Are you aware of instruments on your title or on a title you are looking to purchase that may affect what you are allowed to do with the land and buildings? Here is an interesting read from the Calgary Herald regarding restrictive covenants and how they may impact you. Cameron Horne Law Office can provide you with legal advice on the removal of restrictive covenants, and the likelihood of having the covenant removed. We have made many of these court applications and have the experience to review the title, make the application, as well as complete the purchase or sale of the land. Please contact our office should you have any questions or wish to discuss this matter in detail.
View the article here: http://calgaryherald.com/life/swerve/suite-nothings-restrictive-covenant-dashes-laneway-retirement-house-dreams
We recently had the pleasure of working with Joely Sorensen and Krista McIntosh on the incorporation of their new business, Activate Human Resources Corp. Here they are with their newly signed minute book.
Cameron Horne Law Office provides legal advice and services on incorporation, unanimous shareholders agreements, joint venture agreements, annual corporate filings and resolutions with respect to small business corporate matters.
Please contact us if we can be of assistance to your business.
An element of the 2015 Alberta budget which will affect home buyers is the scheduled increase in registration fees at the Land Titles Office for registration of Transfers of Land (“Transfers”) and mortgages. The increased fees will have significant impact on the cost of closing a real estate purchase.
For context, the fees for registration of Transfers and mortgages are based on a sliding scale formula, relative to the declared value of the purchased land (and buildings) and the amount of the mortgage (or line of credit) to be registered against the title of the land.
Currently, and prior to July 1, 2015, the Land Titles Office registration fees for both Transfers and mortgages are calculated as follows:
$50.00 plus $1.00 for each $5,000.00 of the declared value of the land and the amount of the mortgage.
For example, if a purchaser pays $500,000.00 for the land and buildings and provides a mortgage for a loan of $400,000.00, the Land Titles registration fees will be calculated as follows:
Transfer: $50.00 + $100.00 = $150.00
Mortgage: $50.00 + $80.00 = $80.00
For land transfers and mortgages registered at the Land Titles Office after July 1, 2015, the fees will be increased dramatically, as set out in the recent provincial budget. The calculations will still be based on a sliding scale, but as follows:
$75.00 plus $6.00 for each $5,000.00 of the declared value of the land and the amount of the mortgage.
Using the same purchase example as above, the registration fees after July 1, 2015, will be calculated as follows:
Transfer: $75.00 + $600.00 = $675.00
Mortgage: $75.00 + $480.00 = $555.00
It is important to note that these increased fees will only affect purchasers, as the current standard real estate purchase contract requires the purchaser of real property to pay the costs of registering the Transfer and mortgage. Sellers of real property will not be affected by this increase in registration fees.
The result of these increased fees may have a number of impacts on purchasers.
First, some lenders require a purchaser to show that they have sufficient financial resources to meet the closing costs of a purchase. This may be a factor for some purchasers, especially when CMHC, or other mortgage insurance providers, are factored into the equation. This may have an negative impact on mortgage lenders approving financing, and prospective purchasers are advised to ensure that they include a financing condition in their purchase offers.
Secondly, there will be a perception that law firms are dramatically increasing the costs of closing purchase transactions. This will be true, but the increased “cost” to the purchaser will reflect the increased Land Titles registration fees. Those costs are paid by real estate law offices, upon registration, and recovered from purchase clients when the file has been finalized.
Cameron Horne Law Office does not intend to increase our legal fees (the fees paid to our office to prepare the purchase documents) for the foreseeable future, but the funds our clients will be requested to bring in for closing will increase due to the additional Land Titles registration costs.
While of little consolation to purchasers of real property in Alberta, the increased registration costs still remain the lowest in western Canada and Ontario. The attached chart shows the registration costs for the same hypothetical transaction as discussed above ($500,000 purchase price, $400,000 mortgage) for all provinces from BC to Ontario. As a reminder, the “new” Alberta registration costs will be $1,230.00. Registration costs in other provinces range from $1,650.00 in Saskatchewan to $12,200.00 in the City of Toronto.
A solution could include negotiating a provision into the purchase contract whereby the seller will contribute to the registration fees by reducing the purchase price by an amount that will lower the registration costs to assist the purchaser.
COMPARITIVE LAND REGISTRATION FEES / TAX
Purchase of $500,000.00 house with $400,000.00 mortgage
|Transfer:||$75 plus $6.00 / $5,000.00 declared value||$ 675.00|
|Mortgage:||$75 plus $6.00 / $5,000.00 declared value||$ 555.00|
|Transfer:||1.0% on first $200,000.00||$2,000.00|
|2.0% on the balance||$6,000.00|
|Transfer:||$3.00 / $1,000.00 declared value||$1,500.00|
|Mortgage:||$150.00 flat rate for up to 4 titles||$ 150.00|
|Transfer:||0.0% on first $30,000.00||$ 0.00|
|0.5% from $30,000.00 to $90,000.00||$ 300.00|
|1.0% from $90,000.00 to $150,000.00||$ 600.00|
|1.5% from $150,000.00 to $200,000.00||$ 750.00|
|2.0% over $200,000.00||$6,000.00|
|PLUS $70.00 flat fee||$ 70.00|
|Ontario (outside Toronto)|
|Transfer:||0.5% on first $55,000.00||$ 275.00|
|1.0% from $55,000.00 to $250,000.00||$ 1950.00|
|1.5% from $250,000.00 to $400,000.00||$2,250.00|
|2.0% over $400,000.00||$2,000.00|
|Toronto (Ontario base charge PLUS):|
|Transfer:||0.5% on first $55,000.00||$ 275.00|
|1.0% from $55,000.00 to $400,000.00||$ 3,450.00|
|2.0% over $400,000.00||$ 2,000.00|
The New Home Buyers Protection Act
By: Geoffrey Horne, Cameron Horne Law Office
As of February 1, 2014, any new home built in Alberta must comply with the provisions of the New Home Buyers Protection Act (the “Act”), which sets out mandatory warranty coverage for new home construction, or substantial renovations to existing homes. For purposes of this discussion, we will be focusing on single family home construction. The Act provides for coverage of condominium common property, which will not be discussed in this paper.
The Act applies to new construction for which Building Permits have been issued by a municipality on February 1, 2014, or later. Any new homes for which Building Permits were issued before February 1, 2014, are not subject to the provisions of the Act, and are subject only to any warranty program in existence prior to that date, if any.
A “new home” is defined in the Act as a building, or portion of a building that is newly constructed, or that is being re-constructed and is intended for residential occupancy, and includes:
- a self-contained dwelling unit that is detached, or semi-detached, and also includes secondary suites;
- multi-family homes including semi-detached, row housing, townhouses, duplexes, stacked townhouses and apartment condominiums;
- common property, facilities and other assets of a condominium corporation;
- a building intended for residential occupancy and that is a reconstruction which affects more than 75% of the square footage of the home, above grade; and
- a manufactured home (a home constructed as an individual pre-assembled unit intended for delivery to a residential site, or from a number of pre-assembled units intended for delivery to and assembly at a residential site) on permanent foundations; and
- dwellings on recreational properties.
A “new home” does not include a hotel, motel, dormitory, care facility, re-locatable work camp, or a multi-family dwelling built for rental purposes, if the dwelling is owned under a single title (an apartment building) and provided that a restrictive covenant is registered on the title restricting the sale of the building for 10 years after an occupancy certificate is issued or the title is registered.
Generally speaking, a new home cannot be built unless the home is covered by the mandatory insurance coverage under the Act and is registered with the Registrar appointed under the Act. The Registrar is mandated to compile a registry of new home builders, new homes under construction and the required insurance coverage and to maintain an on-line registry, which is accessible to the public, containing all of the necessary information. The registry is currently active and can be accessed at:
Searches can be entered by municipal address, legal description or LINC number.
As always, however, there are exceptions to this general rule. A person building their own home, for their own use (an “owner builder”), may apply from an exemption from the mandatory insurance coverage. However, this exemption applies only when the owner builder resides on the property. If the owner builder sells, or transfer the title to the property, prior to the end of the warranty period (i.e. before 10 years), the owner builder must purchase sufficient insurance to cover any subsequent owner to the end of the mandatory warranty period.
Currently, the warranty provided by builders is subject to the warranty program provided by the particular home warranty program the builder subscribes to. These warranty programs vary as to what is covered and for how long. For example, the Alberta New Home Warranty Program (“ANHWP”) provides for a one year warranty on “deficiencies” and a five year warranty on structural components of the new home.
The Act provides that any new home builder, whether a home building company or an owner builder, must provide the following mandatory warranty coverage from the date that coverage begins:
- one year for defects in materials and labour;
- two years for defects in materials and labour for defects relating to “delivery and distribution systems”;
- five years for defects in materials and labour for defects relating to the “building envelope”; and
- ten years defects in materials and labour for defects relating to structural defects.
The Act also requires that the various warranty providers must also provide an option for the home buyer to purchase extended warranty protection for building envelope for a further two year period.
Some definitions are in order. Coverage begins on the earlier date on which the municipality grants occupancy of the home, or the date that the transfer of title to the property is registered. This may not necessarily be the same date, especially if the buyer is purchasing a “spec” home from a builder’s inventory. That spec house may have been completed some time ago, and the warranty period is already running as occupancy has been granted. This can be a significant issue if the buyer is purchasing a former show home.
- “Defects” means any design, construction or material used in the construction of the house that are contrary to the Alberta Building Code; or which require repair or replacement due to the builder’s negligence; or constitutes an unreasonable health or safety risk; or has resulted in material damage to the new house;
- “Delivery and distribution systems” – refers to the electrical, gas, plumbing, heating, ventilation and air-conditioning systems, or any other similar system (may also include centralized speaker systems or possibly computer networks installed by the builder);
- “Building envelope” – the collection of components that separate conditioned space from unconditioned space, the exterior air or the ground, and is generally referred to the shell of the home, including the roof and walls; and
- Structural defects are not defined under the Act, but the insurance policy provides this means any defect in materials, design or construction that results in the failure of a load-bearing part of the house and which causes structural damage that materially and adversely affects the use of the home for residential occupancy.
The warranty automatically transfers to any new owners of the home, if it is sold to a new buyer before the expiry of the mandatory 10 year period, or any extensions. The new owner does not have to apply for the transfer of the warranty.
Currently, the following are recognized warranty providers under the Act:
- Aviva Insurance Company, through the National Home Warranty Program;
- Blanket Home Warranty Ltd.;
- Progressive Home Warranty Solutions Inc.;
- The Alberta New Home Warranty Program; and
- Travellers Insurance Company of Canada
The estimated insurance premium paid by builders is between $1,700 and $2,000, and will vary depending on the warranty provider, the builder and the home. These costs, in addition to any costs for extended warranties or Pre-possession insurance, will most likely be passed on to the purchaser of the property, as part of the final purchase price.
As with any insurance policy, there are limits as to what coverage will be provided. Under the Act, the coverage limits for a single family home is the lesser of the purchase price paid to the builder and $265,000.00 (excluding the price of the land).
Many people are familiar with the Deposit Protection provisions offered by the ANHWP, and other warranty programs in the past. The Act does not require the warranty providers to include mandatory deposit protection under their particular programs, but does require them to offer optional “Pre-Possession insurance” which the purchaser can obtain for a further fee.
The Pre-Possession insurance offered by the ANHWP is divided into two components:
Deposit Protection Insurance which begins upon payment of the initial deposit under the construction / purchase agreement and terminates on the start of construction, and insures against the loss of a deposit paid to a builder; and
Home Completion Insurance which begins when construction is commenced and ends when the occupancy certificate is issued or when the title transfers to the purchaser, and is insurance against the default of a builder to complete construction of the new home.
Pre-possession Insurance provides coverage for up to 20% of the total price of the home (excluding land costs) to a maximum of $100,000.00. Other insurers may have other restrictions, fees and coverage limits.
THE INSURANCE POLICY
The insurance policy provides that the insurer will determine the reasonable costs of repair or replacement of Defects or Structural Defects and may either cause the work to be done directly (either by the builder or a third-party contractor) OR may pay financial compensation to the owner of the house in lieu of making repairs. If financial compensation is paid, the insurer will have no further liability for the Defect or any consequential damages.
The policy has numerous exclusions, which are very similar to the exclusions included in the prior forms of warranty provided before the Act came into force. Exclusions include items such as:
- Non-residential use;
- Site grading and surface drainage (not including subsidence under footings or driveways/walkways);
- Utility services;
- Septic tanks and fields;
- Home appliances;
- Water wells, or the quality and quantity of municipal water supply; and
- Designs, materials or labour supplied by anyone other than the builder or its sub-trades;
Loss or Damage exclusions
- Weathering, normal wear and tear;
- Normal shrinkage caused by drying after construction;
- Substantial use of the property for non-residential purposes;
- Negligent or improper maintenance of the home by anyone other than the builder;
- Alterations to the home by anyone other than the builder;
- Insect, rodent or vermin damage, unless due to non-compliance with the Building Code;
- Acts of nature;
- Damage to personal property;
- Fire, explosion, smoke, flooding or sewer back-up;
- Inconvenience or distress to the owner;
- And a number of other exclusions.
An owner cannot undertake any unilateral action or remedy regarding the repair or replacement of defects without the consent of the insurer (except to mitigate losses) or the policy may be voided. An owner must also allow the insurer’s representative access to the property to assess, repair or replace any defect, and must also allow the builder access to the property for the same reasons.
The policy provides that additional living expenses will be paid to the owner if the defects or remedy make the house uninhabitable during the repair period. The Regulations under the Act currently provide that the owner will be paid $150 per day, to a maximum of $15,000.00
If an owner considers that a Defect exists, they must file a written Request for Claim Assessment to the insurer, before the end of the relevant warranty period. This is different from the former warranties provided, where the limitation date was 60 days after the end of the relevant warranty period.
A deductible must be paid (between $50 and $500, depending on the nature of the claim) and the insurer will then send an inspector out within 60 days of the request. The inspector will provide a written report within 60 days of the inspection.
If it is determined that repairs are to be completed, they will be done by the insurer, or its representatives, which can include the builder.
If the owner is not satisfied with the inspector’s decision, they may apply for dispute resolution under section 519 of the Insurance Act, which is used to appoint an “umpire” whose written decision will determine the issue.
This may, or may not be, an arbitration, such as under the older versions of the warranty coverage, and an umpire’s decision is subject to judicial review.
An umpire does not need to have any specific credentials, but generally must have some expertise and knowledge in the matter under dispute. The umpire is chosen by both the builder and the owner, or their representatives, acting together.
For further information and frequently asked questions, please see:
What is a Real Property Report?
A Real Property Report (an “RPR”) is a survey of a parcel of land, completed by an Alberta Land Surveyor, which shows the location of a house, outbuildings, fences and other structures on the parcel, relative to the surveyed property lines. An RPR is completed in accordance with the Alberta Land Surveyors Association standards of practice.
We recommend that you follow this link for further information:
An RPR will show the location of any structures which are permanently attached to the land or to the house located on the property. It will also show the location of any Utility Rights of Way (“URW”), Overland Drainage Rights of Way (“ODRW”), Maintenance Rights of Way, or any other municipal rights of way which are located on the land.
A “permanently attached structure” means any structure on the property which is attached to the house on the property or cannot be moved with ordinary effort. A deck attached to a house will be shown on an RPR.
A poured concrete patio would be marked on an RPR, while a patio made of paving stones may not show, as it could be picked up and moved to a new location, or taken away entirely. A shed may or may not be shown on an RPR, depending on its size or its location. A shed larger than 100 square feet is noted on the RPR, as is a shed of any size that has been installed on a concrete foundation, or one that has been constructed within 1.20m of a property line or on a URW or ODRW.
Current City of Calgary bylaws also require that window wells and air-conditioning compressors must also be shown on RPR’s as they are structures which are permanently attached to the property.
Fences must be marked on an RPR if they are within 20cm of a property line. Fences show the perceived boundaries of a property, regardless of which who constructed it.
Structures which encroach into URW’s or ODRW’s must be marked on an RPR, notwithstanding the size or type of construction of the structure. Any structures which encroach into City of Calgary property must also be marked on an RPR. Structures such as retaining walls, fences or planters which extend to the back edge of a sidewalk are most likely encroaching into City property as there is often a strip of land, which the City has reserved as a URW, between the back of the sidewalk and the surveyed property line.
Do I need an updated Real Property Report when selling my house?
The current requirement in the standard Alberta Real Estate Association purchase and sale contract mandates that the seller of property must provide a “current” Real Property Report, with a Certificate of municipal compliance to the buyer at least 10 days before the purchase and sale transaction closes.
A “current” RPR has been interpreted by the Canadian Bar Association (Alberta) Real Property Section to mean one that shows the current state of improvements on the land, and may not be current with respect to time. A 15 year old RPR may be acceptable, if all of the structures on the land are shown on the RPR and nothing has been added. A 1 year old RPR may not be current if fences, decks, patios, etc. have been built since the RPR was issued. An RPR is deemed to be current if the only change on the property is the removal of a structure; if the structure does not exist any longer, it cannot possibly encroach on any URW, ODRW or property line setback.
If you have built any new permanent structures on the land after you purchased the property, you will most likely need an updated RPR. If you have built a deck, a fence, a patio, retaining walls, flower boxes, etc., or have installed central air conditioning, you should seek legal advice as to whether you need an updated RPR or not. If your neighbour built a fence on, or near, the property line, you should also seek legal advice as to whether you need a new RPR or not.
What is a Certificate of Municipal Compliance?
A Certificate of Municipal Compliance (a “Compliance Certificate”) is a statement from the local municipality that the structures on the property have been constructed in accordance with the relevant planning bylaw. This means that the buildings have been constructed within the appropriate setbacks from property lines, or that no structures have been built on URW’s, ODRW’s, or other rights of way and are in compliance with other planning bylaw requirements.
Once an RPR has been commissioned and completed, the RPR is then submitted to the municipalities Planning Office, either by the seller or by the surveyor, with a request that the municipality endorse the RPR with a Compliance Certificate. The municipality will provide a Compliance Certificate if all of the structures attached to the land, or the buildings on the land, are constructed in accordance with the relevant planning bylaws.
If the structures on the property do not comply with the planning bylaws, the request for an RPR will be rejected with a request that the seller either remove the offending structure, or apply for consent from the municipality that the structure can remain. A municipality may require that the seller enter into an Encroachment Agreement (for a fee) to obtain municipal permission to retain the structure, or that the seller obtain a Development Permit for the offending structure (also for a fee). In some cases, the municipality may deny any application for relief and will require the offending structure to be removed.
For this reason, an updated RPR must be obtained well before the closing date in the contract so that the issues can be addressed, and remedied, before the closing date.
Please contact CAMERON HORNE LAW OFFICE if you have any questions about your current RPR.