SELLER WINS, HOUSE BUYER LOSES DEPOSIT

Posted in: Real Estate- Jul 09, 2014 Comments Off on SELLER WINS, HOUSE BUYER LOSES DEPOSIT

Buying a new house? You usually have to put up a hefty deposit to cinch the deal. This is partly to show your commitment to the deal and also to create a pool of funds for the seller to look to if you walk. (Sellers take note: this can be key if the buyer is a non-resident or his finances unknown.)

If you’re the buyer, you want to make sure you can get your deposit back if conditions in the contract (like a house inspection, getting a mortgage or having your lawyer review the title) aren’t satisfied. You also want to keep the deposit small to minimize your loss if you can’t go through with the deal.

Usually the buyer and seller focus on the amount and timing of the deposit. But you should also pay attention to the wording of the deposit clause. That’s because the addition of a few words can make the difference between the deposit being kept by the seller and the buyer being able to get it back. A hot-off-the-press B.C. Court of Appeal decision illustrates this.

The deposit in this case was $100,000. After the buyer refused to go through with the purchase, the seller sued to have this money released to him, claiming he was entitled to keep it. The buyer argued he should get his deposit back because the seller hadn’t lost any money (i.e., the seller should only be allowed to keep the deposit if he resold at a lower price).

The purchase contract read like this:

“… unless the balance of the cash payment is paid … on or before the Completion Date, the Seller may, at the Seller’s option, terminate this Contract, and, in such event, the amount paid by the Buyer will be absolutely forfeited to the Seller …, on account of damages, without prejudice to the Seller’s other remedies.”

The seller said this meant he was entitled to keep the deposit here. This view is supported by a previous B.C. Court of Appeal decision, which considered similar wording (but with additional words which said the money was also “non-refundable”).

The buyer focused on the words “on account of damages” instead. He said that if the seller hadn’t suffered any such losses (because the seller was able to resell at a higher price), then the deposit had to be refunded. The buyer relied on a different previous B.C. Court of Appeal decision supporting this view.

The buyer won at first. The trial court ordered the deposit to be returned to him. In doing so, the court stressed the fact that the words “non-refundable” weren’t in the deposit clause. But the court also commented that the matter would likely be appealed. Which it was.

And the B.C. Court of Appeal overturned the decision. It decided that the seller could keep the deposit without having to prove loss.

This decision jives with what buyers and sellers normally think a deposit is for and how the standard contract deposit clause in wide use in this province works. But it shows yet again that a few words in a contract can make a critical difference, and whole cases can turn on what they intend.

Consider consulting your lawyer if you need help with writing up your contract, or if your real estate deal goes sideways.

 

This column has been written by Janice Mucalov LL.B as part of “You And The Law”. It provides information only and must not be relied on for legal advice. Names of the parties in reported cases have been changed or removed to protect their identity. Lawyer Janice Mucalov is an award-winning legal writer.

WHAT B.C.’s NEW WILLS LAW MEANS FOR YOU

Posted in: Wills and Estates- May 06, 2014 Comments Off on WHAT B.C.’s NEW WILLS LAW MEANS FOR YOU

There’s a sweeping new wills law in B.C. you should know about. Called the Wills, Estate and Succession Act (WESA), it came into effect on March 31, 2014. WESA overhauls many of the rules about wills and what can happen with your estate – some of the new rules could affect you.

Let’s start with this one. Remember the potboiler flick “Body Heat” starring Kathleen Turner and William Hurt? It turned on the rule that a will is generally revoked (cancelled) if the person who made the will later marries. Many people (and in the movie, a careless young lawyer) don’t know or overlook this old rule.

Well, under the new law, marriage won’t cancel a will anymore. So if you’ve made a will and have since gotten married, take a look and see if your will still does what you want.

A will pre-dating WESA remains in effect and is still legal

Under the new law, you can also now make a will at the age of 16 already, not 19. Before, only a few “minors” could do that, like a legally married minor or a sailor.

Rules have also changed if you die without a will. For example, if all your children are yours and your spouse’s children, your spouse now gets the first $300,000 of your estate (not $65,000 as before), but only the first $150,000 if there are children from previous relationships.

And if you die without a will, your spouse now has the choice to buy the family home (or treat it as part of his/her share of your estate) – the new law does away with your spouse getting a “life estate” in it, meaning the right to live there till he/she dies. There is only a short 180-day window to make this choice.

And WESA treats a couple who have lived together for two years in “a marriage-like relationship” (including same-sex couples) much the same as formally married couples.

WESA also gives the courts more leeway to fix (validate) wills that don’t meet will-making technicalities, and to treat other records or documents as a will (that before would not have counted as one). This is intended to help carry out the wishes of the will-maker better than before (may increase the chance of disputes too, however).

But the new law preserves the right of a will-maker’s spouse or children to challenge a will in court if they believe it doesn’t adequately provide for them.

Still, the key take-away is that you’re best off making a proper will in the first place. Almost half of all adults in B.C. don’t have one – even though a will is your best chance to see your assets dealt with as you want. And making a will helps avoid fights, costly court house trips and maybe permanent estrangement among your loved ones later.

This primer only touches on a few highlights. Though streamlined, the new law is complex and can be a bit of a mine-field. To make a will, do some estate planning, settle an estate or dispute a will, be sure to ask us for legal help.

 

This column has been written by Janice Mucalov LL.B as part of “You And The Law”. It provides information only and must not be relied on for legal advice. Names of the parties in reported cases have been changed or removed to protect their identity. Lawyer Janice Mucalov is an award-winning legal writer.

 

WHY AND WHEN TITLE INSURANCE?

Posted in: Real Estate- May 05, 2014 Comments Off on WHY AND WHEN TITLE INSURANCE?

If you’re buying a new home or recreational cabin in B.C., you might wonder if you should get title insurance. What protection do you get if you shell out the one-time premium for this?

Title insurance started as a fix for problems with old-England style land transfer systems in some U.S states. It insures buyers or lenders against potential loss of title (i.e., ownership of the property you’re buying) and problems with the title. Now a billion-dollar industry in the U.S., it has also for years been available in Canadian provinces like Ontario and B.C.

But B.C. has a government-backed, Torrens-inspired land title system that “guarantees” your title. It’s like the Mercedes of land registration systems. In B.C., you can generally rely on the accuracy of the register in the Land Title Office as to who the owner is and what registrable charges are outstanding. To deal with the possibility of losing title through fraud, a provincial assurance fund pays financial compensation in appropriate cases (not an easy process though).

Before the arrival of title insurance here, the B.C. system worked well for many decades, and is usually considered just fine for everyday, normal transactions.

The occasional title and mortgage fraud cases get a lot of press. But they’re rare. In the last two decades, only some 17 title or mortgage fraud claims have reportedly been paid from B.C.’s assurance fund, out of 16 million real estate transactions processed by the Land Title Office.

And as between innocent defrauded home owner and bank or mortgage lender, where (unbeknownst to the true owner) a fraudster transfers title to an accomplice (who then takes out a mortgage and disappears with the money), the lender now bears the risk of loss.

So is title insurance worth it for you in B.C.?

Banks like it. Recent high-level B.C. court decisions saddling mortgage lenders with the risk of mortgage fraud have given banks and lenders an incentive to get borrowers to opt for a lender’s policy. However, such a policy, though paid by you, only protects the lender.

So if you’re getting a mortgage to finance your home purchase, the bank may allow you to buy a lender’s title insurance policy instead of a new survey, which could be more expensive. (Another alternative is having the bank accept a short-form “protocol” legal opinion – this too would save the survey cost and protect the lender.)

Still, you might want to consider an owner’s policy for yourself (for which you pay a separate premium). In addition to insuring your title to your new property, it would offer benefits, such as covering you in case of previously unknown defects that a new survey would have shown.

As well, title insurance would cover you for other problems you might run into – as a sampler, construction done by the previous owner(s) without proper permits (unauthorized accommodations or other “after-the-fact” improvements come to mind); zoning, land-use or building by-law infractions; and set-back problems. A new survey wouldn’t show most of these problems, which could be costly to fix.

While you, as a buyer, should generally get a new property survey, title insurance may also be worth it. Being an insurance product, it has exclusions. Talk to our lawyers to get a better understanding of it and find out if it’s a useful product for your particular transaction.

 

This column has been written by Janice Mucalov LL.B as part of “You And The Law”. It provides information only and must not be relied on for legal advice. Names of the parties in reported cases have been changed or removed to protect their identity. Lawyer Janice Mucalov is an award-winning legal writer.

Translate »