Real Property Outline – Curran – Spring 2011
NOTE: How to approach a contract:
1) Is there a contract?
a. Did the parties intend a contract to be formed?
b. Was there offer (not just a letter of intent), an acceptance to the offer, and some consideration?
i. If acceptance amended a term to offer, it is a counter-offer
ii. Consideration: Deposit on purchase price constitutes consideration
c. Elements of a contract must be present:
i. Fundamental elements: parties, property, price
ii. Conditions and terms must not be so vague that the contract is uncertain
2) Is the contract enforceable?
3) Deposits: Look at deposits after determining whether contract is enforceable – different results if k is not.
How to approach a Question:
1) Look at contract itself: SFK, Property Disclosure Statement
2) Legislation, real estate counsel rules and RESA, LTA, Law and Equity Act
3) Cases: General principles from cases, specific cases to deal with particulars.
Definitions:
- Conveyance: Actual instruments used by which ownership or an interest in the land is transferred from one party to another – the documents used to transfer land. Includes the documents being prepared and executed.
o Moment of conveyance is the transfer of executed and signed documents.
- Encumbrance
o Burden on title that limits fee simple: any charge, lien, mortgage, judgment, covenants, and easement.
o Prevents the vendor from having clear and free title.
- Covenant: Positive or negative promise to do or not to do something – CL only recognizes restrictive covenants
o Registered on title, run with the land and binds successive purchasers
o Can apply to have a covenant discharged
o Examples: Covenants restricting height of buildings, restriction from cutting down certain trees.
o S. 219 Land Title Act recognizes statutory covenants
- Easement: Party with an easement over land has a right to do something on that land for a particular purpose.
o Ex. easement to access an adjoining property, for utility and sewage line, for entry onto property to make repairs.
o Registered on title and run with the land. Party does not own the easement, but owns the ability to use the land for the specified purpose.
- Lien: Encumbrance on the property used as security for payment of a debt or a claim of a debt
o Notifies potential buyers of financial outstanding dealings that the property will be implicated in
o Vendor must discharge the lien before the conveyance – otherwise the purchaser will obtain a property with an outstanding lien on it
The Real Estate Market and the Business of Law
Causes of high solicitor liability:
- Residential real estate law is leading area for claims from the Lawyer’s Insurance Fund
o Policy coverage: Coverage for insured lawyers in BC. Claims reported to Lawyer’s Insurance fund, and if they are within the deductible, the lawyer can avoid repercussions.
- Communications: Failure to consult with and receive instruction from client, breakdown of communication with legal assistant and lawyer, failure to inform client of charges on title, failure to receive and fulfill undertakings
- Oversights: Sloppy practices – not great moneymaker so lawyers take shortcuts to speed process - fail to confirm dates, send documents, confirm contract, notice charges on title or hold backs on purchasing price, drafting errors, improper searches
o the world subject to exceptions – such as subject to property tax.
- Unmanageable risk (aka fraud)
- Legal issues – changing law and changing approaches (ex new ability to e-file)
- Engagement Management Failure in managing and meeting expectations: Client expected lawyer to do something that they had not undertaken to do
- No trail of communication or confirmation of instructions or changes or instructions: Confirmation of title, changes in instruction must be in writing
Lawyer Oversight: How lawyers are regulated
- 1. Legal Professions Act: Establishes Law Society BC, which establishes how lawyers will be certified, how they will conduct themselves. Attached to Lawyer’s Insurance Fund.
- 2. Law Society Rules: Sets out how you become a member, disciple procedures, how Law Society is governed
- 3. Law Society of BC: Residential Conveyance Procedure Checklist: Procedure for residential conveyance (initial contract, review validity of purchase contract, search title in LTO, consult with client and obtain instruction, follow up with client, obtain freehold transfer, closing, post-closing procedures.
- 4. BC Real Estate Practice Manual: Reference forms and Precedents for conveyance matters
- 5. Professional Conduct Handbook: Chapter 12: Statement of how lawyers are to conduct themselves in their dealings, general canons of legal ethics, specific rules.
o Lawyers can hire employees, must lawyer must maintain contact with client at all times, must directly supervise employees, must maintain actual control of the files.
o Legal assistants can be delegated tasks, but lawyer maintains full professional liability.
o Paralegals can draft documents, cannot review documents before signing or review search reports.
o If lawyer is realtor and lawyer – lawyer can show the property, can held execute necessary documents
Regulatory Context: Context in BC – Aboriginal Rights and Title, Torrens System
Aboriginal Title
- Unextinguished Aboriginal title and rights on BC land
- Recognition of Aboriginal rights by courts: entitlements to use or ownership of land is a pre-existing legal right that is not constitutionally protected by is not recognized by statute.
- Aboriginal title – unique proprietary interest arising from prior use and occupation of land that confers exclusive use and occupation to the land. Can be infringed but not extinguished by the Crown (burden on Crown title) (Delgamuuk v BC)
- Aboriginal title is not registrable in the BC LTO (Uukw v BC)
- Cannot register encumbrances on existing land:
o Decision to refuse to register a certificate of pending litigation (challenge to fee simple transaction on basis that Ab title exists on the land) upheld (Skeetchstn v BC)
- Title claim failed on technicality, but in obiter judge held that the Ab band had title on 200 hectares of land that has not been extinguished by private land conveyance of fee simple title. (Tsilhgot’in Nation v BC, 2007)
- Indian reserves not party of Torrens system, but some FN through special acts of Parliament have opted into Torrens system.
Colonial Torrens System
Land Title Act
- Purpose of Torrens System: Certainty of title and transparency allows us to easily enter into land transactions without worrying about charges on title
- Facilitates transfer of land: Title search shows all encumbrances on title in central location; no need to search anywhere else.
- S. 20: Unregistered instrument does not pass: Instrument must be registered in compliance with the LTA in order to operate a transfer or charge land.
- Indefeasible title: Registration of certificate of title is conclusive evidence that the person named on title is indefeasible entitled to land in fee simple. Ownerships is against the world, regardless of past encumbrances and ownerships (S. 23)
o Subject to certain qualifications: Crown dispositions (municipal taxes, public easements, rights of expropriation, etc.)
- Title obtained through registration – instruments must be registered to have an impact on title (S. 20)
- Registered indefeasible title owner is protected against actions for the recovery of land, absent narrow circumstances (S. 25)
- S. 22: Instrument is effective as from the time of registration, regardless of the date it was executed
- Charges: Registered owner of a charge less than fee simple is deemed to hold a valid interest in the land (S. 26)
o Registration of the charge gives notes of the interest on which the charge is registered (S. 27(1))
o If there is a mortgage on title, the vendor must deal with the mortgage before he can transfer land (S. 27(2))
- Priority of competing charges is based on date and tile of registration (S. 28)
- Notice is irrelevant for land transfers: All instruments must be registered on title – Except in the case of fraud, anyone taking land from a registered owner is not affected by unregistered interest (S. 29)
- S. 24: Title by prescription abolished
- S. 33: An equitable mortgage or lien is not registrable
Strata Property Act
- Sets out particular special rules for common lands and common assets provided for the creation of legal division of parcels called strata lots
- Each owner has ownership in fee simple in their own particular unit, and everyone owns the common property as property in common (halls, landscape).
- Government structure – strata council – rules for common property, creates by-laws
Property Law Act
- Contains substantive law
Family Relations Act
- Spouse who is not registered on title may be given rights to title
Fraudulent Conveyance Act & Fraudulent Preference Act
- Cannot assist someone to convey land if the purpose os to defraud creditors
- Chapter 4 Rule 6 Professional Conduct handbook: Lawyer must not engage in conveyance that they know is fraudulent/purpose is to defraud creditors.
BC Residential Conveyance Procedure Checklist: Steps in a Conveyance
- Purchaser’s lawyer often acts for the purchaser and for the bank (who provides the mortgage. Purchaser’s lawyer has responsible to:
o 1) Gather information: Search title, collect financing information, search tax holdbacks, etc.
o 2) Prepare and execute documents – confirm with client
o 3) Effect the conveyance: receive funds, register documents, pay out funds.
- Purchaser’s lawyer will use Checklist – checklist identifies issues that must be addressed – HST, client identification and verification, restrictions on handling cash, Aboriginal rights
- Checklist identifies rsks:
1. Initial Contact
- Client identification and verification rules: satisfy yourself that the legal identity of purchaser is such so that they could continue with the conveyance, confirm terms of your retainer – see Law Society report.
o Generally over the phone
- Retainer agreement: Establish parameters of what you will and wont’ do for the client, cost, client instructions – confirm terms of retainer.
o Send letter to client regarding these terms – limits liability.
- Consider conflict of interest problems.
- Obtain and review purchase agreement for whether it meets form requirements, problems with the conveyance.
2. Review Purchase contract and property disclosure statement/Client Interview to discuss particulars
- Ensure valid/enforceable contract, discuss any deficiencies with the client
- Adjustment date must be defined:
o Date when all the financial matters to do with the property switch from the purchaser to vendor, and the vendor is not longer responsible for taxes/insurance. Purchaser takes on responsibilities.
- Confirm requirements for chosen method of financing
- Confirm property size, price, secure dates.
- Determine whether there are any unwritten representation or warranties – anything no in the contract that is important to the client.
- Address zoning concerns, problems under FRA, and environmental considerations, whether a survey certificate is necessary.
3. Search title
- Due diligence for whether title is marketeable – clear and free of encumbrances (with only those encumbrances purchaser is ok with).
- Obtain a search of property (Land Title Search) and a plan of the property from the LTO,
- Ensure registered owner on title is same as vendor on the contract
- Determine level of tax that will be applied on property, confirm with client
- Review the purchase contract with client to ensure they understand and that it embodies everything that they think will happen during the conveyance
4. Follow-Up from Interview and Title Search
- Send client a letter summarizing everything (state of title, etc)
- Contact vendor-solicitor, confirm closing procedure
- Financing: If mortgage on title for purchaser to assume, assume it is assumable, otherwise order payout statement to discharge mortgage.
- Discuss any encumbrances with vendor’s lawyer
- After discussion with vendor’s lawyer, confirm everything in a written letter
5. Prepare Documents
- Forms for land transfer, for charges, for mortgage documents, tax return Statement of adjustment: Shows exactly who owes what at what point in time
6. Matters before Closing
- Ensure all searches have been returned and reviewed
- Undertakings: Chapter 11 Rule 8 and 8.1 deemed undertakings
o Establish appropriate undertakings for closing with vendor’s lawyer, obtain client’s consent.
- Obtain mortgagee’s consent and assume mortgage
- Execute all documents with client, receive necessary funds to complete.
- Deposit funds in trust account.
7. Registration
- Arrange for registration of Land Title documents in LTO.
8. Closing procedures
- Conduct post-registration index search to ensure on intervening charges or encumbrances.
- Request and obtain funds from mortgagee’s solicitor.
- Pay out balance of the funds to seller, real estate agent, mortgagees, tax authorities.
- Obtain and register and discharges of mortgage
- Obtain certificate of title.
- Report to your client on registration.
9. Post-closing
- Transfer funds from trust account to pay fees and disbursements
- Pay any holdback amounts after appropriate confirmation.
- Ensure the lender has repaid mortgage and dischar
- Present final report to your client, enclosing certificate of title.
- Close file, retain it for a reasonable period (10 years is the requirement under Law Society Rules)
LIMIT LIABILITY:
- Keep paper trial of what was said and agreed to and have this confirmed by client
- Continue to do title searches along the way to ensure clear title.
MARKETING THE PROPERTY
- Licensees represent either a vendor or purchaser
- Vendor’s licensee: provide an estimate of the value of the property, advertise the property using mechanisms such as MLS, and negotiate the terms of sale on your behalf
- Purchaser’s licensee: seek property that you would find desirable, advise you on merit of the property, advise you on how much to offer, negotiate purchase terms, arrange financing
o Purchaser’s licensee creates the contract for purchase and sale – will execute documents, will use Checklist (above)