Category: Real Estate

5 Ways to Ensure You Don’t End up with a “Moneypit”

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Over the past several years (since the beginning of the Covid pandemic in early 2020), real estate lawyers in New Brunswick have experienced a huge increase in real property transactions. Many of these transactions have involved purchasers from other provinces that sold their homes for significant returns on their investments and purchased properties in New Brunswick for cash. Often, purchasers have not even viewed the properties in person prior to completing the transaction. In some cases, people have viewed a property by videoconferencing technology with their real estate agent. In other cases, purchasers have not viewed the property at all and complete the transaction sight unseen.

Purchasing a home without completing the proper due diligence can lead to all kinds of problems. In the 1986 movie, “The Money Pit,” Tom Hanks and Shelley Long purchased a property that turned out to be far more than they bargained for. We might have laughed at this movie, but there’s nothing funny about paying top dollar for a property only to find out that there are significant issues hiding behind the walls that will cost you more time, money and headaches than you could have ever imagined! Here are 5 ways that you can avoid purchasing your own version of the money pit:

  1. Get a home inspection

A home inspection is one of the easiest ways to ensure peace of mind when purchasing a new home. For a reasonable fee, a property inspector will look through a home and provide you with a report about the issues that must be fixed and some of the issues that should be fixed. You may wish to negotiate with the vendors about the purchase price if they are unwilling to cover the costs of the required repairs. Here are some links to local property inspectors that our clients often use:

  1. Say no to “as is where is”

Many people have purchased properties on an “as is where is” basis over the past several years. This is okay if you are willing to be responsible for any repairs required or issues that arise. However, when you purchase a property on an “as is where is” basis, you are releasing the Vendors from responsibility for most defects. The doctrine of caveat emptor (“let the buyer beware”) typically applies to defects that are not visible. There are some small exceptions to this real in cases of fraud, for example, but we recommend saying no to “as is where is” purchases whenever possible.

  1. Visit the property in person (if possible)

We have seen many people over the past several years purchasing properties either sight unseen or only viewing the properties by video conferencing technology. We recommend visiting the property in person and using a checklist to review common property issues. Better yet, you can avoid many issues with a property if you combine a personal visit with an inspection in #1 above. Here is a link for a free home inspection checklist The Ultimate Home Inspection Checklist for Buyers (with Printable PDF) | REW

  1. Ask for (and review) a Property Disclosure Statement

You will typically receive a property disclosure statement when you are purchasing a property through a real estate agent. There is usually a box you check that states that you “require a property disclosure statement”. This statement has questions regarding defects of which the Vendor may be aware. The answers are typically “yes”, “no”, “n/a” format with an opportunity for the vendor to expand on certain answers. These forms have questions about the foundation, water leaking, roof repairs, electrical, etc. It is important to closely review this disclosure statement and to ask your lawyer and/or real estate agent any questions you may have. If you find latent defects to the property (defects that could not be discovered through ordinary due dilligence) that the vendor did not disclose, you may be able to make a claim against the vendor for misrepresentation and damages to assist you with repairs to the home.

  1. Prepare a list of questions to ask your lawyer at the time of closing

Finally, you should prepare a list of questions to discuss with your lawyer at the time of closing. Some important items that I always like to review with clients;

  • What does the map look like online? Does it match up with what you thought you were purchasing? Does it match the description in a historical deed?
  • Is there a subdivision plan that provides detailed dimensions for the land?
  • Are there any easements on the property? If so, what rights does the easement holder have? (i.e. can they merely walk over the property to get to another property? Is there a shared driveway? Is there an easement to cut wood on the property or access a well or spring?)
  • Do you plan on possibly operating a business out of the property? Have you checked to ensure the property is appropriately zoned, so that you can do what you want without getting flak from the municipality or neighbours?

As the saying goes: there are no stupid questions. I am always appreciative when clients who attend a meeting to sign closing documents are engaged and ask a lot of questions. I hope you find these suggestions helpful! As always, if you have further questions or wish to schedule a consult, please contact us at 506-325-3333.

 

 

 

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Are you a Landlord or a Tenant looking for information? Check out this site

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I attended a Continuing Legal Education session this week on Real Property Law and one of the presenters was the newly named “Chief Residential Tenancies Officer.” I must admit that I had no idea that the Office of the Rentalsman had been recently renamed as the Residential Tenancies Tribunal. The website for this tribunal has lots of information that can be helpful if you are  a tenant or a residential landlord. What is especially helpful are the various forms and resources, which include Form 6 –  Standard Form Residential Lease. I highly recommend that both landlords and tenants spend some time navigating this site and taking advantage of the many resources contained within the site. Here is a link to the site: https://www.snb.ca/RTT-TLL/E/RTT-TLL_E.asp

 

 

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5 tips for home buyers prior to closing!

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In the 1986 movie, the Money Pit, a young couple move into a home that is terribly dilapidated. While falling down stairways and leaking bathtubs in this movie are enjoyable for comedic value, no one enjoys these things when they happen to you!

A home is the single largest purchase most people will ever make. Therefore, it is important to take the time to investigate your purchase prior to closing and not be pressured by lawyers, real estate agents or family members. Also, you should be careful not to fall in love with a home (too much) prior to proper inspection. You may be excited about your new home, but if you choose to waive your inspection, miss defects, or close on an “as is where is basis,” disaster may follow. For example, in Anderson v. Lawrence, 2013 NBQB 21, Justice Morrison of the Court of Queen’s Bench of New Brunswick heard the home purchasers’ claim against the vendors’ for negligent and fraudulent misrepresentation. The purchasers suffered serious water damage in their basement and the ceilings in the main floor of the house caused by a leaky roof.

The purchasers had viewed the property prior to purchase and saw water in the basement and detected a musty smell, but were assured by the vendors and a real estate agent that the problems had been solved. There were also issues with the septic system. Finally, the purchasers received 17 acres of land rather than 34 acres, as the vendors represented.

The Court in Anderson, supra held that the vendors both negligently and fraudulently misrepresented the water leakage and the size of the land. As a result, the Court ordered the plaintiffs were entitled to $24,339.49 for costs of repairs and $13,070 for the value of the missing 17 acres of land in addition to interest and legal costs.

This case is a helpful lesson to purchasers of homes to be extremely critical before committing to a purchase. It’s easy to end up with your own version of a money pit! Here are some helpful tips to assist you with the purchase of your home:

1. Hire a licensed property inspector. The cost ranges from $200-$500, but will be worth every penny if your inspector finds issues that you may not be able to see with your own eyes;

2. Use checklists to evaluate the condition of the home. Here is a link to a helpful checklist that you may wish to use to evaluate the condition of the home. As stated in the checklist, it should not be relied upon nor be a replacement for a certified home inspection. We make no representations or warranties about the accuracy of the information either, but believe it is a helpful starting point;

3. Attend the inspection with your licensed inspector. Make sure you attend the home with your inspector and ask lots of questions;

4. Read the inspection report carefully and discuss with you inspector, legal counsel and real estate agent;

5. Research the inspector. Not all inspectors are created equally. Take the time to ask potential inspectors questions about  their experience, qualifications, costs, etc.

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Not all Title Insurance Policies are Created Equally: lender’s title policy vs. owner’s title policy

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You are buying your first home and you have signed so many documents your hand is getting sore. You likely have signed a mortgage, the mortgage covenants, discussed title to the property with your lawyer, arranged for fire insurance; maybe you talked about zoning requirements (depending on your plans for the property); arranged for your down payment on the home; Not to mention that you have been dealing with the logistics of moving—renting a van, picking up pizza and soft drinks to lure your friends in to helping you out; You have been so busy that you probably do not even remember the (likely very brief) conversation you had with your lawyer about title insurance. There can be serious consequences of not being aware of the difference between a Lender’s vs. and Owner’s title insurance policies. What is more concerning is the differences are not easily identified by title insurance companies and require a thorough reading by the counsel and the policy holder.

Here are some basic differences between the two types of title insurance policies:

1. Lender’s policy

A lender’s title insurance policy is usually required by your mortgage company when you purchase a home if you do not have a building location survey. Whereas a survey can  be thousands of dollars, a typical title insurance policy usually costs between $1-200 per policy. This makes title insurance an alluring option for home purchasers rather than spending thousands of dollars when you have already made the (likely) single biggest investment of your lifetime!

Here are some key facts about the lender’s policy:

  • Also known as “loan” policy
  • Lender requires lender’s policy before financing purchase;
  • Only covers the lender’s interests in the property;
  • Types of risks covered:
    • Fraud (signing wrong name on mortgage, etc.);
    • Legal fees in defence of title (ownership issues);
    • Issues regarding priority (other mortgages or judgements registered ahead of bank’s mortgage);
    • Gap coverage (if mortgage not registered on title for a period of time after closing);

2. Owner’s Policy

An owner’s title insurance policy can provide protection against the losses listed in the policy. Some examples could be:

  • someone else owns an interest in your title
  • existing liens against the title
  • violations of municipal zoning by-laws
  • encroachments onto an adjoining property (other than fences and boundary walls)
  • setback violations
  • realty tax arrears
  • outstanding municipal utility charges, provided such charges form a lien on title
  • existing work orders
  • lack of legal access to the property
  • unmarketability of the land due to adverse matters that would have been revealed by an up-to-date survey / RPR/ Building Location Certificate

3. Some helpful links

If the difference between the two types of title insurance policies is still not clear, here are some links that may assist you in further understanding the differences:

 

 

 

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Tip of the Week! Budget early for costs related to property purchases

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The Real Property Transfer Tax Act requires purchasers of property to pay a one-time tax upon purchase of a property in New Brunswick. On April 1, 2016, the real property transfer tax increased from 0.5 per cent to one percent of the assessed value of a property or the actual purchase price, whichever is higher. This can result in significant increases in closing costs for purchasing a home. For example, transfer taxes on a home purchased for $150,00o would have been $750.00 prior to April 1, 2016. After this date, the transfer taxes would be double at $1,500.  In addition to other closing costs (registration fees, title searches, etc), disbursements related to property purchases can feel unpredictable and overwhelming if you are purchasing a property for the first time.

TIP: Budget early for costs related to property purchases and take the time prior to committing to a purchase to speak with your lawyer about possible costs! This can help you avoid unnecessary stress leading up to what is likely the single most expensive investment most people will make–your home!

 

 

 

 

 

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