What are standard conditions that a Purchaser of residential real estate may want in a contract for the purchase of a home?

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Purchasing a home in British Columbia is an exciting and significant milestone. However, the process can be intricate, and it is crucial for Purchasers to include specific standard conditions in their purchase contracts to protect their interests and ensure a smooth transaction. The following are examples of conditions:

  1. Buyer Financing: Including a financing clause in the contract allows the Purchaser to withdraw if they are unable to obtain satisfactory mortgage financing within a specified timeframe. This condition is essential as it ensures that the Purchaser is not obligated to proceed with the purchase of the home if their financing falls through.
  2. Property Inspection: Conducting a thorough inspection of the property is crucial to identify any potential issues or defects. It may be desirable to include a broad inspection clause, which allows for inspections at the Purchaser’s discretion. This will allow for a home inspection and can include a subsurface oil tank inspection if necessary.
  3. Insurance: Including an insurance clause is essential to protecting the Purchaser’s interests. This clause allows the Purchaser to exit the contract if they are unable to obtain satisfactory property, fire, and liability insurance.
  4. Review of Title: This condition allows the Purchaser to perform a review of land title to address the potential encumbrances on the land. These could include covenants, liens, easements, and statutory building schemes. A thorough review of the title is essential to ensure that the property meets the Purchaser’s needs.
  5. Strata Documents: In the case that the property being purchased is part of a strata, the Purchaser can include a clause requesting to see the strata bylaws and rules, as well as the minutes from prior annual general meetings and a depreciation report.
  6. Property Disclosure Statement: A property disclosure statement can provide the Purchaser with valuable insight into the property. The statement may disclose defects such as insect infestation, asbestos insulation or moisture problems. It is often desirable for the Purchaser to request a copy of a property disclosure statement.
  7. Clarifying Fixtures vs. Chattels: The law surrounding what constitutes a fixture and what constitutes a chattel is complex. It is prudent for the Purchaser to specify what is included in the offer price in the purchase contract. This may be a hot tub or a large mirror fixed to the wall.
  8. Lawyer’s Approval: Where a Purchaser has reservations about the form of the contract, the Purchaser could insist on a condition that the contract be subject to their lawyer’s approval within a specific period of time.

 Remember however that the above list is just a few examples of standard conditions often included in a real estate contract. These are not guaranteed to be present, nor are they the only clauses that may be desirable for your specific home purchase. To make sure you’re not missing out on—or trapped by—a clause that could cost you thousands, contact Heath Law and speak to an experienced real estate lawyer today!

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Why should I meet with a lawyer before signing a residential real estate contract?

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Signing a residential real estate contract is a significant part of buying or selling a property, as it governs the legal obligations of the Buyer and Seller. Consulting a lawyer before signing a real estate contract is recommended for the following reasons:

  1. Legally Binding Document: A lawyer will review the contract with you to ensure that you understand that you are entering into a legally binding financial obligation.
  2. Understanding Complex Terminology: A lawyer can simplify complex legal jargon, ensuring you fully comprehend the contract’s terms and the implications they have for you.
  3. Inserting Conditions: If you are a Purchaser, a lawyer can assist you in determining what conditions or “subject to” provisions need to be inserted. Example conditions include financing, inspection, or the sale of your own home.
  4. Understanding your Risks: If you are a Seller, the lawyer can explain under what circumstances a Buyer can terminate their obligations under the contract.
  5. Reviewing Title and Identifying Problems: If you are a Buyer, the lawyer can assist you with understanding what encumbrances or charges will remain on the title after your purchase and whether these affect the marketability of the property.
  6. Understanding the Location: Many Buyers may be new to the area and a lawyer could advise on the neighbourhood and what future development may take place in adjoining properties.
  7. Peace of Mind: Finally, our lawyers provide peace of mind by protecting your interests and ensuring the contract is fair and enforceable.

All too often, people underestimate the complexity of real estate contracts and leave themselves at risk. Heath Law has experienced lawyers that can help you avoid the pitfalls of a shady real estate deal or incorrectly filed documentation. Contact us today for any real estate purchases you’re considering.

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What are standard conditions that a Purchaser of residential real estate may want in a contract for the purchase of a home?

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Update and reminder! URGENT: B.C. LAND OWNER TRANSPARENCY REGISTER (“LOTR”)

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URGENT: B.C. LAND OWNER TRANSPARENCY REGISTER (“LOTR”)

We write to advise that effective November 30, 2021, the B.C. Government requires that
any Corporation, Trust or Partnership that owns an interest in real estate must file a
Land Owner Transparency Report with the Land Owner Transparency Registry.
Failure to file may result in government-imposed penalties.

What is the Land Owner Transparency Registry?

The Land Owner Transparency Registry is a publicly searchable registry of information about
beneficial ownership of land in British Columbia. Beneficial land owners are people who own or
control land indirectly, such as through a corporation, partnership, or trust.

The Registry is intended to end hidden ownership of land and combat money laundering in B.C.
The B.C. provincial government created the LOTR to identify the individuals that actually own
real estate in the province.

Does the Land Owner Transparency Registry apply to you?

With few exceptions, all corporations, partnerships, and trusts that own real estate in British
Columbia must register. Trusts include formal trusts, bare trusts, and prescribed trusts.

What do you need to do?

If you own an interest in land in a corporation, partnership, or trust, you must prepare and
register a Transparency Report with the LOTR by November 30, 2022. An interest in land
includes a fee simple interest, life estate, or long-term lease.

Only a Legal Professional can register the Report.

The Transparency Report contains information about:

1. The corporation, partnership, or trust that owns real estate (“Reporting Bodies”);
and,

2. The individuals who are beneficial owners of the corporation, partnership, or
trust, as well as settlors of trusts (“Interest Holders”).

The Transparency Report discloses information about Interest Holders, including:

1. Name
2. Citizenship
3. Social Insurance Number (or Individual Tax Number)
4. Date of Birth,
5. Residency for Tax Purposes, and
6. Address

Only some of this information will be publicly searchable, and certain Interest Holders are
eligible to restrict what is available to the public. Government agencies will have access to all
information. All Interest Holders must be advised that their personal information was included
in a Transparency Report and a special letter giving notice under the legislation must be
provided to the Interest Holder.

The Transparency Report must be uploaded to the LOTR Registry online.

The report must also be updated when the information concerning the Interest Holder changes, for
example, a change in residential address, name, or ceasing to be an interest holder.
Specific reporting requirements apply for each type of corporation, partnership, trust, and
Interest Holder.
A failure to prepare and upload a Transparency Report may result in the government pursuing
administrative penalties of up to $50,000 or 5% of the assessed value of the real estate.

What can Heath Law LLP do to help?

We have a team of lawyers and staff well versed in preparing Transparency Reports and
compliance under this new LOTR legislation.

Please advise our office by November 1, 2022, if you own real estate in a corporation, trust or
partnership, and if you would like our assistance in preparing and filing a Land Owner
Transparency Report.

Yours truly,
HEATH LAW LLP

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Relief from Forfeiture under a Commercial Lease

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Relief from forfeiture is an extraordinary equitable remedy that the courts can apply at their discretion, which allows them to forgive imperfect compliance with a contractual or statutory requirement. In choosing to apply relief from forfeiture, the court is deciding to protect a party against a loss that would otherwise occur from that party’s breach on the basis that not to do so would be unequitable.

In a recent case, Airside Event Spaces Inc. v Langley, 2021 BCCA 306, the courts have reiterated that an applicant must act in good faith in order for relief from forfeiture to be appropriate, regardless of the disproportionality between the loss suffered on forfeiture and the loss suffered by the other party due to the breach of contract.

In this case, the company was leasing a hangar at the Langley Regional Airport from the city of Langley, which the city had terminated because the company breached the lease contract. The company admitted that it had breached the lease in numerous ways, and to having failed to remedy the breaches when Langley gave it the chance. Still, the company claimed that the loss that they would suffer compared to the loss that Langley had suffered through their breaches was so disproportionate that the court should use their power to apply relief from forfeiture. The company had paid $440,000 for the premises in 2013, and claimed to have invested in excess of $1.5 million in improvements over the years that it had leased the space. The B.C Supreme Court Judge found that since the company had misled Langley, attempted to conceal breaches of the lease, altered the premises contrary to the lease and without the lessor’s consent, and performed all manner of other misconduct that the company had not remotely acted in good faith. As such, the Judge dismissed the application and refused to apply relief from forfeiture.

On appeal, the Court confirmed that Judge had correctly considered the evidence in this case, and did not commit an error by finding that the consequences of the forfeiture, although significant, did not justify relief from forfeiture due to the company’s clear bad faith.

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B.C Land Owner Transparency Register

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URGENT: B.C. LAND OWNER TRANSPARENCY REGISTER (“LOTR”)

We write to advise that effective November 30, 2021, the B.C. Government requires that
any Corporation, Trust or Partnership that owns an interest in real estate must file a
Land Owner Transparency Report with the Land Owner Transparency Registry.
Failure to file may result in government-imposed penalties.

What is the Land Owner Transparency Registry?

The Land Owner Transparency Registry is a publicly searchable registry of information about
beneficial ownership of land in British Columbia. Beneficial land owners are people who own or
control land indirectly, such as through a corporation, partnership or trust.

The Registry is intended to end hidden ownership of land and combat money laundering in B.C.
The B.C. provincial government created the LOTR to identify the individuals that actually own
real estate in the province.

Does the Land Owner Transparency Registry apply to you?

With few exceptions, all corporations, partnerships and trusts that own real estate in British
Columbia must register. Trusts include formal trusts, bare trusts, and prescribed trusts.

What do you need to do?

If you own an interest in land in a corporation, partnership or trust, you must prepare and
register a Transparency Report with the LOTR by November 30, 2021. An interest in land
includes a fee simple interest, life estate, or long-term lease.

The Transparency Report contains information about:

1. The corporation, partnership or trust that owns real estate (“Reporting Bodies”);
and,

2. The individuals who are beneficial owners of the corporation, partnership or
trust, as well as settlors of trusts (“Interest Holders”).

HEATH LAW LLP

The Transparency Report discloses information about Interest Holders, including:

1. Name
2. Citizenship
3. Social Insurance Number (or Individual Tax Number)
4. Date of Birth,
5. Residency for Tax Purposes, and
6. Address

Only some of this information will be publicly searchable, and certain Interest Holders are
eligible to restrict what is available to the public. Government agencies will have access to all
information. All Interest Holders must be advised that their personal information was included
in a Transparency Report and a special letter giving notice under the legislation must be
provided to the Interest Holder.

The Transparency Report must be uploaded to the LOTR Registry online.
The report must also be updated when the information concerning the Interest Holder changes, for
example, a change in residential address, name, or ceasing to be an interest holder.
Specific reporting requirements apply for each type of corporation, partnership, trust, and
Interest Holder.

A failure to prepare and upload a Transparency Report may result in the government pursuing
administrative penalties of up to $50,000 or 5% of the assessed value of the real estate.

What Heath Law LLP can do to help?

We have a team of lawyers and staff well versed in preparing Transparency Reports and
compliance under this new LOTR legislation.

Please advise our office by November 1, 2021, if you own real estate in a corporation, trust or
partnership, and if you would like our assistance in preparing and filing a Land Owner
Transparency Report.

Yours truly,
HEATH LAW LLP

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What are a Spouse’s Rights upon Foreclosure?

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When a home falls into foreclosure the property is sold to satisfy the owner’s creditors. The sale proceeds first go to the mortgagee, and then to other creditors in order of priority. Priority is generally determined based on various factors such as the type of creditor and the date of registration of the debt. In general, a judgment creditor cannot claim an interest in property beyond that held by the judgment debtor. The Court Order Enforcement Act (CEA) confirms this common law principle, and clarifies in s. 86(3)(a) that a judgment creditor’s interest is subject to any equitable interests that may have existed prior to the registration of the judgment.

In a recent decision, Chichak v Chichak, 2021 BCCA 286 the court had to determine priority between a judgment creditor with a registered judgment, and the unregistered equitable interest of a spouse.

In this case, Mr. Chichak was the sole registered owner of the property subject to a mortgage. Ms. Chichak had transferred her interest in title to him several years earlier. In 2014, Cardero Capital and First West Credit Union both obtained judgments against Mr. Chichak and registered them against the title of the property. The property was foreclosed and sold in 2016, and $312,830.83 of the sale proceeds remained after satisfying the debts owed to the highest ranking creditors. Cardero and First West applied to the courts for access to the remaining proceeds. At the same time, Ms. Chichak applied to have a 50% equitable interest in the property declared in her favour and argued that this interest should outrank the judgment creditors in priority. The chambers judge found in favour of Cardero and First West by applying the statutory presumption of indefeasibility (meaning the only valid interests in reference to the land are those that are registered against the title) and by looking at case law where transfers of title between family members had been considered gifts which extinguished the equitable interests of the giftor.

On appeal, the Court ruled that the chambers judge had mistakenly applied the principal of indefeasibility, stating that while a genuine purchaser for value would take priority over an unregistered equitable interest, a judgment creditor is not a genuine purchaser and therefore does not have the same priority. To allow the judgment creditors to take priority over the equitable interest would be to grant an interest in the property beyond what was held by the debtor, which would be contrary to the CEA. The Court allowed the appeal and sent the case back to the Supreme Court of B.C for redetermination.

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What Happens if the City/Municipality Decides to Expropriate Land?

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Local governments, such as the City of Nanaimo, are empowered by section 31 of the Community Charter to expropriate land. Section 289 of the Local Government Act gives the same power to regional districts. Expropriation is the taking of land without the owner’s consent and is an exceptional power which isn’t often exercised. The Expropriation Act must be adhered to by the local government and covers procedural requirements to be taken, as well as compensation for the land itself and disturbance caused to the landowner. Local governments can expropriate in order to provide services for the benefit of all or part of the community or in order to provide any services which are considered necessary or desirable.

In 2011 Nanaimo City Council adopted bylaw no. 7130 to expropriate land along Bowen Road. The purpose was to improve the public road and to carry out the replacement of the Quarterway Bridge. The city was unable to acquire the land through negotiation, although negotiation is the preferred option. Local governments secure certainty of costs if able to negotiate a set purchase price, while under expropriation, expenses and damages to be paid to the landowner are much less certain. Local governments are statutorily obligated to pay the market value of the property plus reasonable damages for the disturbance caused by the expropriation – amounts that are challenging to predict.

After a decision to expropriate, the local government will need to physically inspect the land, as certain issues can affect the value of the property. Under section 6 of the Expropriation Act, notice of intent to expropriate the land must be given to the owner, as well as posted on the land itself. Section 32 of the Community Charter provides authority for a local government to enter and inspect the land. Section 290 of the Local Government Act provides the same power for a regional district to enter and inspect, as does section 9 of the Expropriation Act. Consent of the owner is not necessary, but the local government is responsible for paying any compensation related to loss or damage caused by entrance and/or inspection. In compliance with the Expropriation Act, the local government will conduct an appraisal of the market value of the land which would have been obtained had the owner sold under normal circumstances. Reasonable compensation to be paid to the owner must also be calculated, covering factors such as moving expenses, legal expenses, and potentially increased mortgage rates for the owner’s subsequent property purchase.

 

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Is a Strata Corporation Able to Disallow Residents Under a Certain Age?

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Strata corporations (“stratas”) are legal entities with all the powers of natural persons at full capacity. They’re often created to divide buildings and/or parcels of land into individually owned pieces, while the common land and amenities are owned together. Stratas have certain responsibilities under the Strata Property Act and Regulations, including being responsible for common expenses and disclosing Rules and Bylaws which apply to occupiers. Stratas also have the power to provide Bylaws for the management and use of the lots, including prohibiting occupants under certain ages.

Age is not a protected ground of discrimination under the Human Rights Code in the context of property purchases, but race and gender, among other factors, are included. Stratas have the power to disallow would-be owners who are not of a certain age. The Human Rights Code gives broader protection covering age-based discrimination to tenants, as opposed to owners. Stratas may only require that tenants be at least 55 years of age. They cannot require, for example, that tenants be at least 19 years of age, but the strata could require that owners be at least 19 years of age. Individuals who resided within the strata before the time that an age restriction bylaw was passed are considered ‘grandfathered’ in and may continue residing despite the new provision.

Age-based requirements can occasionally make it challenging for young families to find housing for purchase, but the Condominium Homeowners Association of BC reported that buildings with 19-plus age restrictions represented only a small portion of the overall market. Affordable and accessible housing is a developing area and age-based provisions may undergo further legislative reform in the future.

 

 

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Selling or Buying a House with an Unsavoury History

This blog will discuss the disclosure that is required in a real estate transaction when a home has a stigmatized history.

The case which highlights this issue is Wang v. Shao, 2018 BCSC 377.

The facts of this case were as follows:

  • The case surrounded the purchase of an upscale home in Vancouver in 2009 (the “Shaughnessy Home”)
  • The seller of the Shaughnessy Home was Ms. Wang (the “Seller”) who was an immigrant from China
    • The Seller lived with her daughter, Ms. Yuan, Ms. Yuan’s husband Raymond Huang and their children
  • In 2007, Raymond Huang was shot to death on the sidewalk in front of the property
    • It was believed that this was a gang affiliated attack
  • As a result of the murder, the children were asked to leave the private school they were attending and started attending a private school in West Vancouver
  • Yuan then purchased a house in West Vancouver
  • The Seller meanwhile had gone back to China and Ms. Yuan moved to West Vancouver, meaning the Shaughnessy Home was empty and as a result, put on the market
  • When the Shaughnessy Home was put on the market, Ms. Yuan asked the realtor whether it was necessary to disclose the murder to prospective purchasers and the realtor said that unless a prospective purchaser specifically inquired about a death, there was no need to disclose
  • The eventual purchaser was a Ms. Shao (the “Buyer”) who received this answer when asking why the seller was selling:
    • the reason for selling was that the daughter had moved to a school in West Vancouver where she would have a better chance to practice her English
  • Eventually, a contract of purchase and sale dated September 3, 2009 was signed specifying a price of $6,138,000 and a closing date in November, 2009
  • On September 30, 2009, the Buyer learned through a friend that “a death had occurred” at the front entrance of the property. The Buyer then conducted a Google search and discovered that an alleged gangster had been shot fatally near the front entrance of the Shaughnessy Home
  • The Buyer informed the Seller that she would not be not be completing the transaction due to a breach of the Contract of Purchase and Sale
    • The breach being that the Seller expressly stated that there were no latent defects on the property that render the property dangerous or potentially dangerous to the occupants
  • The Seller then initiated a claim against the Buyer for breach of contract and the Buyer filed a counterclaim for fraudulent misrepresentation

There were two issues that the court had to decide on:

  • whether there was a latent defect on the property; and
  • whether there was a fraudulent misrepresentation

On the first issue, the court determined that there was not a latent defect on the property relying chiefly on the caveat emptor doctrine which basically means buyer beware.   The court reasoned that subjective concerns of this kind were not amenable to measurement on an objective standard and would impose an impossible standard of disclosure in circumstances such as this.  The court also said that latent defects dealt with defects or imperfections in respect of the property itself or any measurable condition or quality of the property and that the murder did not affect the property itself.

On the second issue, the court determined that the incomplete representation was a misrepresentation upon which the Buyer relied to her detriment. The court accepted the Buyer’s evidence that she would not have agreed to purchase the property had she known that a reputed gang leader had been murdered at the property’s front gate. The fraudulent misrepresentation vitiated the contract for purchase and sale and the Seller’s action was dismissed.

However, there was an appeal, Wang v Shao, 2019 BCCA 130.

The latent defect issue was not appealed and the fraudulent misrepresentation was overturned.

The court reasoned that If the law were now to be modified to require that upon being asked a general question like the one asked in this case, vendors must disclose all of their personal reasons and explain the causes for those reasons, even when they bear no relationship to the objective value or usefulness of the property, the door would be open to a huge number of claims. Buyers, perhaps unhappy with their purchases, could claim that information was ‘concealed’ or that a misrepresentation by omission had occurred — despite the fact the undisclosed information is, on an objective view, completely irrelevant to the value and desirability of the property.

In conclusion, latent defects are only those defects that affect the actual property and are not discoverable through reasonable inspection and if you have any particular concerns about the property you should ask outright.

It should also be noted that leave to appeal has been filed in the Supreme Court of Canada.

 

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Easements

Do Good Easements Make Good Neighbours?

In Mending Wall, the American poet Robert Frost famously asked: Do good fences make good neighbours? In the poem, two neighbours are walking in tandem on either side of their fence, laboriously re-stacking fallen stones. The narrator questions this customary practice because their lands respectively contain apple and pine tree orchards. In response, the neighbour reiterates the adage: good fences make good neighbours. Here, Frost hints at the complexity of property rights. But, let’s suppose the fence was intruding two meters into the narrator’s property. What then?

Often, properties are subject to easements which—broadly stated—grant the right of use, enjoyment, and/or access to others. There are two general categories of easements: public and private. First, public authorities can acquire by expropriation an easement-like right of access for the maintenance of public services and utilities, what is known as a statutory right of way. Once established, these rights-of-way may limit where you can build permanent structures on your property (e.g. a patio, pool, carport, etc.).  For example, Frost’s narrator may have powerlines over a portion of his property; this could restrict the size of his orchard to ensure the utility company’s access.

Second, easements may be granted privately between property owners. These agreements run with the land, insofar as the right-of-access (or otherwise) is registered against the granting land (the servient tenement). Consequently, the easement will persist even when the initial property owners have sold their lands. The benefiting lands (the dominate tenement) carries the right for each subsequent owner’s or inhabitant’s enjoyment. For example, the narrator’s neighbour may be so content with fence mending because he inherited lands that benefit from an easement; whereas the narrator questions the custom because he has inherited lands that grant this benefit.

There are three elements required for an easement to be valid. First, there must be servient and dominate tenements. Private easements cannot exist in gross (“thin air”). These lands need not be contiguous, but they must be close enough to allow the one to benefit the other. Second, because easements impose a burden on the servient tenement, courts will not enforce one unless it improves the dominate land somehow. Third, an easement must be capable of forming the content of a grant. In other words, easements may only concern property rights, such as access to or use of lands. It cannot grant the right to a spectacular view, for instance. Nor can an easement impose a positive obligation on the servient tenement-holder. In Frost’s Mending Wall these three elements appear to be satisfied. Does that mean the narrator’s neighbour can fence the easement lands? Maybe.

Easements grant a property right, not a type of ownership. As such, they never grant the benefiting landowner exclusive possession of the subject lands. Where sufficient access remains for the servient tenement-holder, a dominant tenement-holder may fence easement property—provided it contributes to the easement’s purpose. In Beyer v. Clarke, for example, the B.C. Supreme Court permitted such a fence because it improved the land’s safety for the dominant-tenement holder and their dog. The easement at issue granted a general right of use and enjoyment. To that end, the dominant tenement-holder constructed an ornate garden. Because the fence contained a gate which allowed garden access to the servient tenement-holder and because the fence contributed to the easement’s general purpose, the court refused to order its removal. From this precedent, the narrator’s neighbour may fence the easement lands, provided it contains a gate and contributes to the easement’s purpose.

How do easements end? First, the tenement-holders may agree to remove the easement from the land titles registry. Second, the benefitting landowner may abandon the easement. This requires more than mere disuse. Rather, it requires an action which clearly demonstrates their intention to abandon the right. They may, for example, fence over their access route. And lastly, the easement’s purpose may be rendered obsolete.  An easement allowing for septic truck access, for instance, may become obsolete when a city installs sewage lines.

As Robert Frost’s Mending Wall suggests, property law is complex. Maintaining good relations with your neighbour often requires more than a fence. If your property is subject to an easement and you are hoping to make changes, call our office for more information about your rights and your property’s restrictions.

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