Buying a house, especially in the picturesque province of British Columbia, is incredibly exciting. If you’ve finally found the home of your dreams, you know this. Maybe you’re already choosing your paint colours and planning your future garden. But before you get too far ahead of yourself, there are several tasks to be completed, and chief among them is drafting your Contract of Purchase and Sale.
What Is the Contract of Purchase and Sale?
The Contract of Purchase and Sale is a legally binding agreement between a buyer and a seller. It lays out the terms and conditions for the purchase of property and the rights and responsibilities of the parties involved. The Contract of Purchase and Sale is a requirement for any residential real estate transaction in B.C.
In this post, we highlight eight sections that should be included in a comprehensive, well-crafted Contract of Purchase and Sale.
1. The Parties
This section of a Contract of Purchase and Sale identifies the buyer(s) and seller(s), providing their legal names and contact information.
2. Property Description
This section provides the legal definition of the property as well as details about its location. This includes:
- Its exact street/municipal address
- Postal code
- Parcel identifier (PID), a 9-digit number that identifies each parcel of land within the land title registry in B.C.
3. Purchase Price and Deposit
The purchase price for the property (i.e., what the buyer is willing to pay for it) will depend on the home’s unique features, the state of the real estate market at the time of the transaction, and other factors. The price is negotiable, and the buyer and seller often make offers back and forth until they reach an agreement.
The deposit amount is typically a percentage of the purchase price. It is a show of good faith that the buyer will complete their purchase. The Contract of Purchase and Sale specifies when and to whom the deposit will be paid. The deposit amount varies but hovers around 5% in British Columbia.
4. Completion and Possession Dates
The completion date is when the sale is finalized, and legal ownership of the property officially transfers from the seller to the buyer. The buyer then assumes title to the property at the Land Title and Survey Authority of B.C. The possession date is when the buyer takes actual possession of the property; i.e., they are eligible to move in.
5. Terms and Conditions
The Contract of Purchase and Sale sets out the conditions that must be met for the sale to be finalized. The details of the conditions are not uniform; they always depend on the individual features of the house and the circumstances of the parties involved. However, some conditions are common to many contracts. These include:
Finance Approval
Used when the transaction is contingent on the buyer’s ability to obtain the money needed to complete the purchase, usually through a mortgage.
Home Inspection
The buyer often asks for a home inspection on the property to identify any potential issues and better understand the home’s condition. If they are not satisfied with the outcome of the inspection and it is a requirement for the purchase to proceed, they may be entitled to walk away from the deal.
Property Survey
The buyer might request a property survey, an official record that establishes the size and boundaries of the parcel of land.
If the conditions in the Contract of Purchase and Sale are not met, the buyer or seller may cancel the sale.
6. Inclusions and Exclusions
The inclusions and exclusions clauses specify those items that are or are not part of the sale of the house. Inclusions are part of the property and are therefore included in the sale price. Fixtures—i.e., items attached to the home—are inclusions. Examples of fixtures include:
- Doors
- HVAC system
- Built-in shelving
Exclusions, by contrast, are not included in the sale price. These are items that the seller intends to keep. Chattels—i.e., anything that can be moved without damaging the property—are considered exclusions. Examples of chattels include:
- Area rugs
- Light fixtures
- Curtains
Chattels are often negotiable between the buyer and seller.
7. Title
Title is the legal right to ownership of a property. In a standard Contract of Purchase and Sale, the seller transfers ownership of the property to the buyer. But before that happens, the buyer (via their lawyer) conducts a title search to confirm that the seller is legally allowed to sell the property. The title investigation ensures that the property has no unknown liens or encumbrances (legal rights or claims against the property) on the home.
8. Adjustment Date
The adjustment date is when the buyer becomes responsible for all taxes, utilities, rates, and assessments. It is typically the same as the possession date.
Next Steps in the Real Estate Process
Different types of residential real estate (e.g., cabins or condominiums) call for different contracts. The eight components listed above do not represent every possible section in a Contract of Purchase and Sale. There might be additional clauses concerning, for example, dispute resolution (e.g., mediation and arbitration), the option to terminate the contract, the offer’s expiry date, and agency disclosure (which outlines the relationship between the buyer and the realtor).
When drafting your Contract of Purchase and Sale, your terms and conditions should be totally clear. By avoiding vague and ambiguous wording, you’ll ensure that all parties understand their rights and responsibilities within the transaction. This, in turn, will mitigate the risk that costly and time-consuming legal problems will arise.
Once your Contract of Purchase and Sale has been negotiated and signed by all parties, further steps must be completed. The buyer must conduct their due diligence and pay their deposit, the parties’ lawyers have to handle paperwork, etc. But you may want to consider introducing yourself to the new neighbours because you’ll be that much closer to owning your dream home!
Contact CM Lawyers for Trusted Real Estate Services in Vernon & Salmon Arm
The knowledgeable real estate lawyers at CM Lawyers understand the intricacies of buying a new home. We carefully draft Contracts of Purchase and Sale, conduct due diligence, and ask the right questions to ensure your home purchase meets your needs and expectations. Whether you’re a first-time buyer or an experienced investor, we will help you navigate these critical aspects to make a confident and informed decision.
With convenient locations in Vernon and Salmon Arm, CM Lawyers proudly represents clients in real estate transactions throughout Northern Okanagan and Shuswap. To schedule a consultation, please contact us online or call us in Vernon at 250-308-0338 or Salmon Arm at 250-803-9171.