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Sale of a Property by a Non-Resident

IMPORTANT:  This is not tax advice. Talk to an accountant. Do not delay addressing this issue with an accountant as it will delay receipt of the proceeds of your sale.  This information is provided by me for information only so you can understand why there may be a hold back from the sale proceeds.   Canadians who purchase Taxable Canadian Property (TCP) from non-residents of Canada could be liable for taxes of up to 50% of the purchase price if the Purchaser and the Seller fail to comply with the reporting and withholding requirements governed by section 116 of the Income Tax Act (Act). This applies where the Seller of a property is Non-Resident of Canada.  Eg the seller lives in the USA and is selling their vacation home in Canmore.  The Seller is to pay the tax but the Purchaser is liable to the CRA if the Seller does not pay them. TCP defined TCP includes: Real property that is situated in Canada. The Canadian government has the right to tax a non-resident's sale of TCP. The tax is calculated on either capital gain or [...]

Closing Process for Buying a New Condo from a Builder

The process for taking possession and title for a new condominium differs from most home purchases.  The major difference is that the purchase funds cannot be released to the builder until the property title is transferred to the buyer's name.  This means that the closing cannot occur using the Western Conveyancing Protocol which is a time saving way to close real estate transactions that allows the seller to be paid before the title is registered in the buyer's name.  Title Insurance also cannot be used to expedite the closing. So what this means for you is that the timeline to close from the lawyer side of things is longer. As soon as you receive notice of your possession date, you must notify your lawyer and your mortgage lender.   You then must arrange a meeting with your lawyer as soon as possible to sign the paperwork that transfers the condo to you.  Your lawyer can then send the title to be registered at the Land Titles Office.  The timeline for registration can be 2 to 4 weeks depending on the volume of documents the Land Titles [...]

Mortgages 101

The Financial Consumer Agency of Canada provides a lot of useful information for new home buyers and mortgages.  You can visit their site here. Some of the topics they cover are: Down payment Find out how much money you need to put down to be able to get a mortgage. Home Buyers' Plan See how you could use RRSPs for the down payment. Mortgage payments: understanding interest versus principal Learn how your mortgage payments are applied to the loan. Choosing a mortgage type Learn about the differences between open and closed mortgages Choosing an amortization period See how this affects how much interest you pay. Choosing a mortgage term Look at your options before making your choice. Understanding fixed and variable interest rates Read about the differences and how the decision will affect your payments. Frequency of payments See how accelerated payment options can save you thousands of dollars. Mortgage default insurance Get the details and examples of how this works. Other insurance options Learn about other mortgage insurance you may be offered. Mortgage registration Find out about standard and collateral charges. Home equity lines of credit [...]

2 critical things to know if your mortgage is insured

What is Mortgage Loan Insurance? Mortgage loan insurance is an insurance policy that protects your mortgage lender in case you default on your mortgage. Mortgage loan insurance is usually required where your downpayment is less than 20% of your purchase price.  Mortgage loan insurance is offered by Canada Mortgage and Housing Corporation ("CMHC") and Genworth Financial Canada ("GE").  There are different types of insurance available and you must be approved for an insured mortgage (your lender arranges it). If you default on your mortgage, the mortgage loan insurance will kick in and pay the amount that you owe on your mortgage to your mortgage lender. How much is it and who pays for it? You pay the mortgage lender's insurance premium and this amount is usually added to the principal amount of your mortgage.  The insurance premium is based on a percentage of your home's purchase price. Mortgage Loan Insurance is not Mortgage Life or Critical Illness Insurance which is insurance that may pay out your mortgage when you die. 2 Critical Things to know if your Mortgage is Insured If you default on your mortgage, [...]

Title Insurance – Known Defects

Does title insurance provide coverage for known defects? For example, if you are aware of a encroachment (where a portion of a structure goes onto neighbouring property or violates the setback requirements of the municipal bylaw) will title insurance provide coverage if you are forced to remedy the encroachment? First Canadian Title insurance (the company I order title insurance policies from) deals with known defects on a case by case basis.  FCT underwriting will ask questions about the type of property, how long the encroachment has existed, whether anyone is aware of a complaint with respect to the encroachment and so on. Most times FCT is able to provide full coverage over encroachments for a mortgage lender lender. FCT is also able to usually provide enforced removal, limited marketability coverage for a homeowner as well. This means that the homeowner would be fully covered by FCT if during their period of ownership they are forced to remove the encroachment. In addition, FCT would agree to provide that same coverage to subsequent purchasers for a new premium with the limitation that coverage would not be provided in the event a prospective purchaser raises [...]

Things to Know regarding Landscaping of your New Home

When you are buying a new home from a Builder, you may be required to complete the final grade or landscaping.  Here is an explanation of some terms that you should know. Rough Grade Approval:  Usually this is applied for by your Builder once backfilling of the foundation walls and shaping of the lot is completed according to the Surface Drainage Plan.  The lot is surveyed by a land surveyor, architect, or professional engineer who prepares a Plan of Certification of As-Build Grades/Lot Grading Certificate.  It is submitted to the City and the City will conduct a lot grading inspection.  If the lot is graded properly, the City will issue a Rough Grade Approval.  You cannot start your landscaping or install things like a shed until the Rough Grade Approval is obtained. Final Grade Approval:  The Final Grade Approval is usually applied for after the Rough Grade Approval.  Sometimes the Builder provides the Final Grade Approval, but most times it is the Buyers responsibility. The application for Final Grade Approval is made once the lot is graded to where the final product needs to be placed.  The City [...]

Should I use the same Lawyer as my Builder?

A commonly asked question I get is, My Builder has agreed to pay my legal costs for the purchase of my new home if I use their Lawyer to complete the transaction.  I want to save money, but I’ve heard it might not be a good idea to use the same Lawyer because it is a conflict of interest.  What does this mean and what should I do? What is a Conflict of Interest?  Although the purchase of your new home might appear to be one transaction it is actually two transactions – the sale of the home to you by your Builder and your purchase of the home from your Builder.  A Lawyer who represents both of you has 2 separate clients – you and the Builder and each of you has separate interests.  This difference in interest is referred to by Lawyers as a “Conflict of Interest”. The reference to “Conflict” doesn’t mean “Dispute”.  It means a situation where the parties have different interests but there is no actual dispute between them. Can a Lawyer act for the Buyer and the Builder? A Lawyer can [...]

Examples of Mortgage Fraud

Incidents of real estate title and mortgage fraud are very real in Canada and cost property owners and mortgage lenders millions if not billions annually.  Even though you are buying a new home from a builder, you may still be at risk of real estate title or mortgage fraud. Mortgage Fraud is any scheme designed to get mortgage financing under false pretences. It can be a simple act of falsifying information on a loan application or more complicated schemes among several parties to obtain financing on a property that exceeds the market value of the home. Once you become the owner of your new home or lot, you may be at risk of Real Estate Title Fraud.  Real Estate Title Fraud usually involves the use of stolen identify or forged documents to transfer the property owner’s title to the fraudster.  The fraudster then obtains a mortgage on the property, keeps the mortgage funds, and the property owner is left to pay. Fraud schemes come in many creative forms and new schemes are constantly being discovered.  Often these frauds are committed by organized groups, but sometimes an [...]

Title Insurance – Claim Examples

Claim Examples Last Updated January 07, 2016 I strongly recommend title insurance to all my clients who are purchasing a home.  Almost every real estate transaction I do now is title insured. You should know that -  Lawyers are responsible for ensuring the property is transferred to you without any financial encumbrances registered on title (liens, caveats, mortgages that you are not responsible for) but there are things that we don't typically check for - like building and development permits for work inside the property including renovations, lot grading, work orders or stop orders. Here are is an example of what title insurance has covered: Regarding Gap Coverage - Intervening Registration/Financial Interest on Title  - Example provided by First Canadian Title Insurance In Lewis and Dayo v. FCT,  a home owner sued the title insurance company for coverage when a mortgage was registered on their property title just before closing. The lender policy was purchased for $179 but the homeowner declined the $50 homeowner policy. Shortly after closing, a claim was made to FCT regarding a gap registration issue in the amount of $21,000, which had priority to the transfer and mortgage. What [...]

What you need to know about Real Property Reports (RPR)

What is a Real Property Report? A real property report (RPR) is a document that illustrates the location of visible improvements (for example, a house, garage, shed, deck, or fence) located on a property relative to the property boundaries.  Click here to see what a Real Property Report looks like. A Real Property Report includes the following: The legal description of the property; Dimensions and directions of all property boundaries; Designation of adjacent properties, roads, lanes; Location and description of all relevant improvements situated on the property including dimensions and distances from the property boundaries; Right-of-way or easements as noted on the title to the property at the date of the survey; Location and dimension of any visible encroachments onto, or off of the property; and A certificate and opinion by an Alberta Land Surveyor. Because it includes a statement detailing the surveyor’s opinions or concerns, the RPR is often relied on by the buyer, seller, lender, and the municipality as an accurate representation of the improvements located on the property. If you are a Seller, you need a Real Property Report because: It may protect [...]

Alberta New Home Buyer’s Protection – What is covered?

As of February 1, 2014 every new home in Alberta must have warranty coverage. As well, every new home must be registered in the Home Buyer Protection Public Registry. The Registry provides information about the home, the name and contact information for the builder and warranty provided. Minimum coverage required The minimum required warranty coverage terms are: One year labour and materials for finishes throughout the home; Two years for defects in labour and material related to heating, plumbing, and electrical systems; 10 years for major structural. Major structural includes the foundation and framing and parts of an underground parking structure.  The frame includes the roof’s structural integrity; and Five years on building envelope, with a requirement for the warranty provider to offer the option to purchase additional years of coverage.  The building envelope is the exterior shell of the home including the roof and the walls. Be sure to read your warranty policy carefully in order to find out what is covered, including any conditions, exclusions, expiry dates, or claim reporting cut-offs that you need to be aware of. There are currently 7 warranty providers in Alberta [...]

Important to know if you are Buying a Condo

If you are buying a condo in Edmonton, it is important that you make your offer to purchase the condo subject to review of the condominium documents.  These documents will include the bylaws of the condo corporation, financial statements and budgets, reserve fund studies, meeting minutes, and an information statement.  In these documents you may find information related to the condition of the building, any lawsuits by or against the condo corporation, and current or potential special assessments, and any special restrictions such as age or pet restrictions.  There are companies that will review these documents for you. Not only should you be satisfied with the condominium documents but your mortgage lender should too. Disclose any issues to your mortgage lender It is necessary that you disclose any issues with the condo building to your mortgage lender even if you feel that they are minor issues or they do not affect you as part of your mortgage application/approval process. For example, anything related to the building structure (even if you think it is not relevant to you), any lawsuits against the corporation, and even special assessments that you [...]

Costs Involved in Buying a New Home from a Builder

If it is your first time buying a home, you may not know that there are other costs involved in purchasing a home besides the total purchase price.  In order to be properly prepared,  you should understand what is included in the total purchase price shown on your Purchase Agreement and what other costs you will be responsible for. The Purchase Price is the agreed upon price of your new home set out in your Purchase Agreement.  This is the base Purchase Price.  Here is a list of some additional costs you may be required to pay when you are buying a newly constructed home: Goods and Services Tax (G.S.T.) is payable on the construction or purchase of a newly constructed home.  You may be able recover some of the GST paid for the new home through the federal government’s G.S.T. New Housing Rebate. Usually, the total Purchase Price indicated on your Purchase Agreement will include the net G.S.T – that is, your base purchase price, plus the full G.S.T. payable, less an amount equivalent to any applicable G.S.T. rebate.  However, your Purchase Agreement may say you have [...]

Should a Buyer accept Title Insurance in lieu of an RPR?

B Before reading this article you may want to read: "What is Title Insurance?" "What is a Real Property Report?"   Most Real Estate Purchase and Sale Agreements contain a clause requiring the Seller to provide the Buyer with a current Real Property Report marked with compliance by the municipality (for houses or bare land condominiums only). Sometimes, the Seller does not have a current Real Property Report with compliance.  In that case, the Seller may offer to purchase a Title Insurance Policy for the Buyer in lieu of providing the Buyer with a Real Property Report with compliance.  The Seller may do this because: it is less expensive to pay for the buyer's title insurance instead of a new RPR with compliance; or the seller is a aware of an issue that may be revealed on the RPR and therefore don't want to provide one (this may prevent title insurance coverage); or there is not enough time to have a Real Property Report with compliance prepared prior to the Closing Date. Should a Buyer accept Title Insurance instead of a Real Property Report with Compliance? [...]

Buying a New Home from A Builder – Possession

One of the first questions to your Builder is usually – When do I get to move in? What is the Possession Date?  Simply put, the Possession Date is the day the Seller (the Builder) is paid and the keys to your new home are released to you. Depending on your purchase contract with your Builder, the Possession Date will be a fixed date that you know when you sign your purchase contract or, as is most often the case; your Builder will give you about 30-45 days written notice of the Possession Date. Can your Possession Date change?  Your Possession Date could change even if your purchase contract refers to a fixed Possession Date and even after you have received written notification of the Possession Date.  There are usually clauses in the purchase contract that will allow your Builder to change the Possession Date in the event of circumstances that are beyond the Builder’s control such as weather and the availability of building materials.  I have seen instances where the Possession Date remains as scheduled, where is delayed for several months, and where the Possession Date [...]

For Sale by Owner Tips

Are you selling or buying your house without a Real Estate Agent? Here are some tips to consider when completing the purchase and sale contract. Although the benefits of using a real estate agent to help with your property sale are many, you may have decided to sell your property on your own.  This means you will have to complete a purchase and sale contract. Here are some things to consider. The following is not a substitute for legal advice and is being provided as general information only.  An agreement to sell a house/condo has to be in writing.  This means that you need to have a written contract between you and the buyer that sets out the terms of the sale like the name of the buyer, the property address, the sale price, and the possession day. Everything you agree to has to be in in writing. So if there is anything that you agreed to that is not included in the contract, then it is not enforceable.   For example, if you agree to repair a toilet then you must include this as a [...]

What is a Bareland Condo?

How can you determine if the condo is conventional or bare land? You need to review the Condominium Plan. What is a bare land condominium? In a bare land condominium project, units are created from the land.  An owner owns everything that is built on the unit including all parts of the building, decks, patios, driveways, etc. The condominium plan registered at the Land Titles Office looks very similar to an ordinary single family subdivision plan but is registered as a Bare Land condominium plan under the Condominium Property Act.   There are no buildings shown on a bare land condominium plan. Most resale condominium purchase contract will state that if the Property is a condominium unit that creates a lot (bare land condominium), as part of the normal closing documents, the Seller will provide the Buyer a real property report. For example, this Plan is for a certain condo-town home complex. Notice how the plan shows the units which were created look like lots rather than buildings. This would be a bare land condo and you would need a real property report. What is a conventional condo? [...]

What is a Bridge Loan or Interim Financing

Bridge /Interim Financing is a loan made to facilitate the purchase of your home prior to the sale of your existing home where you plan on using the sale proceeds from your existing home to complete the purchase of your new home. For example, the possession date for your new home is July 10 and the sale of your existing home does not close until July 15.  Your new home needs to be paid for on July 10 but the funds from the sale of your existing home won't be available until July 15.  So, your lender may give you a 5 day loan so that you can pay for your new house on July 10.  The loan will be paid out on July 15 when you receive the sale proceeds from the sale of your existing home. If you are selling and buying a property and your purchase transaction closes before your sale you will need a Bridge Loan or Interim Financing.  If Possession Date is the same date for both transactions, I would also recommend a Bridge Loan or Interim Financing. It is possible your sale may [...]

What is Title Insurance

Title Insurance is an insurance policy that protects a residential or commercial property owner and their lenders against losses related to the property's title. For a one time fee, title insurance may provide protection from such losses as: Unknown title defects (title issues that prevent you from having clear ownership of the property); Existing liens against the property's title (e.g. the previous owner has unpaid debts from utilities, mortgages, property taxes, or condominium charges against the property); Encroachment issues (e.g. a structure on your property  needs to be removed because it is on your neighbour's property); Title fraud; Errors in surveys and public records; Other title-related issues that can affect your ability to sell, mortgage, or lease your property in the future. Your title insurance policy may protect you as long as you own your property, and may cover losses up to the maximum coverage set out in the policy.  It may also cover some legal expenses related to restoring your property's title. It is important to read the policy and ask questions to be aware of the coverage that is provided. You also need to be aware of [...]

What you need to know about Real Property Reports (RPR)

A Real Property Report (RPR) is a document that illustrates the location of visible improvements (for example, a house, garage, shed, deck, or fence) located on a property relative to the property boundaries. RPRs are not prepared for condominium units. An RPR includes the following: The legal description of the property; Dimensions and directions of all property boundaries; Designation of adjacent properties, roads, lanes; Location and description of all relevant improvements situated on the property including dimensions and distances from the property boundaries; Right-of-way or easements as noted on the title to the property at the date of the survey; Location and dimension of any visible encroachments onto, or off of the property; and A certificate and opinion by an Alberta Land Surveyor. Because an RPR includes a statement detailing the surveyor's opinions or concerns, the RPR is often relied on by the buyer, seller, lender, and the municipality as an accurate representation of the improvements located on the property. If you are a Seller, you need an RPR because: It may protect you from potential future legal liabilities resulting from problems related to property boundaries [...]