At the bottom of the signature page of a real estate sale contract, more correctly called an Agreement of Purchase and Sale (APS) - whether buying or selling, is an area where the parties to the contract affix their signatures, address, phone number and lawyer's contact information.
By signing, the parties are simply acknowledging receipt of a true copy of the real estate contract, which is legally necessary to form a binding contract between the parties.
When you buy a home, you obviously require a down payment. Unless you have sufficient cash to pay the entire purchase price, you'll also require a mortgage.
A deposit is submitted with your offer upon acceptance of your offer by the seller. This deposit is credited toward the purchase price on completion (closing) as part of your down payment. The balance of your down payment, in addition to the full mortgage advance from your lender, is also paid to the seller on closing and adjusted to reflect such things as prepaid property taxes, monthly condo fees or fuel oil.
This document is used when one or more of the terms of your real estate contract require changing after it's been executed by both the buyer and seller. Real estate clauses, the price or completion date may be deleted, inserted or altered. To be legally valid, it must be signed and dated by all parties to the agreement, with each receiving a true copy prior to the irrevocable (expiry) date of the amendment. It's also preferable to have signatures properly witnessed.
Chattels and Fixtures
In a typical APS, items such as appliances, carpets, plug-in electric lights, pool tables or curtains are often, but not always, included in the contract. As these are movable and not physically attached to the property, they are referred to as chattels. And unless specifically mentioned as being included in the contract, they are automatically excluded.
Fixtures, on the other hand, include such items as furnaces, air conditioner systems, drapery tracks, and built-in appliances, installed broadloom, hard-wired electric lights, garage door openers, owned security systems and satellite dishes and attached swimming pool equipment. Anything that is physically attached to the property is automatically included in the purchase unless specifically excluded in the real estate contract.
Chattels, however, must be written into the agreement to be included in the sale, otherwise, they're automatically excluded from the sale.
Rental items, such as hot water tanks, water softeners and sometimes furnaces and air conditioners are excluded from a sale because a seller has no right to sell them. The buyer must agree to assume the rental contract(s) as part of the agreement. If there's no reference made to rental items, a problem could arise after closing when the rental company demands payment. If unpaid, they typically have the right to remove their equipment from the property or, depending on the terms of the rental contract, go after the previous owner.
When a homeowner enters into a listing agreement with a real estate brokerage, authorizing the brokerage to market their property, the homeowner agrees, amongst other things, to pay the brokerage for its services by way of a commission, usually but not always calculated as a percentage of the sale price of the property. It could also be a flat fee, and is payable upon the date set for completion (closing) of the APS.
Confirmation of Acceptance
Once the negotiations of an APS are complete, the last party to affix their initials to the document must also add their signature, date and time on the appropriate line on the signature page. This confirms the final acceptance date and time from which the clock begins to tick for any time-related conditions that may be contained in the agreement.
When a buyer and seller enter into an APS, along with numerous other terms and conditions, the agreement must include a completion date when the balance of funds are to be paid by the buyer to the seller in exchange for possession and the transfer of clear title to the buyer. The more common real estate terminology for this is activity closing date.
Deposit vs Down Payment
This real estate terminology refers to monies submitted with or upon acceptance of an offer. It is often confused with the monies paid by the buyer on closing. It is not the down payment. It's usually made payable to the listing brokerage, held in their trust account and credited to the buyer on closing as part of their purchase price.
The deposit provides a level of comfort to the seller that the buyer will honor the terms of the agreement and close on the date agreed for completion.
Occasionally, a brokerage will represent both buyer and seller in the same transaction. Both parties must provide written consent to this arrangement prior to entering into any APS. Since the brokerage's loyalty is divided between each of the parties, who obviously have conflicting interests, it's absolutely essential that a dual representation relationship be properly explained, documented and acknowledged by all parties.
Since easements are extremely common, this real estate terminology rarely crops up in the home trading business. An easement, which is registered on title, is a non-possessory interest in real property owned by someone else to use for a specific purpose. Often, utility companies have easements in order that they may enter upon a property to service their equipment.
This real estate terminology refers to the unauthorized intrusion onto the lands and property of another.
The right to an encroachment by one landowner over an adjoining owner's property is sometimes granted by express written agreement. Examples are when a window sill, eave, deck, porch or chimney extends over a side yard area. This is particularly common in older urban areas with narrow side yards. When the overhang is no longer present, the encroachment ceases to exist. No right to substitute an encroachment exists if one is lost, except by further agreement.
An agreement permitting the encroachment of an improvement onto an adjoining parcel of land may be registered against the title of both properties affected by the encroachment.
Because the term of a condition pertaining to the sale of the buyer's property is typically longer than that of arranging financing, for example, it would be unreasonable for a buyer to expect a seller to accept an offer that included such a condition without an escape clause for the seller.
Typically, such a condition extends for a period of 30 to 60 days, during which time, the buyer is supposed to be aggressively marketing their home to fulfill this condition. If it weren't for the escape clause, the seller's home would be effectively off the market. However, with the escape clause, the seller may continue to market their home and entertain offers from other buyers.
This bit of real estate terminology is from a listing contract with a seller. It refers to the period following the expiry of the contract. The duration is agreed upon between the agent and the seller(s), but is typically 60 to 90 days.
For example, if the original brokerage commission was to be 5%, and the seller signs a new contract with a competing brokerage at 4%, and the property subsequently sells to a previously introduced buyer as described, then the seller may still be liable to pay the first brokerage a commission of 1% of the sale price plus GST.
An irrevocable date is always included in an offer to purchase or an amendment to an existing contract. If the recipient of the document fails to accept it during this open period, by affixing their signature(s), and prior to the irrevocable date, then the 'offer' effectively will expire. The offer cannot be legally revoked or withdrawn by the party making the offer once they sign it. But it is automatically revoked if not accepted by the recipient prior to this date.
Lawyer's Title Opinion
This is a service provided by a lawyer in the form of a letter stating the lawyer's view of whether or not a buyer has good and marketable title to the property. It includes search and inquiry results, along with any outstanding issues that may affect future title to the property.
In any real property transfer, including any and all documents pertaining to a transfer, the legal description must be included. This entails adding the municipal lot and plan numbers, possibly a block or reference plan number, or in the case of a condominium, the corporation, level and unit numbers. For a rural property, it would be the concession and lot or part lot numbers, possibly east or west half or something similar, approximate acreage and the frontage, depth and any irregularities of the lot or parcel.
Liens and Encumbrances
A lien is a form of non-possessory security interest granted over a property to secure the payment of a debt or performance of some other obligation. There are many types of liens, but most common are mortgages, secured credit lines, mechanics liens or those granted as security for installed rental equipment such as a furnace.
An encumbrance is a legal term for anything that affects or limits the title of a property, such as a mortgage, lease, easement, lien or restriction. Also, those considered as potentially making the title defeasible (voidable) are also encumbrances. For example, charging orders from a court on behalf of a creditor, or a work order from the local municipality can result in a title transfer not being fulfilled unless such order is satisfied.
The highest price in terms of money, that a property will bring to a willing seller if exposed for sale on the open market, allowing a reasonable time to find a willing buyer who is buying with the knowledge of all the uses to which it is adapted and for which it can be legally used, and with neither buyer nor seller acting under necessity, compulsion nor peculiar and special circumstances.
Market value is not to be confused with market price, which is an accomplished or historic fact, as the amount paid or to be paid for a property in a particular transaction. Market price tends to closely align with market value in an efficient market system involving willing, informed parties acting rationally and prudently and given reasonable periods of time with no undue influences. Successive market prices in the sale of comparable homes form the basis of estimating the market value of a particular property.
A mortgage loan is a loan secured by real property through the use of a document which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word 'mortgage' alone is most often used in everyday usage to mean mortgage loan. More simply stated, when someone with insufficient cash to pay the full price wants to purchase a home, they must borrow the needed balance from a credit union, bank or trust company (mortgagee). Mortgages can also be arranged with the services of a mortgage broker or agent.
When the parties to a contract, whether an APS, listing contract, BRA or lease, wish to terminate and release each other from a contract, they enter into a mutual release. When fully executed by all parties to the contract, this legally binding document, which sometimes includes the brokerage(s), effectively puts an end to the agreement.
In the case of an APS, instructions to the deposit holder (usually the listing brokerage) are included for the disposition of any deposit paid previously by the buyer. Usually, but not always, the deposit is returned to the buyer without interest or deduction.
Notice to Conditional Buyer
If a buyer submits an offer on a property that is conditional upon the sale of their present property, it'll include an escape clause for the seller. The seller will continue to market the property while the buyer is busy trying to sell their present home.
If the seller receives another acceptable offer, the seller can accept it, conditional upon being released from the APS they have with the first buyer. Through their agent, they deliver a Notice to Conditional Buyer (NCB) to the buyer, the buyer agent or to the buyer's address.
Once delivered, the buyer will have 48 hours or whatever time period was established in the APS, to either waive (remove) the condition or conditions (depending on how the clause was phrased in the APS) or execute a mutual release. If the buyer signs a waiver, they've bought a house. If they release, they're out and will receive a refund of any deposit paid.
Notice of Fulfillment
When a buyer submits an offer, it usually contains at least one condition and probably more, especially if they're buying a rural property. For example, time is needed to arrange a new mortgage or a home inspection. Once a firm written commitment from the lender or a satisfactory report from the home inspector is received, the document to sign is called a Notice of Fulfillment (NOF). This is delivered to and signed by the seller which acknowledges the condition(s) has been fulfilled and the purchase is now unconditional.
In common practice, however, many agents mistakenly use a form called a Waiver. This form actually just removes the condition from the APS and fails to state that the condition was fulfilled. The two forms ultimately accomplish the same result, but in a different way. If there's any conflict later, such as a misunderstanding regarding mortgage approval, a buyer agent might regret not having had the buyer execute the proper form in which the buyer confirmed they actually fulfilled the condition and didn't simply remove it.
Null and Void
In law, the real estate terminology of 'null' and 'void' mean of no legal effect. A transaction which is void is of no legal effect whatsoever or an absolute nullity. The law treats it as if it had never existed or happened. For example, when a condition for the benefit of a buyer contained in an APS is not fulfilled, the buyer declares the contract null and void or as having never existed.
Periodically, a homeowner receives a Notice of Assessment with a value applied to their property. The local municipality or tax authority determines the tax (mil) rate, which in conjunction with this assessed value, establishes the amount of property taxes payable for that property.
An assessment increase doesn't necessarily translate into higher taxes. And there are appeal options if the homeowner disagrees with the assessment increase.
A ROW refers to the right to pass over land owned by another party, more or less frequently, according to the nature of the easement.
Representations and Warranties
All contracts contain representations and warranties, which are basically the underlying matters or facts as they're being presented in terms of the contract.
When selling real estate, the sellers represents themselves to be the owners who have the legal authority to sell the property, and warrant that the property is as they represent it to be. A representation is defined as an account or statement of facts, allegations or arguments. They present everything from its past to present status and are created to induce someone to enter into a contract.
A warranty moves from the present to the future. In real estate, when a seller warrants something, they're promising that the 'item' is free of defects and will repair or replace it if found otherwise for a specified amount of time into the future. The warranty obligates the seller to the terms of the contract.
Warranties can be either expressed (written) or implied (verbal or assumed). Implied have less force in court. Thus, a buyer should insist on any warranty being expressed, that is written into the APS.
Used together, the terms 'representations' and 'warranties' are assurances that the seller gives to the buyer that the buyer can rely on as factual.
This real estate terminology involves the lawyer or closing service. A closing or completion date is the date when funds are exchanged for a transfer/deed and possession of the property.
A requisition date, often referred to as a title search deadline date, is the last date upon which a buyer's lawyer can require the seller to clear up any title problems. This may be important, especially if the buyer intends to mortgage the property. The lender will require clear title before advancing any funds.
Sheriff's Execution Search
This vital function is performed by the law office handling a closing. It's done for the current owners (soon to be previous), as well as all named buyers of the property, and discloses any unsatisfied judgments (claims) that may have been filed which may create a lien or interest in the subject property. If any of the parties to the transaction are aware of any judgments against them, they should inform their lawyer as early as possible.
Seller Property Information Statement
A SPIS (different monikers in different areas), a highly controversial document, is designed in part to protect sellers by establishing that correct information concerning a property is being provided to prospective buyers of their property. Such statements assists buyers in the decision-making process.
Under the Family Law Act, if a spouse is not named on the title to the property, the non-named spouse must consent to the sale by affixing their signature to the APS where appropriate, and to all other pertinent documents to give the sale full force and effect. It refers not only to married couples, but also common-law relationships, provided the non-titled spouse has resided in the property for a certain period of time as described in the act. Therefore, no spousal approval, no sale. Any transfers without such consent would be considered fraudulent.
This is real estate terminology employed in the purchase and sale of condominium property. When a buyer makes an offer on a condominium, they want to know they're not buying into an unhealthy corporation.
A SC is a brief report on the current financial and legal health of the corporation. When buying a resale condo, it's wise to include a condition in the APS, providing the buyer's lawyer the opportunity to review and approve this certificate.
It must also include a list of all contracts to which the condo is a party, such as management and maintenance contracts. A buyer may request copies of these contracts.
A buyer's lawyer will review the SC and all accompanying documents and advise their client on whether they should proceed with the purchase or abort it.
Under the Condominium Act, management is permitted 10 business days to prepare it and charges a fee of $100 including GST. Who pays this fee is negotiable.
The term 'survey' is loosely used - sometimes erroneously - to refer to a Survey, Surveyor's Real Property Report (SRPR) or a Reference Plan (RP).
An SRPR is a legal document that shows the location of all improvements (buildings, decks, pools, fences, etc) relative to the boundaries of the subject property. It usually includes an illustrated plan along with a written report of the surveyor's opinion regarding any concerns. In a real estate transaction, it may be relied upon by all parties to the transaction as an accurate representation of the property.
An RP is a graphical representation of a description of land and is necessary for a severance. It shows the boundary and dimensions and any physical or documentary evidence that could affect property title, such as the location of fences, hedges, retaining walls or overhead wires in relation to the boundaries. Evident or registered easements and rights-of-way would also be shown. Buildings and any improvements would generally not show unless they were used for boundary positioning or encroach on the subject property.
Survive and Not Merge on Closing
In an APS of real property, a buyer usually wants assurance that any chattels or fixtures included in the agreement will be in good working order when they take possession. They want to know that what they're paying for will be as represented by the seller.
However, once a transaction is closed, when the transfer/deed has been exchanged for the closing funds, the realty sale is completed. And so are all the obligations by both parties. Under the Doctrine of Merger, all obligations have merged or have been fulfilled, completed and satisfied unless some provision was included in the contract.
To provide a buyer with assurance that any seller warranty in the contract will be effective, the buyer must insist that some reference for a warranty to survive closing be included in the real estate contract.
An insurance policy typically offered to a buyer by their lawyer, it is designed to protect against certain undesirable situations that might limit or affect the use, marketability or forced removal from the property. Example could be surprise restrictive covenants, zoning, location on conservation authority lands, a building encroachment onto adjoining property, defects which would be discovered by a local authority search, improvements built without a permit, a future forgery claiming an interest in the property, future construction of an encroachment onto the lands or matters which would be revealed by an up-to-date survey. Also, taxes, special assessments, utilities and condominium arrears may be covered in most title insurance policies.
Title insurance can simplify real estate transactions. For example, a policy may eliminate the need for an up-to-date survey, thereby saving money for a buyer, and possibly avoiding closing delays. Title insurance is often promoted as a method to avoid last minute title defect problems that could destroy a sale. Advocates cite the benefit of title insurance for a lender, who receives certain assurances.
Title search is the process normally performed on a purchase of real property, or when an owner wishes to mortgage his or her property, primarily to ensure that a seller has the right to sell or transfer a property. It provides information regarding any restrictions or allowances pertaining to the use of the land, such as real covenants or easements. Also, if any liens exist on the property which need to be discharged at closing, such as mortgages, municipal tax arrears or mechanic's liens. It's completed prior to closing and before the Requisition Date included in the APS.
Since documents concerning conveyances of land are a matter of public record, anyone can perform a title search. However, it's advisable to hire a title company or lawyer to conduct an exhaustive search. A title report may show recorded legal rights to the property such as a right to share a driveway given by a previous owner to a neighbor. Or the municipality may have the right to strips of the property for installation of power or communication lines or water or sewer pipes.
This real estate terminology refers to a property, usually occupied by the homeowner or tenant, that is for sale on the understanding that the present occupants will vacate (move out) prior to completion. The seller must remove all chattels not included in the APS. The buyer can move into the property immediately upon closing. The same applies at the end of a tenancy.
When a property is sold subject to an existing tenancy, such as when an investor buys a tenanted property and agrees to assume the tenant, then vacant possession will not apply. Or there may be part vacant possession with only certain rooms, levels or a basement apartment occupied by a tenant.
If a buyer wishes vacant possession of a property that is currently tenanted, they may not be able to evict the tenant, and certainly not prior to closing since the buyer is not the landlord. The buyer will have to appoint the seller - in writing - to act as their agent to provide the tenant with appropriate notice to vacate. Even then, the tenant may not comply.
When a buyer purchases real property, the offer often includes conditions to facilitate such requirements as arranging satisfactory financing, a home inspection, well water portability test or to sell their present property. When such conditions are fulfilled, they may sign a waiver form which effectively removes the condition(s) from the APS. Technically, if the condition has actually been fulfilled, the correct form to execute would be a Notice of Fulfillment of Condition, but waivers are often used erroneously in its place.
A waiver would be used correctly if the buyer wanted to remove a condition if that particular condition had not yet been fulfilled. For example, if the buyer decided not to pursue a home inspection even though they had the right to do so, they would sign a waiver.
These are rules established by various levels of government for controlling the usage of specific parcels and individual lots of land and set aside land for certain predefined purposes. In an urban area, for example, some land is zoned residential and some commercial. If one wishes to sell or buy property in an area, how the property is zoned, be it commercial or residential, could be an integral component in the decision process. Each zone type, sometimes referred to as a zoning district, has its own set of restrictions regulating how such type may be used.
One of the main functions of zoning requirements is to ensure that adjacent lands have compatible uses. Most people would not want a noisy, unsightly factory next to their home. Each zone type has its own restrictions regarding the kind of activity that can occur within its boundaries to ensure compatible activities.