THE FIRST TIME HOME BUYER
This edition of the Landry McGillivray “ADVISOR” is
intended to help you, the first-time home buyer, understand what
will occur during a new home purchase and hopefully also help the
transaction close as smoothly as possible. It is intended as general
information only. A lawyer should be consulted by every home buyer
prior to making a purchase.
AGREEMENT OF PURCHASE AND SALE
In the majority of cases, your lawyer will not see the Agreement
of Purchase and Sale until after it has been signed by you and the
Vendor (Seller). This Agreement is normally in standard form and
drafted by the real estate agent. This Agreement forms the basis
upon which you agree to purchase the property. You should not hesitate
to make an appointment to go over the terms of the Agreement or
any aspect of it which may be unclear to you. In fact, it is recommended
that you consult your lawyer prior to signing the Agreement of Purchase
and Sale. Landry McGillivray offers a free initial consultation
to review agreements of Purchase and Sale.
It is essential that you adhere to the terms of the Agreement,
and all time limits specified in it. Should you anticipate any difficulties
with these deadlines, advise your lawyer immediately. It is most
important that you advise your lawyer when your financing has been
confirmed or declined within any relevant time limits.
TITLE
Your lawyer will ensure that you acquire clear title to your new
property and that there are no liens or encumbrances. Under the
new Nova Scotia Land Registration Act, the government guarantees
ownership of each parcel of land that is registered under the new
system. Each property in the province has to be converted or “migrated”
to the new land registration system before it can be sold. This
process and it’s costs is normally the responsibility of the
Vendor.
Should any difficulties arise with respect to title or migration
of the property, your lawyer will advise you. Should such a problem
not be rectified, the agreement may be null and void and your lawyer
will arrange for your deposit to be returned to you.
The Parcel Register for your property will disclose any registered
building restrictions or easements over the property and your lawyer
will bring these to your attention.
The land registration system guarantees that you have a good and
marketable title to your new property, but does not guarantee that
the dwelling is within the boundaries of the lot nor the quality
of construction. Lawyers do not certify that the building is suitable
for the uses you intend, however, if you request it, your lawyer
will check the applicable zoning for the area.
THE SURVEY
The title search does not determine that the house, driveway, garage,
etc. are located on your lot. A survey or location certificate is
required to confirm that these things are within your lot boundaries.
If you are obtaining a mortgage, your lender will require a copy
of the location certificate before advancing funds to you.
Often, the previous owner will have a location certificate which
will satisfy the requirements of the mortgage company. It is important
to note that if the survey certificate is not prepared for you,
then there is no contract between you and the surveyor. Should the
survey prove to be incorrect, you may have no recourse against the
surveyor who prepared it.
MUNICIPAL TAXES AND LIENS
Provincial legislation gives municipalities in Nova Scotia lien
rights against properties for outstanding taxes or betterment charges.
Betterment charges arise from certain improvements such as sidewalk
construction. If there are unpaid taxes or betterment charges, the
municipality has the right to sell the property to recover the taxes
or charges owed by the landowner. Your lawyer will order a tax certificate
from the appropriate municipality to determine whether there are
any outstanding taxes or betterments.
On closing, the current year’s taxes will be apportioned between
the purchaser and vendor. If the vendor has paid the full year’s
taxes applicable to the period following closing. Your lawyer will
prepare these adjustments for you and review them with you prior
to closing.
NEW HOME CONSTRUCTION
If the house purchased is newly constructed or has yet to be built,
many special considerations apply including H.S.T., lot approval,
permits, water and sewage approvals, rebates, warranties and Builders’
Lien Act holdbacks among others. If you are thinking about building
or buying a new home, consult your lawyer very early in the process.
MORTGAGE
Most purchasers require mortgage financing. This is the purchaser’s
responsibility to arrange. Once your mortgage application has been
approved by the mortgage company, it will forward the necessary
documents and instructions to your lawyer in order that it may be
prepared prior to closing. Your lawyer will review the terms of
the mortgage with you at the closing and will arrange to have the
mortgage funds advanced to the law firm on the date of closing,
and then disburse funds on your behalf.
FIRE INSURANCE
As purchaser, you must ensure that the property is adequately protected
against fire and other perils. You should have the insurance in
place effective the day of closing.
If you are obtaining a mortgage, you must obtain insurance coverage
at least equal to the amount of the mortgage company’s requirements
and the mortgage company must be named under the loss payable clause
in the insurance contract.
Your lawyer will need written proof of home insurance before the
closing can take place. It is your responsibility to provide this
well before closing.
UTILITIES
You should contact the appropriate authorities to ensure that the
power, phone and water remain connected and are changed over into
your name. You do not want to move in without the benefit of water
or lights in the home.
JOINT TENANCY AND TENANCY IN COMMON
The purchaser has a choice as to the manner in which title to the
property is taken. The most common means of taking title for married
couples is as “Joint Tenants”. As Joint Tenants, should
one spouse die, the title to the property passes to the survivor
immediately upon death, without estate complications.
The title to the property may, if you wish, be taken as “Tenants
in Common,” whereby each person may deal by will with his
or her one-half share as he or she wishes. Should one owner die,
the property does not pass automatically to the other. Instead it
is dealt with under the directions of the deceased’s estate.
For tax, credit or other reasons, some purchasers take title in
the name of one individual only. Many business and professional
people choose this option so that the property is not at risk of
being attached by judgments arising out of business failure. Your
lawyer will discuss this with you prior to the closing if you wish.
THE CLOSING
The closing takes place on the date set out in the Agreement of
Purchase and Sale unless changed by agreement between the parties.
You should arrange through your real estate agent to inspect the
property the day before closing and advise your lawyer of any problems.
On or before the day of closing, it will be necessary for you to
meet at your lawyer’s office to sign the mortgage documents,
and to review the adjustments. The Vendor will be responsible for
providing the keys and Deed to the property. This transfer of funds,
Deed and keys will be done between the two law firms involved.
After the Deed is received and recorded at the appropriate Land
Registration Office, it will be forwarded to you along with a final
report. You should receive this approximately three months after
the closing. All necessary documentation will also be forwarded
to your mortgage company.
FEES AND DISBURSEMENTS
Shortly before closing, your lawyer will advise you as to the exact
amount of money required from you to complete the transaction. Your
lawyer will require the closing funds in the form of certified cheque
or bank draft made payable to the law firm in trust. In addition
to the purchase price, there will be other expenses associated with
your purchase, including the following:
1. Municipal deed transfer tax - the amount varies, depending upon
the Municipality in which the property is located. In Halifax, the
rate is 1.5% of the Purchase Price.
2. Location Certificate - if necessary.
3. Oil adjustment (if oil heated) - for a full tank of oil.
4. Recording fees - The normal transaction will require the recording of two (2) documents, a Warranty Deed and a Mortgage.
5. Legal fees as agreed with your lawyer.
6. Municipal tax adjustments - depends on the amount of municipal
taxes, the portion of which is prepaid and the time of year of the
closing.
7. HST - on legal services and disbursements.
8. Law firm disbursements and charges for photocopies, administration
fee, courier, etc.
We trust the foregoing will assist first-time home buyers and help
make their purchase an enjoyable experience.
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