The prospect of owning property for the first time is an exciting milestone in life.
But many first time buyers have little to no knowledge about the standard terms of a Contract of Purchase and Sale, which can be an intimidating process for some.
The following is a general guide to help you familiarize yourself with a Contract of Purchase and Sale, so you'll feel more comfortable when you are ready to buy a property in Vancouver and the Lower Mainland.
Contract of Purchase and Sale
The sample contract below lists most of the standard terms that you'll encounter:
Agents and clients information
This first section of the contract is basic information about the brokerage firm preparing the document.
The following boxed section of the contract lists contact details for both the Buyer and Seller involved in the transaction.
Property
The property section is where you will find all the relevant information regarding the property including the full address and the Parcel Identifier (PID).
A PID is a nine-digit number that uniquely identifies a parcel in the land title registry of BC. It enables lawyers, notaries, realtors, and other stakeholders to get extensive information about the property.
Purchase Price
This is the most important section of the contract where the purchase price is put into writing. This is also where the bulk of the negotiations happen between the Buyer and Seller.
Once the Buyer's offer is submitted to the Seller, the Seller can then place a counter-offer. When a counter is received, you will see a new price and initials (as seen on the bottom right side of the page) to indicate a counter-offer has been placed.
This process continues until a satisfactory price is agreed upon by both parties.
Deposit
The deposit amount is what the buyer will agree to submit once the contract is enacted.
Industry standard for deposits is typically 5% or more but the amount will vary since the final amount can be negotiated between the Buyer and Seller.
The deposit is not due until the contract is firm. Once the deposit has been given the contract become binding on both parties.
Terms and Conditions
Since every transaction is unique, each contract can have unique “TTC”. However, this can include the creation of holdbacks for damage deposit or anything else that both parties agree to.
The following are some common terms and conditions you may find on a purchase and sale contract: The parties will be required to provide title to the property from clients, of any encumbrances.
- Title Search - The Seller will be required to provide title to the property free and clean of any encumbrances
- Strata fees – Buyer needs to be aware that there are monthly strata fees that needs to be paid if the property is a strata property, commonly known as a order.
- Acknowledgement – Seller and Buyer acknowledge having been advised to seek independent legal advice.
- Property Tax Transfer – 1% on the first $200,000, 2% between $200,00 up to and including $2,000.000 and -% on the portion greater than $2,000.00 and is payable by the Buyer on the completion date unless the buyer qualifies for an exception.
- Almost all property transactions are subject to PTT.
Completion, Possession, and Adjustment Dates
The Completion date is the day that both the sale completes and title of the property change hands between Buyer and Seller.
The Possession date is the move-in date or the date the Seller is given the keys.
The Adjustment date is when tax transfers from the Seller to the Buyer. This usually falls on the same date as the Possession Date. It also in the basis for adjustments between parties from property tax for strata fees.
Included and Excluded Items
This section lays out exactly what items are to be included and excluded from the purchase price.
There are two classifications of items which are fixtures and chattels.
Fixtures are objects that are physically affixed to the property (e.g. flooring, light fixtures, doors, windows, etc.) whereas chattels are personal property that are not attached to the property (e.g. clothing, furniture, framed paintings hung on the wall.).
If the Seller wants to ensure a particular item is included or excluded in the purchase, get it in writing!
Viewed
This is a promise by the Seller that all included items will remain in the same condition after the Buyer views them on a certain date.
Title
This clause ensures that there are no encumbrances or any other charges on the title.
Tender
In short, this clause sets out the payment method for the Buyer to the Seller.
Documents
This clause requires all documents that are required to enact the contract are submitted to the Land Title Office by the agreed Completion date.
Time
The time clause is inserted for the protection of both parties.
Time is of the essence clause means that delay by one property may be presents for cancelling the contract on applying to court for damages. If the Buyer is unable to complete on time, the Buyer may lose their deposit plus.
Buyer Financing
The buyer is required to pay the purchase price on the completion date, even if the buyer is relying upon a new mortgage to finance the purchase price. Some conditions may apply.
Clearing Title
The Seller must clear any existing financial charges from the title, or the Seller agrees that they may wait to pay and discharge existing financial charges immediately after transaction by the Lawyer or the Notary.
Costs
The Buyer will bear all costs of the conveyance and, if applicable, any costs related to arranging a mortgage. The Seller will bear all costs of clearing title.
Risks
All buildings on the property and all other items included in the purchase and sale will remain as the seller’s responsibility until 12:01 am on the Completion date. After that time, the buyer is responsible for everything.
Plural
This clause states that when referencing to any party in this contract, words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.
Representations and Warranties
There are no other representation, warranties, guarantees, promises or agreement other than those set out in this contract.
Personal Information
Both the Buyer and Seller agree to give consent the collection, use and disclosure of their personal information to the following parties:
- Brokerages and its Licensee(s) described in the Agency Disclosure section
- The real estate board where the Brokerages and Licensee(s) are members of
- The real estate board of the Multiple Listing Service if the property is listed there
Assignment of Remuneration
Both the Buyer and Seller agree that the Seller is authorized to act on behalf of both Buyer and Seller to pay the commissions out of the proceeds of the sale.
Restriction on Assignment of Contract
The Buyer and the Seller agrees that the contract must not assigned without the written consent of the Seller.
Agency Disclosure
The Seller and the Buyer acknowledge that they read and understood the brochure published by the BC Real Estate Association entitled working with a Realtor.
Acceptance Irrevocable
Once the Seller accepts the contract, the Seller can't argue that the conditions imposed by the Buyer are too subjective or uncertain to be enforceable. Because the clause provides that the contract is executed under seal, no additional consideration is required to be paid by the Buyer to the Seller.
Offer
The offer, or counter-offer, will be open until a specified date for acceptance. Once an offer or counter-offer is accepted by the Seller, the terms and conditions of the contract will be legally binding.
Acceptance
This is a written confirmation on the acceptance of the offer upon the agreed terms & conditions of the contract, as well as agreed payment for commissions.
When it Comes to Contracts, Ask Your Lawyer to Review Them
We hope this article has helped you gain a better understanding of the terminology found in a Contract of Purchase and Sale.
Should you ever make the jump to purchase your first home, it is important that you hire a real estate lawyer to review the contract in detail.
With such a significant financial commitment at stake, a lawyer will ensure that you fully understand EVERYTHING laid out in the contract before you sign on the dotted line.
If you have any questions related to a real estate purchase or sale, please contact Sundeep Gill at (778) 565-4700 or schedule a free consultation on our contact form.