I am a first time house buyer. What do I need to know before I sign an offer to purchase?
It is important to appreciate that an offer to purchase is a contract. Once you have signed it you will be bound by the terms. It is a good idea to consult a lawyer before you sign the contract and not after.
You should be sure to obtain as much information about the property you want to buy before you sign any offers to purchase. You should be sure to get the following information:
- check the amount of the yearly property taxes and if there are any tax arrears;
- check any restrictions on the title to the property;
- consider having a building inspector look over the property for structural problems and prepare a written report for you;
- check with your banker and make sure that you will be eligible for the amount of mortgage financing you will need.
Can I put conditions on the offer to purchase?
Yes, you may make your offer to purchase conditional on many things. Some of the most common conditions are
- obtaining a favourable building inspection report;
- obtaining suitable financing from your bank;
- obtaining your lawyer's approval of the terms in the offer; and
- selling your present home if you have one.
Do I need a lawyer to help me buy a home?
It would be an excellent idea. Particularly if you have never purchased property before, there are many things that need to be looked at. For example, your lawyer will order a copy of the title to the property and check it for restrictions on the title, such as easements, restrictive covenants, and encumbrances such as mortgages, builder's liens, and other items. Any one of these things on the title to your property could have very serious consequences for your future use and enjoyment of the property. Without expert guidance, you could find yourself in serious difficulty down the road.
What is an easement, a restrictive covenant, and an encumbrance?
An easement is the right or privilege given to someone (or a corporation) to a limited use of lands that belong to someone else. A very common example of an easement is the right of way for water, sanitary, and storm sewer lines.
A restrictive covenant is a contract which gives one owner of land the right to restrict another owner of land from using his or her land in a certain way that might be detrimental to the saleable value of the first owner. Restrictive covenants are always negative; that is, they are meant to prevent something from happening. For example, a land developer will often file a restrictive covenant on a parcel of land being developed for single family homes stating that the land must be used for private residential purposes only and no attached or semi-detached homes, duplexes, apartments, or any house designed for more than one family can be built on the lands.
An encumbrance is a general term meaning some sort of charge upon the land and may include restrictive covenants and easements as well as many other items.
Because there are so many things like these that may appear on the title to the property you wish to buy, you really should use a lawyer to help you.
How much will a lawyer cost me to help me buy a house?
The cost will vary from lawyer to lawyer and you should obtain several quotes. It will also depend on the value of the property you are buying and any special circumstances that might require additional time and attention. Note that the Professional Code of Conduct for the legal profession stipulates that within a reasonable time of beginning representation of a client, a lawyer must provide in writing as much information about fees and disbursements (out of pocket expenses) as is reasonable and practical in the circumstances, including the basis on which fees will be determined.
There are some costs involved in purchasing a house over and above lawyer fees (usually called disbursements). For example, the Real Property Report and a Compliance Certificate will usually exceed the lawyers fees and it is important to obtain an estimate of these costs in order to budget.
What other costs are associated with buying a house?
You should expect the following expenses on top of your legal fees:
- the cost of a building inspector's report if you hire one
- an adjustment for taxes. For example, if you take over the property on September 1 and the previous owner has paid the taxes for the full year, you will have to pay back the balance of the taxes from September to December of that year.
- fire insurance
- appraisal fees if your bank or mortgage company asks for one
- GST if the home is a new one. Usually there is no GST paid on previously owned property.
- registration fees at the Land Titles Office
- fees payable for obtaining a new mortgage
- a real property report
- interest charges if there is a delay between getting your mortgage advance from your lender and paying the seller in full. Delays like this often occur because it takes time to register documents at the Land Titles Office and get the title in your name, and you must have the title in your name before your lender will advance funds. The delay is usually not more than a few days.
Keep in mind that you will also have moving expenses and charges for such things as arranging phone lines and utilities accounts.
Who is responsible for the real estate agent's commission?
The listing agreement is a contract between the seller and the real estate agent. The seller is responsible for the payment of the commission unless expressly stated otherwise.
What does an offer to purchase usually include?
In Alberta, most offers to purchase are contained in a standard form prepared by the local real estate board. At a minimum, these forms will cover the following information:
- the parties, that is the names of the vendor (seller) and purchaser (buyer)
- the legal and municipal title of the property
- the purchase price, including the deposit and information about whether an existing mortgage on the property will be taken over by the purchaser or whether the purchaser will obtain a new mortgage, the payment of the outstanding balance between the deposit, the mortgage funding and the total price
- interest on any outstanding balances
- conditions (subject to's), such as the right to have the agreement looked at by the parties' lawyers, obtaining financing, satisfactory building inspection, etc.
- any items that are to be included in the purchase price such as drapes, appliances, rugs, mirrors and so on
- any information about the state of repair of the property or warranties about land use, and bylaws or, as the case may be, a statement that no warranties about the property are made
- time requirements, such as the amount of time the vendor will have to accept the offer; for the transfer of actual possession; and the date for adjustments to such things as the municipal tax account
- insurance requirements; who is responsible for insuring the property, for what time periods and for how much
- information about how to deal with default if one of the parties tries to back out of the deal
- payment of the real estate commission
- payment of GST and other taxes
- places for the signatures of the vendor and purchaser, their witnesses and the real estate agent
What are the options for how my spouse and I register ownership of our new home?
Most couples in Alberta choose to register the title to their homes as "joint tenants". Joint tenants own the whole property together. If one joint tenant dies the other automatically inherits the whole property. One joint tenant cannot leave the property to anyone else in a will. The other, less common way of holding title to land when there is more than one person is by "tenants in common". Each tenant in common separately owns an equal interest in the property with equal rights to occupy the whole of the land. A tenant in common can dispose of his or her own interest in the land by selling it or leaving it to someone in a will.
Of course, it is always possible to register title to your home in your name alone or in the name of your spouse. While you may have good reasons for doing this, it should be thoroughly discussed with your spouse and your lawyer before you take this route.
If the home is your matrimonial home, the spouse who is not named on title will still have something called dower rights.
What are dower rights?
Dower rights arise out of an Alberta provincial statute called the Dower Act which defines the right of a spouse to continue to live in the matrimonial home during his or her lifetime. The purpose of dower rights is to prevent a spouse from selling the matrimonial home (or homestead in the case of a farming couple) without the consent of the spouse. Dower rights do not arise except with a spouse. When a married person disposes of a homestead, the Dower Act requires the consent of the spouse in writing or else the vendor must state on the transfer of land document that he or she is not married or that the spouses have not lived on the land since the date of the marriage. If a spouse wants to consent to the sale of the property, he or she must sign an acknowledgment to that effect before a Commissioner for Oaths (or Notary Public if sworn outside of Alberta) and must be given legal advice about dower rights separate and apart from the other spouse.
What is a mortgage?
A mortgage is defined in the Alberta Land Titles Act as "a charge on land created merely for securing a debt or loan." In other words, a bank or mortgage company lends you the money to buy your home and you in turn sign documents which are registered on the title to your home promising to repay them. You, the owner of the land, are called the "mortgagor" and the lender is called the "mortgagee". If you default (i.e., do not pay) on your mortgage, the home will be repossessed to repay the loan.
Note that there are other types of mortgages, common law mortgages and equitable mortgages, but most purchasers in Alberta will be obtaining the type of statutory mortgage described by the Land Titles Act.
How do I go about getting a mortgage?
Banks, trust companies and mortgage companies are in the business of lending money in the form of mortgages. Start with your bank, as they will be familiar already with your credit rating and financial situation. It is a good idea, however, to shop around for the best deal in terms of interest rates, flexibility in payment options, and so on. If you obtain a good deal elsewhere, your bank may match it.
You can also get a mortgage from your parents for example, or anyone who is willing to lend money on the basis of a mortgage arrangement.
What kind of a Land Titles registration system do we have in Alberta?
This system is named after a land titles registration system created by Robert Torrens, of South Australia in the 1850s. It was first used in Canada in the Colony of Vancouver Island in 1861 and in the province of British Columbia in 1869. The Torrens system has been in use in Alberta since 1887.
How does the Torrens system work?
The Torrens Land system is based on three principles:
Each of these principles taken together explain how this system works.
What does the Mirror Principle mean?
The Mirror Principle means that the title to property will reflect completely and accurately all the current facts of the title so that it is free of adverse claims or burdens unless they are mentioned. In other words, the title should show to the world all of the relevant information about ownership and claims or warnings about the property that an interested party will want to know. Generally speaking, a title will show the current owner and all outstanding registered interests in the land, such as mortgages, caveats, easements and builder's liens. The Mirror Principle is not absolute; there can be certain public rights or burdens that affect the title, such as a right to expropriation or zoning restrictions, that may not be shown on the title.
What does the Curtain Principle mean?
The Curtain Principle means that the current certificate of title contains all the information about the title and it is not necessary for an interested person such as a potential purchaser to worry about any past dealings with the property. This does away with the need to search back through the history of a piece of property to be sure that the present registered owner has a good title. In other land title systems, it may be necessary to search back through all of the past titles to be sure of the validity of the present title. The Torrens system avoids this. It is possible, however, to ask for a historical search if you want to know who owned the property in the past.
What is the Insurance Principle?
The Insurance Principle means that an insurance fund is in place to compensate anyone who suffers as a result of a mistake being made concerning the validity or accuracy of a title. The idea behind the Torrens system is that the registry must guarantee the accuracy of every title to land. If, as a result of human error, there is a mistake about the title to a piece of land and someone suffers a loss as a result, they will be compensated by the fund.
Who runs the Land Titles system in Alberta?
The Government of Alberta regulates the Land Titles system in Alberta. It is administered through registered agencies such as search houses and law firms. There are two offices, one in Edmonton and one in Calgary. Alberta was divided into two land registration districts. The South Alberta Land Registration office in Calgary was responsible for the land from the US border to Township 34 (just south of Innisfail, Alberta), and the North Alberta Land Registration office was responsible for all the land north of Township 34 to the Northwest Territories. With computer access both offices can now register land in either the north or south of the province.
What documents are kept at the Land Titles Office?
The Land Titles offices keep all original titles and all original related documents. Documents are now kept both in paper form and, beginning in 1988, in computer files. The two Land Titles offices contain literally miles of files and millions of documents and the computerization of the system meant that people wanting to use the Land Titles system could have online access province-wide. Most records at the Land Titles offices are available to the public. To obtain a copy of a title or document, you must fill out a Land Titles Office search request and pay a fee for each search, which varies according to the document requested.
Who uses the Land Titles system?
The Land Titles system is used by
- the federal, provincial, and municipal governments,
- real estate companies,
- utility companies,
- appraisers and assessors,
- land surveyors,
- oil and gas companies,
- lawyers, and
Anyone with an interest in a piece of land in Alberta will use the Land Titles system at one time or another.
When I look at the title to my house, it seems to have a bunch of funny looking words and numbers that don't bear any resemblance to my house address. What do they mean?
Your house address is a method of describing the location of your property devised by your municipality. It is quite different from the legal description of your property that is used at Land Titles. For land that is located in a city, town, village or acreage, the legal description is defined by plan number, block number, and lot number. Local municipalities approve plans for subdivisions of lands within their jurisdiction. This subdivision plan is reviewed by Land Titles and assigned a plan number.
What about rural land? How is it described?
Rural land is described by the use of the terms meridian, range, and township. Land in Alberta is described as being west of the fourth, fifth or sixth meridian. These are north/south lines of longitude. The fourth meridian is the Alberta/Saskatchewan border, the fifth meridian runs through Stony Plain and Calgary, and the sixth meridian runs through DeBolt and Jasper. Between the meridians are vertical columns called ranges which are numbered from east to west of each meridian. Townships are horizontal rows crossing the meridians and ranges. The townships begin with row number 1 at the US border and continue up to row 126 adjacent to the Northwest Territories border. Each township is roughly six miles square and contains 36 sections.
This page was last updated in March, 2000.
This section is sponsored by the Alberta Real Estate Foundation