Common Legal Issues When Buying or Selling a Home

Most people only buy and sell a home once or twice in their lives, so of course they have questions about the process.  Unless you are in the business of buying and selling homes you would have no reason to be aware of the common legal issues involved in buying or selling a home in Alberta.

Following are some of the common legal issues you may encounter when looking to buy or sell a home in Alberta. Each circumstance has a unique set of facts and therefore nothing in this article should be taken as specific advice applying to your situation, but rather general information. If you require advice on a specific legal matter relating to one of the issues below, or generally in buying or selling a home, please contact one of our Edmonton residential real estate lawyers to assist you.

  1. Conditions

There are several types of conditions commonly found in real estate purchase contracts. These conditions are typically in favour of the buyer, and it is up to the buyer to release those conditions for a purchase to proceed. The most common conditions are:

    • Financing

As a buyer, a financing condition allows you to get approval from your financial institution for a mortgage on the particular property you are planning to purchase. Even with a pre-approval for a mortgage, many lenders will require an appraisal or other evaluation to ensure that they are confident the property you are planning to purchase holds the value you intend to pay. If you are counting on financing to be able to complete a purchase, you will never want to waive a financing condition until you ensure you have written approval in hand relating to the property you wish to purchase.

    • Home Inspection

Home inspections are a condition in favour of the buyer to allow an inspection report to be completed. If the inspection report finds deficiencies with the home, depending on the circumstances, the buyer may choose to:

      • accept the agreement as is knowing of the deficiencies; or
      • renegotiate the agreement to address the deficiencies; or
      • terminate the agreement and simply walk away from the property..
    • Sale of a Buyer’s Home.

Conditions regarding the sale of a buyer’s home are used where a buyer cannot afford to purchase a property until their current home is sold. If your offer is attractive to a seller, the seller may enter into an agreement to allow the buyer to purchase the property on condition they first sell their home. Typically, these provisions will be time limited in nature. Sometimes these provisions may provide an exclusive window for the buyer under which the seller cannot sell their home to another party. They can also be (and more commonly are) structured such that the seller may continue to show and attempt to sell their home so long as the condition is outstanding. Usually the provision is structured such that should the seller wish to accept another offer, the buyer is given a period in which they can either choose to remove this condition and proceed with the purchase, or alternatively lose out on their chance to buy the property.

2.  Real Property Reports

Real Property Reports or RPRs are surveys of a property that outline a property’s boundaries and note improvements/landmarks such as the outline of buildings, decks, sheds and fences. They typically are signed off on by the municipality governing the property in question as falling into one of three categories:

      1. Compliant
      2. Non-Conforming
      3. Non-Compliant

If a property is compliant that means that the municipality has evaluated the survey and determined that the property is compliant with municipal bylaws. This is ideally what you want.

If a property is non-conforming this means that the property was once compliant with bylaws, but those bylaws have now changed such that something on the property does not conform with current bylaws. In these cases, the municipality is allowing the structure to remain as is, but there could be an issue in the future if you replace a structure – the replaced structure will need to conform to the newer bylaws.

Non-Compliant means there is an issue that violates municipal bylaws and will need to be addressed. As a buyer or a seller, you will want to discuss solutions to this issue with your lawyer.

As a seller, the best way to avoid issues with a Real Property Report in the midst of a sale of your home is to order one ahead of any sale. In that way if it does find an issue, you may have time to rectify it before the sale.

In some cases, a buyer may be able to purchase title insurance as an option to close transactions where a Real Property Report is not available. This is a more complex issue and you may wish to discuss this with your lawyer.

3.  Latent vs Patent Defects

The law in Alberta when it comes to purchasing real estate is “buyer beware”. In other words, you have an obligation as a buyer to make a reasonable inspection of the property for defects. If you choose not to do so then the consequences of that fall upon you.

This applies to what is known in the law as “Patent Defects”. These are defects that a reasonable inspection by a prudent inspector should reveal. There is generally no obligation on the seller to disclose Patent Defects.

“Latent Defects” are defects that would not be revealed by a prudent inspection. A seller is obligated to disclose all Latent Defects within their knowledge when selling a property. If a seller is aware of a Latent Defect but does not disclose it, the buyer may have a cause of action against the seller for any damage they suffer as a result.

If you have questions regarding whether or not you have an obligation to disclose a defect in your home as seller, or you have discovered a defect in a home you have purchased, you should contact a lawyer to receive advice on dealing with your specific issue.

4.  Role of a Lawyer in Your Real Estate Transaction

The role of a lawyer in a real estate transaction is most commonly to transfer title and to deal with financing (both securing it for a buyer or paying it out for a seller). Often lawyers are not involved prior to the real estate contract being signed, but that doesn’t mean they shouldn’t be if you have questions or need advice. Should you have questions regarding legal issues or the form of your real estate contract it may be advisable to contact a real estate lawyer prior to signing your real estate purchase contract. Once you sign that contract you are bound to its terms, and sometimes speaking with a lawyer will save you from stepping in some common pitfalls related to buying or selling real estate. You can also add a condition to your real estate purchase contract allowing for a lawyer’s review, but if you intend on doing so we recommend you speak with a real estate lawyer to ensure that condition is properly structured and enforceable.

If you are interested in buying or selling your home, our Edmonton residential real estate lawyers would be pleased to assist you. You can see our full listing of our Edmonton residential real estate lawyers here:

This article was written by Benjamin Seigel.

©2020 McCuaig Desrochers LLP. All rights reserved. The content of this newsletter is intended to provide general information on McCuaig Desrochers LLP, our lawyers, and recent developments in the law and is not to be relied on as legal advice or opinion.

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