Opening Doors

Before you ask...

In the course of purchasing your new home, you will have many questions - some questions are asked of us so regularly, we thought we’d answer them before you ask.

 

If the property taxes included in the mortgage, why is there a tax adjustment as a closing cost?

 


On closing, the property taxes will be adjusted between you as a purchaser and the seller.  If you have also arranged to pay your property taxes with your regular mortgage payments, the mortgage company will separate out the tax payment and place it in a special tax account to your credit.  The money will accumulate over time so that there will be enough money collected to pay the next tax bill.  Remember, taxes are billed twice a year.  If your closing date is closer than six months from the next tax bill, there will not be sufficient time to accumulate a sufficient sum in the tax account at the mortgage company for payment of the bill.  As a result, mortgage companies may ask for a lump sum of money from you on closing which will ensure they have enough in the tax account to pay the next tax bill.  This amount is often referred to as a tax advance or tax holdback.

 

What is a location certificate and why do I need a new one?


A location certificate is one type of survey product prepared by a Nova Scotia Land Surveyor.  Sometimes it is incorrectly referred to as a plot plan or survey.  It is a diagram showing the location of the house on the land in relation to the boundaries of the land as described in your deed.  A lawyer can not give you any information as to whether the home you purchased is on the land that the owner is selling to you.  The reason for this is that your lawyer can only search records at the Registry of Deeds which relate to the history of ownership on the land, or the “roots”.  The deeds which relate to the property you are buying make no reference to any buildings on the land.  That is the job of the surveyor.  The surveyor visits the property to make sure the house you have contracted to purchase is wholly within the boundaries of the seller’s land, to make sure no one else’s home is located on the land you are purchasing and to show location of driveways, fences and other physical features which relate to the extent of ownership of the property.

 

Purchasers should be cautioned that the surveyor is not guaranteeing the length of the boundaries or exactly where they are located.  If the purchaser wants that information, a boundary survey should be conducted.  However, the cost of a boundary survey is greater than the cost of a location certificate.

 

The mortgage company requires the purchaser to obtain a location certificate because the mortgage company is loaning the money based on the value of the land and building.  The mortgage company is therefore as anxious as you are to make sure the home you are buying is on the land described in the deed which you will receive from the seller.

 


If you rely on a location certificate prepared by a surveyor for someone other than yourself, (for example, a previous owner) you will have no recourse against that surveyor if a mistake is discovered at a later date.  If the location certificate is not a recent one, it may not reflect changes which may have been made to the property or to a neighbouring property since it was prepared.

 

Therefore, it is always advisable to obtain a new location certificate, certified to you, as minimum protection.  Your lawyer will arrange for the surveyor to attend the property to prepare the location certificate.

  

 

Title Insurance

 

An alternative to securing a location certificate would be to consider a title insurance policy.  Title insurance will insure over the possibility of a someone else claiming a legal interest in your property.  It can compensate against pre-existing municipal work orders, frauds, and forgeries which can affect the legal ownership of the property.

 

Mortgage lenders require an up to date survey of the property as a condition of the mortgage, or in the alternative, if there is no location certificate, they will accept in lieu of a location certificate,  title insurance.


To purchase a title insurance policy, ask your lawyer.  The cost of the policy is a one-time premium and the policy protects your investment for as long as you own the policy.  The cost of the policy varies based on the purchase price of your property.

 

 

 

What is “Migration”, the Land Registration System, and how does it affect the purchase and sale process?

Every transaction which transfers property ‘for value’ will trigger a requirement for the property to be registered into the new Land Registration system. Under the current standard language in agreements of purchase and sale, it is the responsibility of all sellers to “migrate” their property prior to sale.  Only a lawyer authorized to work in the new Land Registration system is permitted to ‘migrate’ your property on your behalf.  Ask your lawyer to review with you your ‘parcel register’ which will contain the details of the ownership rights, and other interests that affect your new property. 

 

 

What about HST?

 


The standard form of Agreement of Purchase and Sale provides that any Harmonized Sales Tax payable on the property is added to the purchase price unless the contract states otherwise.  HST is payable on new houses and substantially renovated houses and in some other situations.  The standard form of agreement provides that if no HST is payable, the seller will provide you with a declaration to that effect on the closing date.  HST is calculated at the rate of 13% of the purchase price before applicable rebates.  If your purchase price includes HST and if you are assigning any applicable rebate to the builder, identify that portion of the purchase price that consists of HST in your agreement.  If you are buying a home that has obviously been lived in and used, you need not be concerned about HST as an additional amount to be paid, but it may be prudent to declare your intent, that your price offered includes any HST that may be payable in connection with the transaction.

 

 

 

What are restrictive covenants and how will they affect my ownership?

 


Restrictive covenants, often called building restrictions are conditions which attach to the property you are buying.  Many subdivisions contain restrictive covenants which are a method of land use control.  When a large tract of land is about to be subdivided for residential subdivision, the developer usually wants to ensure that the character of the subdivision is preserved.  The company will usually develop a scheme placing certain common restrictions on the use of the lots to ensure homogeneity of construction and hopefully preserve future value.

 

For example, a restrictive covenant may provide that:

Ø         you can’t raise hogs, cattle or sheep on your property;

Ø         the buildings constructed on the lots must be a minimum size; or

Ø         the property may only be used as a single family residence and not for the purpose of any business or trade.

 

Once restrictive covenants are put in place by a developer they attach to the property or “run with the land”.  If the restrictive covenant is breached by an owner, the remaining owners of the subdivision have the right to enforce the restrictive covenant. Although there may be similar municipal by-laws which also protect the owners, the restrictive covenants are private as between subdivision owners and can only be enforced by them.

 


Under the standard Agreement of Purchase and Sale, you cannot object to the existence of these restrictive covenants before you buy unless they materially affect your enjoyment of the property.  Your lawyer will provide you with any restrictive covenants from the title search, or if you are buying a new subdivision your agent will likely have a copy of the restrictive covenants that will be created with your purchase.  Take time to review them to ensure you are satisfied that they will not unreasonably restrict your use of the property.

 

 

 

What happens on the closing date?

 


This is not intended to be a reference to the day on which you close all your bank accounts, rather, this is the day on which you pay for the property and take possession of it.  Your lawyer will calculate the approximate amount you will need as soon as possible after you sign the agreement.  The exact amount is available shortly before closing.  The money required on closing day must be paid by a certified cheque or bank draft made payable to your lawyer’s firm “in trust”.  The mortgage company will sent your mortgage funds directly to your lawyer, and so on the closing day, your lawyer will have all the funds required to purchase your property on your behalf.  The cheque to pay the seller will be made by your lawyer to the seller’s lawyer once you have signed the mortgage to their closing documents.  Your lawyer will write the cheques for payment of other closing expenses such as:   Deed Transfer Tax, recording of the Deed and Mortgage at the Registry of Deeds and all other closing costs.  Your lawyer records your Deed and the Mortgage at the Registry of Deeds after the closing and will report in due course to you and the mortgage company.  You will receive your original Deed back from your lawyer once the Registry of Deeds has recorded it, kept a photocopy of it for permanent records and it has been microfilmed.

 

AND SO WITH KEYS IN HAND....

 

The movers have arrived, the power is connected and you have your keys in hand.

 

                                                                                       WELCOME HOME!!!!!