepaid monthly strata fees for the month you’re moving in. 
  • Title insurance. This insurance protects your lender from problems related to the property’s title. You can also purchase your own title insurance at the same time.

A “credit” is money you’ve already paid to the seller (for example, a deposit), or you’ve paid or will pay to a third party on behalf of the seller. A credit reduces the amount of money you must pay on closing. Some typical credit adjustments include the following:

  • The deposit. This is a credit because you've already paid this amount of the purchase price to the seller.
  • Any amounts you borrowed that your lender will pay on your behalf. The mortgage reduces the amount of the purchase price that you have to pay out of your own pocket.
  • Property taxes, strata fees, or utility expenses. You might receive the bill for expenses that relate to a time when the seller owned the home. Adjustments should be made for these. 

Your lawyer or notary should alert you to any upcoming property tax bills. Make sure to budget for the payment.

4. Secure financing with a “mortgage loan agreement”

If you’re borrowing money to buy your home, you should have already met with your lender (or a mortgage broker) to negotiate the terms of your mortgage. At closing, you’ll need to sign the mortgage loan agreement. This is the agreement between you and your lender that sets out the terms and conditions of the mortgage. 

Your lawyer or notary should clearly explain the terms of the mortgage to you. Make sure you understand the fees, type of loan, interest rate, payment amount and schedule. Are they what you were expecting? Make note of when your first mortgage payment is due. 

Learn more about getting a mortgage.

Getting mortgage pre-approval doesn’t guarantee you’ll get the loan. A mortgage loan agreement locks your lender into the arrangement. 

5. Authorize the payment of money with a “direction to pay”

A direction to pay contains your instructions for what to do with the mortgage money. Your lawyer or notary will prepare this document for you, but you’ll be asked to sign off on it. You may instruct:

  • your lender to pay the mortgage amount to your lawyer or notary
  • your lawyer or notary to allocate the mortgage money to different parties (for example, to the seller, to taxing authorities, or to pay legal fees)

6. Register the mortgage with a “Form B Mortgage”

Under the law in BC, a mortgage gives the lender a “charge” — meaning an interest or a right — against the property. That charge gives the lender rights if you default on the mortgage. For example, if a borrower doesn’t make their payments on time, the lender can sell the property to pay the debt. 

Form B Mortgage is a document that’s filed with the Land Title Office. It tells the Land Title Office about the lender’s rights against your property. The form also provides key details about the mortgage, such as its amount, amount, the interest rate and the loan period. You’ll be asked to sign this form.

You’ll also be asked to sign a document acknowledging you received copies of:

  • the Form B Mortgage, and
  • the standard mortgage terms.

Understand the Paperwork When Selling Your Home

Learn about some legal documents you might come across at different stages when selling your home.

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Selling a home is a huge financial decision. What you do, or don’t, agree to now can impact your legal and financial obligations, even long after the sale’s complete. So it’s important to understand what you’re committing to. Here are some legal documents you might come across at different stages when selling your home.

Accepting an offer 

The contract of purchase and sale

If you’re happy with an offer that a buyer makes on your home, you can accept it. In BC, an offer is typically made using a standard contract of purchase and sale. This is the key legal document in the sale of a home. It’s important that you understand your rights and obligations as a seller. You can do this by reading our explanation of the standard contract of purchase and sale

Once you accept an offer, the contract becomes legally binding. This means you can’t get out of your obligations without facing significant legal consequences.

Giving buyers key information about the property

1. Disclose key information in the property condition disclosure statement

The property condition disclosure statement provides information that’s of interest to buyers. For example, is the property connected to a sewer or septic system? You might hear this document referred to as a PDS. As a seller, you’re not legally required to complete a PDS. But it’s become standard practice in BC so most buyers will expect one.

Under the law, you must also tell potential buyers about any material latent defects you’re aware of. Sellers usually do this by filling out a PDS. A material latent defect is a problem that can’t be detected by a reasonable inspection of the property. This might include a history of flooding, structural damage to the property, or any work done without permits. 

As long as you’re honest about what you know, the law doesn’t require that what you say in the PDS be factually accurate. This provides you with some protection from claims if a buyer discovers problems with the property after the sale. But the protection doesn’t apply if you lied to the buyer, or misled them about the condition of the property. You also may not be protected if you should have known about the defect.

A buyer may ask if they can incorporate the PDS into the contract. If this happens, ask your realtor or lawyer to explain how this affects you. It may mean that you’ll have to pay damages if anything you say in the PDS isn’t true, even if you made an honest mistake.

2. You can make representations in the sale contract

The standard contract says that the seller isn’t making any representations or promises other than what’s written in the contract. This means that a buyer generally can’t rely on anything you or your realtor honestly say (orally) about the property. 

However, whatever you write in the contract about the state of the building or property (such as the state of the roof or electrical wiring) will bind you. Even after the sale is complete. 

If the buyer insists that you write any representations or warranties into the contract, ask yourself: Do I know this to be true with 100% certainty? If not, it may not be worth the risk.

Closing the deal

What's involved?

The final document review and signing usually takes place at the office of your lawyer or notary. This happens on, or a few days before, the “completion date.” Here are four common documents your lawyer or notary might get you to review or sign. 

1. Transfer ownership with a “Form A Transfer”

When someone sells their home in BC, they must fill out a document called a “Form A Transfer.” The form is prepared by the buyer’s lawyer or notary, but it’s signed by you as the seller. 

Once you sign the form, it must be sent back to the buyer’s lawyer for filing with the Land Title Office. The official record of ownership will be updated to reflect that someone else now owns the property.

2. Understand how much money you’ll receive with a “statement of adjustments”

A statement of adjustments is a document that lays out the financial obligations of the buyer and seller in a real estate transaction. Your statement of adjustment will be prepared by the buyer’s lawyer or notary.

The final line on the seller’s statement of adjustment tells you how much money you can expect to receive from the buyer on completion. The calculation starts with a credit for the purchase price. Adjustments are then made to increase or reduce the amount you’ll receive from the buyer. 

A “credit” is money you receive at closing. Typical credits include the following:

  • The purchase price (including funds obtained by the buyer through a mortgage).
  • Property taxes. Say you’ve already paid a bill for property taxes. A portion of that bill might relate to a time when the buyer will own and use the land. The adjustment recognizes that the buyer should pay you back for that amount of property tax.
  • Strata fees. Similarly, you might have prepaid monthly strata fees for the month that the buyer is moving in. 

A “debit” is something you must pay for at closing.Typical debit adjustments include the following:

  • Real estate commission to be paid to your realtor, and the buyer’s realtor.
  • Lawyer or notary fees.
  • Property taxes or other expenses that relate to a time when you owned the house, but which the buyer will be responsible for paying later. This usually happens when the sale occurs earlier in a billing period.
  • Any adjustments you agreed to make to the purchase price. For example, you might have agreed to compensate the seller for damage discovered during the home inspection.

3. Remove your old mortgage and other financial charges

Buyers want to know they’re getting a home that’s not burdened by other people’s debts. The standard contract requires you to remove financial charges such as mortgages and liens from the property. This is called “delivering clear title.” 

For example, some documents involved in removing a mortgage include the following:

  • A letter to your lender: Usually prepared by your lawyer or notary, this letter asks the lender for a payout statement. 
  • The payout statement: Tells you how much money you must pay the lender to “discharge” (get rid of) the mortgage. Once your lawyer or notary receives the proceeds from the sale of your home, they’ll pay the lender this amount. 

Your lawyer or notary will also make arrangements with your lender to remove the mortgage charge against title. Title is a record of property ownership. This is done by registering a “discharge” of the mortgage with the Land Title Office.

4. Tell your lawyer what to do with the sale proceeds with a “direction to pay”

If a lawyer or notary is helping you with the sale, they’ll ask you to sign an “irrevocable direction to pay.” This document tells them what to do with the sales proceeds. You’re authorizing them to pay part of the sales proceeds to people other than you.

The direction to pay shows how much money is coming in and going out. The main chunk of money coming in is the purchase price for the home.

Outgoing charges include money you need to pay to remove financial charges against the property. If you had a mortgage, this includes what you owe on the mortgage, plus any prepayment penalties.

Realtors' commissions and legal fees might also be included in the direction to pay. Compare the direction to pay with the statement of adjustments to make sure you’re not being “double charged” for anything. If you have any questions about the numbers, ask your lawyer or notary.

Understand the Contract of Purchase and Sale

Learn nine things you should know about the standard purchase contract. 

“The seller’s realtor told us the roof was in great shape. It started leaking a week after we moved in, and we had to borrow $20,000 to get it replaced. There was nothing in the purchase contract about the state of the roof, so we couldn’t get the seller to cover this expense.”

– Jose, Squamish

When someone wants to buy a home, they must make a written offer to the seller. In BC, this is often done with a standard contract of purchase and sale. Here are nine things you should know about the standard purchase contract. 

1. When the standard purchase contract is used

The standard purchase contract is published jointly by the Canadian Bar Association BC and the BC Real Estate Association. It’s used for most residential sales in BC.

If you’re not using the standard purchase contract, or if you’re making changes to it, the information below may not apply. A different contract may be used if someone:

  • Buys a home before it’s built. You’ll be asked to enter a pre-sale contract. These are written by the developer’s lawyers and strongly favour the developer. 
  • Builds a new house. The builder will ask you to sign a construction contract. This is a standard contract developed by the Home Builders’ Association of BC.  

Before you sign any contract to buy, sell, or build a home, it’s a good idea to get a lawyer to review it. Or, you can make your offer on the condition that your lawyer approves the contract.

2. The contract sets out your rights and obligations

The purchase contract is the key document when buying or selling a home in BC. It sets out the rights and obligations of both the buyer and the seller. It says who must do what, and by when. 

The basic promises made in the contract are as follows:

  • the seller promises to transfer ownership of the home to the buyer
  • in exchange, the buyer promises to pay the purchase price to the seller

Each party promises now to do these things at a date in the future (called the “completion date”). The parties agree to certain terms and conditions that are attached to these promises.

3. When you become locked into the contract

“We made an offer on a condo, and put down $50,000 for the deposit. Shortly after, Elise got a job in Australia. The career opportunity was too good to pass up. But it was bad timing because the market had crashed since we’d made the offer. Our lawyer told us if we pulled out of the deal, the seller would keep our deposit, and could sue us for their loss. This was because if the seller put their home on the market now, they’d probably get $80,000 less than what we’d promised to pay. We decided to complete the purchase, and find a place to rent in Australia.”
– Georgia, Surrey

In BC, the buyer’s realtor typically fills out a standard purchase contract, inserting the terms on which the buyer is prepared to buy the home. The seller can choose to accept or reject the buyer’s offer. They can also propose a change to the terms of the offer (called a counteroffer), such as asking for a higher sale price.

When a seller accepts an offer, they agree to sell the home to the buyer on the terms of that offer.

The purchase contract is legally binding as soon as an offer or counteroffer is accepted in writing. This means that the buyer and seller must each now perform their obligations under the contract (or face legal consequences).

A buyer can include subject clauses in their offer. With these, a buyer is saying “I promise to buy the home, if I can satisfy certain questions I have about the sale, by a certain date.” The buyer can walk away from the deal if they can’t satisfy the subject clauses. 

You can learn more about offers, counteroffers and when a contract becomes legally binding on our information on buying a home. See the section “What you should know.”

4. Key dates in the process

Once an offer is made, the legal process follows a general timeline. In their offer, a buyer must propose the dates on which they want certain steps in the process to take place. 

  • Date and time the offer expires. When a buyer makes an offer, they put a time limit on the offer. Usually it’s a day or two. If the seller doesn’t accept or make a counteroffer in time, the offer expires. Both parties can walk away.
  • Subject removal date. If the buyer includes subject clauses in their offer, they propose a date by which they’ll satisfy their inquiries. By this date, they must tell the seller whether they want to go ahead with the sale. This is typically a week or so. But it depends on the complexity of the issues the buyer is trying to resolve. 
    If the buyer doesn’t confirm whether they want to proceed by the subject removal date, the contract ends. This means that neither party is required to go ahead with the deal.
  • Completion date. This is sometimes referred to as the “closing date.” It’s when ownership of the home is legally transferred to the buyer. The buyer also pays the balance of the purchase price of the seller on this date. This date is usually 30 to 90 days from the acceptance of the offer, but may vary depending on the needs of the seller or the buyer.  
  • Possession date. This is the date the buyer can take “physical possession” of the property. It’s usually one or two days after closing. Practically speaking, it’s when the buyer receives the keys and can move in. If it’s a rental property, the possession date is when the new landlord (the buyer) takes charge of the building.

Take the deadlines seriously

In a standard purchase contract, the parties agree that “time is of the essence.” This means each party must meet strict deadlines — or face the legal consequences. If you do miss a deadline, the other party may choose to overlook it. But don’t count on it. 

For example, if you’re the buyer and you don’t pay what you owe by the completion date, the seller might cancel the contract and keep your deposit. They can also sue you for any losses they experience as a result of your failure to complete.

5. How the property is described

At the top of the standard purchase contract, the property is described by:

  1. The street address.
  2. A legal description of the property, from the Land Title Office records. 
  3. Property identifier (or PID). This number is used by the Land Title Office to uniquely identify a ‘parcel’ of land.

You’ll be more familiar with street addresses, but it’s not the only thing to pay attention to. Your lawyer or notary should check that all descriptions refer to the property you think you are buying or selling.

6. The risk of damage passes from the seller to the buyer

There’s always a risk that fire, flood, vandals or disgruntled tenants cause damage to the property once the contract is signed. In the standard purchase contract, the seller is responsible for damage or loss to the property, up to (but not including) the completion date. After that time, the risk passes to the buyer. 

A buyer should purchase “all risk” home insurance that covers them for property damage starting at 12:01am on the completion date. 

7. What the seller promises to give the buyer

“We thought we’d found the perfect spot on the Sunshine Coast. We’d hoped to build our retirement home, alongside a separate cottage for when our kids and grandkids came to visit. We made an offer to buy the land, but it turned out there were some restrictions on how we could use it. Our lawyer said there were limitations on putting up secondary buildings, as well as restrictions on boat parking. These restrictions came with the land — we couldn’t remove them. It wasn’t meant to be.”
– Adrian, Vancouver

In a standard purchase contract, a seller promises to deliver to the buyer title “free and clear” of all encumbrances, except those agreed upon in the contract. The seller is locked into this promise once they accept an offer or counteroffer.

Let’s unpack some of these legal concepts:

  • Delivering title. The seller transfers ownership of the property to the buyer. They do this by registering the transaction with the Land Title Office on the completion date.

Having “title” to land means you legally own it. In BC, the Land Title Office keeps an official record of who owns what land. 

  • Free and clear of encumbrances. An encumbrance represents the right of someone other than the property owner to use the property, or to claim a debt against it. It typically reduces the value of the property or restricts its use. 

    Most buyers assume they’re buying the property with no restrictions attached. But under the standard contract, the seller promises to deliver clear title subject to some exceptions

    Generally, the seller doesn’t have to remove non-financial encumbrances. For example, there may be a restrictive covenant on the title. This prevents something from being done to or with the property. The covenant could, for instance, prevent multi-unit dwellings, or even dictate what the fence must be made of. The standard purchase contract wouldn’t require the seller to remove this type of charge. 

If you’re a buyer, make sure to ask your notary or lawyer to check the title for any charges that the seller isn’t required to remove. If any restrictions are found, ask yourself whether it’s still a good purchase for you. Make your offer subject to searching title for any encumbrance that might affect the property's use or value.

What the seller says about the property

The standard purchase contract says that the seller isn’t making any representations, guarantees or promises other than what’s written in the contract. This means a buyer generally can’t rely on anything the seller (or their realtor) says about the property if it’s not written in the contract. Unless they’re deliberately misleading you, oral comments by the seller won’t be binding on them.

8. What’s included in the sale

A fixture is anything that’s attached to the home such that removing it would cause damage or require repair. The bathroom sink is an obvious example. When someone sells a home, all the fixtures go along with it. On the other hand, anything you can move without causing damage to the property is called a chattel. Appliances such as the washer, dryer, fridge and stove are chattels.

It’s not always clear what’s included in the sale. A buyer should specifically write in their offer anything they want included in the sale. A seller should specifically exclude from the sale anything they want to take with them.

9. What the buyer promises to give the seller

The buyer’s basic promise is to pay the seller the purchase price for the home by the completion date.

The deposit is an amount of money the buyer gives to the seller to secure the sale. It’s usually paid when an offer is accepted or when subjects are removed. The buyer pays the balance of the purchase price on the completion date. If the buyer is borrowing money, some of this money will come from their lender.

If the buyer doesn’t complete the sale, the seller can:

  • Cancel the agreement and keep the deposit. The seller may be able to claim additional damages.
  • Continue with the sale. If a buyer tries to back out of a binding contract, the seller could sue them for specific performance of the contract. This is where a court forces a party (in this case, the buyer) to go through with the sale. The seller could also sue the buyer for damages arising from the failure to complete the sale.

 

If you’re about to make an offer on a home, take a look at our online checklist for new home buyers. It alerts you to some important things you should know before signing the contract of purchase and sale. And it only takes five minutes!

 

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