The Three P’s: Property, Parties, and Price
- Property: have you verified that the property you viewed matches what is in the contract? A buyer needs to be certain that property boundaries are clear, legal descriptions are accurate and that there are no hidden charges (registered or unregistered) that could impact their future use and enjoyment of the property (and their relationship with their new neighbors).
- Parties: Who is the actual Buyer and Seller? It is important to make sure that all potential issues when it comes to signing authority and mortgage requirements are understood at the time of signing so that complications do not cause a delay in the deal and a potential breach of contract!
- Price: How much is this really going to cost? If there are foreign sellers, the property has been used for commercial purposes or it is a recreational property, significant costs or holdbacks may impact the actual cash being transferred on closing day. Determine ahead of time if GST is payable, and by whom. Also, make sure that you are aware of all associated fees (for the realtor, lawyer, municipality, property transfer tax) and potential mortgage costs (CMHC, insurance) so that you aren’t scrambling to come up with additional cash on closing day (and have enough to pay off the old mortgage if you are the Seller);
These are set out in the contract for the buyer and seller to ensure that they can hold the property while they investigate or sort out certain details (property inspection, mortgage, purchase, or sale of another property). When the subjects are removed, the contract is binding and both parties must complete it according to the terms.
Time is of the Essence
A contract for the purchase and sale of the property must be in writing and must have the “Three P’s” clearly set out. It must also set out a date for adjustment for taxes and fees and a closing and possession date. These dates are important! If you are unable to sign sale documents before the closing date, or cannot come up with mortgage funds in time, the opposing party has the option to sue on the contract or renegotiate terms to their advantage. As such, it is important to ensure that you are available throughout the process and that you have allowed enough time to investigate and fulfill all “subjects” and that you have enough time after “subject removal” to ensure that your conveyancing (real estate) lawyer can complete all the legal requirements of both your mortgage lender and the Land Title Authority of British Columbia before the closing date.
- Property Disclosure Statement: A property disclosure statement (PDS) should be included in every real estate contract. However, this document does not safeguard from all risks. A PDS puts the burden on the Seller to provide information that is within their knowledge; however, a Buyer must take reasonable steps also to seek out information on the property, which may be done by a combination of a home inspection, personal inspection of the property, and additional inquiries with the relevant authorities (City, Regional District).
- Included Items: The general rule is that items affixed (attached) to the property cannot be taken by the Seller when they leave. In reality, what counts as “attached” is sometimes up for debate between parties. To be on the safe side, it is prudent to specifically outline both “Included” and “Excluded” items in the contract to avoid the potential for litigation and emotional distress following a real estate deal.
Contact a Lawyer
These are only a few of the things to consider when you contemplate signing an offer. A lawyer can review an offer before it becomes a contract in order to make sure your interests are protected. However, many individuals simply sign a purchase contract before they even think of contacting a lawyer to act for them in a real estate deal. Talk to your realtor about these aspects of your contract before signing and call a lawyer if you would like help in ensuring that your contract matches your expectations when purchasing or selling your property.