15 May Conditions To Consider When Purchasing Property
When purchasing a home using the Standard Form Contract of Purchase and Sale there are certain subject conditions or conditions precedent that a buyer may wish to include. The role of a condition precedent is to establish certain criteria that must be waived or fulfilled before the transaction can be considered binding on all parties. While it is possible to have a condition precedent for both a buyer or a seller, it is more commonly seen for Buyers to use these conditions.
The common conditions precedent are: Buyer Financing, Property Inspection, State of Property Title, Fire/Property Insurance and Property Disclosure. In addition, there are several other due diligence investigations that could be completed as a purchaser investigates the property they intend to purchase. This list is a brief overview of some of the due diligence investigations one could complete. It is not an exhaustive list, nor should it be relied upon as a conclusive list of what investigations to complete; however, it does provide some overview and a starting point of information.
- Buyer Financing
- This condition allows for a buyer to confirm they will be able to obtain mortgage financing for the purchase of the property. The standard term includes the clause that this financing is to be on terms and conditions and at a rate acceptable to the buyer.
- Property Inspection
- An inspection provides an opportunity to be advised of any potential defects in the building. Using a licensed professional inspector, a prospective purchaser can be made aware of any structural, electrical, plumbing or superficial issues with the property. This allows them to make the decision as to whether to proceed, seek a reduced purchase price, or allow for increased renovation estimates.
- State of Title
- This is the review of any charges on title, including any existing or pending covenants, easements, building schemes and rights of way. These, among other charges, can have an effect on your use of the property, and should be reviewed to ensure your acceptance with any potential restrictions or limitations.
- Fire/Property Insurance
- Some properties may have history or components that would cause an insurance company to be unable to insure the property. Confirming that the property is insurable is even more important when relying on mortgage financing to purchase.
- Property Disclosure
- The sellers may complete a property disclosure statement outlining certain information that cannot necessarily be obtained through simple research and inspection. These disclosure statements form a part of the contract and can be relied upon by a buyer should issues relating to the contents of the disclosure arise post-closing.
- Strata Documents
- Reviewing the strata plan, bylaws, AGM and SGM minutes, council meeting minutes, leases, Rules, Depreciation report and accounts is important when purchasing in a strata building. This allows for a review of the overall building status, any upcoming expenses and whether any complaints have been lodged about your potential neighbours.
- Site Survey
- Having a survey completed can assist in determining whether the property or any improvements, including sheds or fences are located on an adjacent property.
- City Planning and Engineering
- Speaking with the municipality the property is located in can help in a variety of due diligence investigations. Zoning of both the property to be purchased, and the surrounding location can help you determine if any neighbourhood changes are coming. The municipality also keeps records of the development of the property including any permits that have been obtained for additions, alterations or improvement. If there have been additions to the home and there aren’t any permits, it may require further investigations.
- Underground oil tank scan
- A potentially expensive issue for buyers is when a property has a buried home heating oil tank. These tanks have the potential to leak oil and contaminate not only the subject property, but also any neighbouring properties as well. Having a scan using best available technologies will allow a buyer the opportunity to find any existing underground oil tank that exists, and discuss removal and remediation with a seller.
- Fixtures v. chattels
- Certain components of the property may be considered a fixture or a chattel depending on how they are affixed to the property. Confirming what’s a fixture, and therefore included, versus a chattel, and thus excluded, is a component of due diligence that can help avoid misunderstandings at the time of closing.
- If there are any new home or other warranties that are in place it is advisable to review the exact terms and conditions of such warranties to ensure that a prospective buyer fully understands the limitations and restrictions that may be included.
- Heritage Designation
- If the subject property is listed as a Heritage Property, there may be additional obligations or limitations on an owner’s use. A consultation with the Heritage Registrar will assist in understanding the particulars of the specific Heritage property and how it can affect use down the road.
- Archaeological Site Records
- Should a property be considered historically and archaeologically sensitive, the province, under the Heritage Conservation Act has the power to put the costs of an archaeological excavation on the homeowner. In order to confirm whether a property is historically and archaeologically sensitive, an individual must make an application to the British Columbia Archaeological Site Inventory.
- Stigmatized or Psychologically Impacted Properties
- Buyers do have a certain onus to investigate the property, and the law is still developing around what a seller needs to disclose in regards to the history of the property.
We recommend that you work closely with a realtor and/or lawyer when preparing an offer to purchase a property to ensure that your interests are protected. If you would like to discuss the foregoing further or if you wish to obtain general information regarding your real estate transaction, please contact our lawyers today for a free initial consultation. Victoria BC Lawyers, Sitka Law Group is conveniently located on Shelbourne Street near the intersection of the borders of Victoria, Oak Bay and Saanich.