It is important to determine the real motivation for the owner of a re-sale condo to sell the property. This will assist you in knowing how to negotiate in terms of your offer price and terms and general strategies. The motivation for sale could be a positive or negative one. If the vendor is selling in a buyer’s market, be particularly thorough in finding out why the vendor is selling in a market that is clearly disadvantageous in terms of the negotiating climate and eventual sale price.

Why Principal Residence Properties Might Be For Sale

• Separation or divorce.
• Death of owner or co-owner.
• Loss of job of principal wage earner or of one of two wage earners, when two wage earners are necessary to pay for the home expenses.
• Job relocation.
• Ill health of one or both home owners.
• Retirement and therefore relocation or downsizing house size needs, or desire to take some of the equity out of the house for retirement purposes.
• Owner lost money in a business or other investment venture and needs to sell the house to pay off the debt.
• Owner has not made payments on the mortgage due to personal or financial problems, resulting in court proceedings by the lender. This could be in the form of an order for sale or foreclosure proceedings. The length of time before the house could be sold in the above circumstances varies depending on the provincial jurisdiction.
• Owner wants to sell in a seller’s market.
• Owner is concerned that the market is changing and could become a buyer’s market.
• Owner is testing the market to see what the market will pay, without any serious attempt to sell.
• Children leaving the home and therefore downsizing of house size needs.
• Desire to buy a larger home due to increasing family size or needs. This could also be due to having an extended family (e.g., parents or relatives).
• Desire to trade up to a nicer home or better neighbourhood.
• Desire to buy a house with a rental suite in basement for revenue purposes.

Why Investment Properties Might Be For Sale
There are many reasons why a condo bought for investment could be listed for sale. It does not necessarily mean the property has serious problems or is a bad investment. Possibly the property is poorly managed, poorly maintained, or has excessive vacancies. In many cases, an astute investor could turn the property into an attractive investment by identifying the exact problems and opportunities, devising a plan for turnaround, and buying at below market value. Explore to find out the real reasons why the property is for sale.

Here are a few of the common reasons for sale:

• Inexperienced Owner. Possibly the owner was a first-time investor who bought beyond his skills, resources, and “comfort zone,” and feels intimidated by the responsibilities, time, and risk involved. He may now have changed his mind and wishes to sell due to the personal stress being experienced.
• Partnership Disputes. About 75% of business partnerships at some point break up or have conflict. Maybe the property is for sale due to unresolved disputes. Another possibility is that some investors need to get out for financial reasons or changed investment goals, therefore the partnership splits up and that triggers the sale.
• Tax Benefits. Maybe the owner has depreciated the building as much as possible and wants to sell because the land value on which the condo is situated has gone up substantially in value. The owner wants to minimize the capital gain aspects by selling in the current market.
• Settling of an Estate. If the owner of the property has died, the executor of the estate wants to settle the estate reasonably quickly, and the property could therefore be priced at fair market value or below in order to entice a sale.
• Run-down Properties. Due to management or financial difficulties, the property could visibly deteriorate, causing the owner to want to sell. Some of the reasons are discussed in further detail below.
• Poor Management. This could be because the owner is attempting to manage it himself, but lacks the skills, knowledge, or personality to do it profitably. Maybe the owner has hired the cheapest management firm and they do the least amount possible. If an owner lives outside the city, province or country, possibly the management company is indifferent and allows the property to deteriorate, causing problems to occur. Another reason for poor management is that the owner is draining the revenue property by taking out too much money personally. This could result in a shortfall of the revenue required to meet necessary expenses.
• Excessive Vacancies. If a condo development has a lot of condos for rent, and suffers from ongoing vacancies, it could be because the building is run-down or has poor management; there are unstable employment opportunities in the community; there is the wrong mix of tenants in the building; there are more attractive competing condo buildings, or the rents are too high. Whatever the cause, the vacancy situation is probably causing serious cash flow problems for the owner.

Here is the rest of the discussion in of the topic of the purchase and sale agreement.

Fixtures and Chattels
This is an area of potential dispute between the purchaser and vendor, unless it is sufficiently clarified. A fixture is technically something permanently affixed to the property; therefore, when the property is conveyed the fixtures are conveyed with it. A chattel is an object which is moveable; in other words, it is not permanently affixed. Common examples of chattels are clothes washer and dryer, refrigerator, stove, microwave, and drapes.

A problem can arise when there is a question of whether an item is a fixture or a chattel. For example, an expensive chandelier hanging from the dining-room ceiling, gold-plated bathroom fixtures or drapery racks, or television satellite dish on the roof might be questionable as to whether they are a fixture or a chattel. One of the key tests is whether an item was intended to be attached on a permanent basis to the property and therefore should be transferred with the property, or whether it was the intention of the vendor to remove these items and/or replace them with cheaper versions before closing the real estate transaction.

In general legal terms, if it is a fixture and it is not mentioned in the agreement, it is deemed to be included in the purchase price. On the other hand, if it is not a fixture and no reference is made to it in the agreement, then it would not be included in the purchase price. To eliminate misunderstanding, most agreements for purchase and sale have standard clauses built into them which state that all existing fixtures are included in the purchase price except those listed specifically in the agreement. In addition, a clause should list the chattels specifically included in the purchase price, and they should be clearly described.

Adjustment Date
This is the date that is used for calculating and adjusting such factors as taxes, maintenance fees, rentals, and other such matters. As of the adjustment date all expenses and benefits go to the purchaser. For example, if the maintenance fee has been paid for the month of March by the vendor and the purchaser takes over with an adjustment date as of the 15 of March, there will be an adjustment on the closing documents showing that the purchaser owes half the amount of the prepaid maintenance fee to the vendor for the month of March.

Completion Date
This is the date when all documentation is completed and filed in the appropriate registry office, and all monies are paid out. The normal custom is for all the closing funds to be paid to the purchaser’s solicitor a few days prior to closing. As soon as all the documents have been filed in the land registry office and confirmation has been obtained that everything is in order, the purchaser’s solicitor releases the funds to the vendor’s solicitor/

Possession Date
This is the date on which you are legally entitled to move into the premises. It is commonly the same date as the adjustment and completion date. Sometimes the possession date is a day later in order for the vendor to be able to move out; in practical terms, though, many purchasers prefer the adjustment, completion, and possession dates to be the same, if it can be arranged. One of the reasons is that the risks of the purchaser take effect as of the completion date, and there is always a risk that the vendor could cause damage or create other problems in the premises if he or she remains there beyond the completion date. As soon as your solicitor has advised you that all the documents have been filed and money has changed hands, your realtor or lawyer arranges for you to receive the keys to the premises.

Merger
This is a legal principle to the effect that if the agreement for purchase and sale is to be “merged” into a deed or other document, the real contract between the parties is in the document filed with the land registry. To protect you, it should be stated in the agreement for purchase and sale that the “warranties, representations, promises, guarantees, and agreements shall survive the completion date.” There are exceptions to the document of merger in cases of mistake or fraud–technical areas that require your lawyer’s opinion– but it is important to understand the concept.

Commissions
At the end of most purchase and sale agreements there is a section setting out the amount of the commission charged, which the vendor confirms when accepting an offer.

Most purchase and sale agreements come in standard formats, with standard clauses, and are drafted by the builder or real estate board. There are generally spaces throughout the agreement for additional, customized clauses to be added.

It is recommended to have a lawyer review your offer to purchase before you sign it. Regrettably, relatively few people do this, because they either don’t realize they should, perceive it to be an unnecessary or costly legal expense, or could cause delay that could cause a purchase to be lost to someone else, or otherwise kill the deal.

Alternatively, rather than seeing a lawyer before submitting an offer to purchase, some people may wish to insert a condition that states the offer is subject to approval as to form and contents by the purchaser’s solicitor within X days of acceptance.

There are many common clauses and features contained in the purchase and sale agreement, many of which vary from contract to contract according to various circumstances-whether one is purchasing a new or a resale condominium or house, etc. A brief overview follows of some of the common features of the agreement for purchase and sale. This article is Part I of a two part series.

Amount of Deposit
A deposit serves various purposes. It is a partial payment on the purchase price, a good-faith indication of seriousness, and an assurance of performance if all the conditions in the offer to purchase have been fulfilled. The deposit is generally 5% to 10% of the purchase price. If there were conditions in the offer, and these conditions were not met, then the purchaser would be entitled to receive the full amount of the deposit back. This is one reason why it is important to have conditions or “subject to” clauses in the offer to protect one’s interests fully. When making a deposit, it is very important to be careful whom the funds are paid to. If you are purchasing through a private sale and no realtor is involved, never pay the funds directly to the vendor; pay them to your own lawyer in trust.

If a realtor is involved, the funds can be paid to the realtor’s trust account or your own lawyer’s trust account as the situation dictates. If you are purchasing a new condominium from the builder, do not pay a deposit directly to the builder unless it is held in trust by the builder’s lawyer or real estate agent. The money should go to your lawyer’s trust account, or some other system should be set up for your protection ensuring that your funds cannot be used except under certain conditions as clearly set out in the agreement,

Another matter you have to consider is payment of interest. If you are paying a deposit, you want to ensure that interest at the appropriate rate or based on the appropriate formula is paid to your credit. In many cases, deposit monies can be tied up for many months, or in a condo presale situation for many years. These delays could represent considerable amounts of interest.

Conditions and Warranties
It is important to understand the distinction between conditions and warranties, as it is very critical to the wording that you would be using in the agreement. A condition is a requirement that is fundamental to the very existence of the offer. A breach of condition allows the buyer to get out of the contract and obtain the full amount of the deposit back. An inability to meet the condition set by a vendor permits the vendor to get out of the contract.

A warranty is a minor promise that does not go to the heart of the contract. If there is a breach of warranty, the purchaser cannot cancel but most complete the contract and sue for damages. Therefore if a particular requirement on your part is pivotal to your decision to purchase the condominium or not, it is important to frame your requirement as a condition rather than as a warranty. Both vendors and purchasers frequently insert conditions into the agreement, sometimes referred to as subject clauses. You can see why the services of an experienced real estate lawyer are important to protect your financial interests.

Risk and Insurance
It is important that the parties agree to exactly when risk is going to pass from the vendor to the purchaser. In some cases the agreement will state that the risk will pass at the time that there is a firm, binding, unconditional purchase and sale agreement. In other cases, the contract states that the risk will pass on the completion date or the possession date. In any event, make sure that you have adequate insurance coverage taking effect as of and including the date that you assume the risk. The vendor should wait until after the risk date before terminating insurance.

When selecting recreational property for investment purposes, there are specific cautions you need to research when doing your due diligence that could impact negatively on the quality of your investment property. Whether you are buying a vacation home for rental purposes only, a combination of personal use and periodic or seasonal rentals, or personal use with a long-term hold plan, the following points are applicable in many purchase scenarios. Some of the categories relate to single family homes, and others to resort condos. In all cases, you need a local real estate lawyer familiar with the area to research the issues on your behalf.

For more information on tax, legal, and estate planning strategies, and upcoming seminars on the topic of Buying Vacation Property for Pleasure or Profit, refer to www.homebuyer.ca.

Local Zoning and Building Restrictions and Opportunities
Check for restrictions on use and other matters. For example, is there a community plan? What type of zoning bylaw is there, and is it subject to change? Is there a rezoning potential for higher or different use? Is there a land-use contract? What about non-conforming use of older or revenue buildings? If you want rental revenue to help pay for your annual expenses, or as an investment property, are nightly or weekly rentals to tourists permitted for your house or condo? Are you restricted to seasonal use? Is there a limit on mobile homes permitted on the property at certain times of the year? Are you restricted from constructing other buildings on the property?

Municipal Taxes
On what basis is the property annually assessed for tax purposes? If a condo property, is it zoned commercial rather than residential? If the former, the property taxes could be three times the residential rate. Many condos in hotels or in core areas are zoned commercial or could be at some future point. Have your lawyer check this issue out thoroughly, as it will have a dramatic impact on your bottom line.

Property Management Are property rentals restricted to a specific property management company, or do you have complete autonomy which company you use? If you are restricted to use the company designated by the developer, what are the terms and do the numbers work for you. Can you rent out the property yourself? Are you obliged to put your property in a rental pool for a fixed period of time each year?

Right of Way
This generally means a statutory (legal) right for certain companies, Crown corporations or government departments to use or have access to part of your property. Examples include hydro, telephone, sewer, drainage, dike, and other public access purposes.

Easement
An easement is similar to a right of way, but normally is the term used when one neighbour gives another neighbour the right to use or have access to a piece of land, e.g., permission to reach a waterfront by crossing a neighbour’s land. This agreement is put into writing and filed in the nearest land titles office. Alternatively, there could be an easement by the municipality to give access to the public to the lake or river.

Restrictive Covenants
A restrictive covenant limits the use of a property for the benefit of another property, the municipality, or the provincial or federal government (the Crown). These restrictions can include such matters as the number and location of buildings, cutting of trees, septic fields, subdivision of the land, and allowable uses of the land. A builder could also place a restrictive covenant on the property.

Building Schemes
This document is registered by the builder on all lots in the subdivision. It controls such matters as size and location of buildings, and the number of buildings permitted. It can also control the materials used on the buildings (e.g., all shake, shingle, or metal roofs), and sometimes the type of landscaping required. The intent is to have consistency in the appearance of the development.

Waterfront Boundaries and Restrictions Properties bordering a water body such as a lake, river, stream, or ocean have special boundary issues you need to research. When you have a survey of land, you have precision. A natural water boundary lacks this type of precision, so there are various tests and formulas used to determine where private property ends and where the government rights begin (i.e., Crown land).

You need to check on what local, provincial, or federal restrictions there are to regulate the use of marine areas adjacent to private property. The purpose of these provisions is to control the construction and use of private floats, breakwaters, docks, sea walls, and the commercial or industrial use of the foreshore.

In these scenarios, the government concern is that the above types of structures or use could impair the aesthetics of the view from the land and sea, or impede the ability of the public to walk along the foreshore.