Transcript Document

REAL ESTATE LAW
Real Estate Brokers’ Program
Barbara Grodaes
Sources of Law
Common Law – foundation of other
elements of law, legislation and case
law.
Legislation – statutes and regulations
passed by government.
Case Law (decisions on the basis of
earlier ruling/judgment) precedents.
Real Property Law
Deals with rights or interests in land
and all that is erected, growing upon
or fixed to the land.
Not dealing with moveable property or
all types of property other than land
and fixtures (personal property law).
Tenure – theoretical basis in that only
the Crown is the absolute owner.
Estates
Defines the nature, degree, extent and
duration of ownership in land.
Real estate and real property mean
the rights or interest an individual
holds with respect to land.
4 types of estates in land: fee simple,
life estate, leasehold and dower.
4 Types of Estates in Land
Fee Simple – most common, can be
inherited, any heir can inherit, absolute
owner of the land.
Life Estate – has most of the rights of
fee simple owner except right to sell.
Leasehold – fixed period of time.
Dower – spouse right to life estate.
Methods of Holding Land
In Trust – legal estate held by one for
the beneficial interest of another.
Co-Ownership – joint tenancy (right of
survivorship) and tenancy in common
(interests split)
Co-operative Housing Ownership –
incorporated, non-profit business.
Methods of Holding Land cont.
Time Share Ownership – rights of
ownership limited for a specific part of
the year (undivided or interval).
Strata Title Ownership – subdivision
plan subdivides the volumetric space
above or beneath land surface (3dimensional drawings necessary).
Surface and Mineral Rights
Generally, surface rights only, title
showing “excepting thereout all mines
and minerals.”
Most titles separated into “surface
only” and “minerals only” titles.
Surface Rights Act regulates rights
and relationship between holders.
Law of Agency
Agency is a contractual relationship in
which the principal and the agent
agree that the agent will do certain
acts on the principal’s behalf in dealing
with a third party.
Legal relationship between the
brokerage and the client (written).
Fiduciary Duties
Loyalty
(RANCOLD)
Obedience
Disclosure
Confidentiality
Reasonable care and skill
Non-delegation
Full accounting
Single Agency
Single agent represents either the
buyer or the seller, never both.
The Seller’s Agent represents seller.
The Buyer’s Agent represents buyer.
Buyers and/or Sellers can represent
themselves or by their legal counsel.
Dual Agency
Same brokerage represents more than
1 party in same transaction; Seller and
Buyer or 2 or more Buyers or all 3, all
competing for property.
Brokerage canNOT disclose price OR
motivation and no confidentiality
concerning material facts.
Dual Agency continued …
Agent MUST have proper written
authorization of both (all) clients.
Agent MUST be particularly careful
and act fairly, honestly & with integrity.
Agent MUST obtain written
acknowledgement in timely manner.
Agent MUST obtain informed consent.
Other Agency
Dual agency also applies to lease
transactions by substituting Landlord
for seller and Tenant for buyer and is
otherwise the same.
No Agency Relationship if one party
acts on his or her own behalf – Ethical
duties – be honest, fair, careful and do
not misrepresent.
Contract Law
An agreement, based on a promise or
a set of promises, which results in
some legally enforceable obligations
between two parties.
Written or verbal, long or short, are
essential parts of many business
transactions.
Legally binding – get legal advice!
Elements Must Exist
1.
2.
3.
4.
5.
6.
Capacity of parties (legally competent).
Legality of object (lawful).
Legal intention (intent to be legally binding).
Consideration (each receives something of
value [promise is value]).
Mutual agreement (offer/acceptance).
Genuine consent (all facts needed to make
a reasonable decision and have free will).
Contract valid if all 6 present,
otherwise, contract is:
1.
2.
3.
Void (never existed).
Voidable (originally valid but able to be
rejected by one of the parties later.
Illegal (contravene a law and not
enforceable).
Capacity of Parties (Competent)
Individuals NOT considered to have
the capacity to make a contract are:
1.Infants or minors (>=18 years).
2.Mentally incapacitated persons.
3.Intoxicated persons.
4.Cannot read OR speak English or
vision impaired.
Legality of Object (Lawful)
Courts will not enforce contracts made for
illegal purposes and violate criminal laws.
Contracts can NOT contravene regulatory
statutes or public policy.
Though no longer legality of object, practical
reasons suggest contracts be made during
a weekday as opposed to being conducted
on a weekend (closing date).
Legal Intention
Parties to contract MUST have
intended their actions to be legally
binding.
In real estate, there MUST be an
invitation to treat in the form of a
statement inviting prospective buyers
to negotiate a purchase contract.
Listed price is intended to solicit offers.
Consideration
To be enforceable, a contract MUST
be made under seal or be supported
by consideration.
What each party in a contract receives
in exchange for the promise to act in a
specified way.
Past consideration NO consideration.
Mutual Agreement  Offer
MUST be definite & made with intent to
create legal, binding obligation.
MUST contain all essential terms of the
proposed agreement so that a contract
exists upon acceptance.
CAN remain open until acceptance and/or
until a stated time limit unless withdrawn
before acceptance is communicated.
Agreement  Offer, cont…
CAN lapse after the passing of a
reasonable amount of time if it
contains no time-limit or acceptance.
MAY be revoked if communication of
the revocation is communicated to the
offeree prior to the communication of
the acceptance of the offeror.
Mutual Agreement 
Acceptance
MUST be unconditional (NO changes
to the Offer – any change is a rejection
and making it a counter-offer).
MUST be communicated to the offeror
in the manner required by the offer.
MUST be made within the time
specified in the offer OR a reasonable
amount of time if no time-limit.
Mutual Agreement
If the offer does not specify a manner
of communication, then the method of
acceptance MUST be in a manner as
good or better than communication of
the offer.
If this is mail or fax, contract is binding
even if mail or fax not received.
Genuine Consent
To form binding contract, mutual agreement
MUST be real and genuine. Inducements
that may invalidate a contract are:
1. Mistake.
2. Misrepresentation.
3. Failure to disclose.
4. Duress or undue influence.
Contract Deemed Invalid
MAY be deemed invalid if one of
following occurs. Courts ultimately
decide if contract is enforceable – they
are not automatically void:
Mistake
Misrepresentation
Failure to Disclose
Duress and Undue Influence
Mistake
May nullify apparent consent, contract has
no legal effect as is based on mistake that
has a ‘narrow’ meaning in contract law.
May remove the element of genuine
consent essential to a contract.
MUST be a mistake of fact and go to root of
contract.
General rule – people are bound by their
signatures, whether they’ve read it or not.
Misrepresentation
Any statement made before or at the
time of contracting, with regard to any
existing fact which induces other
party to enter contract. Can be:
1. Innocent (false without realizing).
2. Negligent (intended to be fact
without checking for accuracy).
3. Fraudulent (knows it is false).
Note for Misrepresentation
The law treats a statement of opinion
made by a real estate agent as a
statement of fact.
An agent making statement of opinion
about real estate may be found having
made negligent representation and be
liable for compensation to the person
who relies of this statement.
Failure to Disclose
Agents have a legal DUTY to exercise care
when providing information. Hiding a
significant defect can be considered FRAUD.
Caveat emptor (let the buyer beware).
Patent defects (visible to the eye & should
be discovered on examination).
Latent defects, must be disclosed. Failure
to do so or conceal may INVALIDATE.
Duress and Undue Influence
Duress is compulsion which forces a person
to act through fear of personal suffering –
not of his/her own free will.
Undue influence is the improper use of
one’s power over another to induce into a
contract (such as educated/uneducated,
experienced/inexperienced) takes
advantage because of his/her position.
Conditions
Condition precedent (normal in real estate)
calls for event or act to occur before
agreement becomes binding.
Condition subsequent (after contract is
binding) that if not met can give right to end
contract.
Conditions are fundamental to the contract
and warranties important when a breach
occurs.
5 Ways to Terminate Contract
1.
2.
3.
4.
5.
Performance (fulfillment).
Agreement (mutually agree).
Frustration (events beyond control).
Non-fulfillment of a condition (“subject
to” clauses/condition not met in time.
Breach of contract (fails to complete).
Remedies
Rescission (court have contract set aside).
Damages (financial compensation for
losses caused) *damages not available
where innocent misrepresentation occurred
– rescission is only available recourse.
Specific performance (court force).
Injunction (court order).
Quantum Meruit (as much as he deserves).
Considerations for Agent
Requirement of writing (Statute of Frauds
requires any contract for the sale of lands or
any interest in lands must be in writing and
signed by parties. *Any contract must be performed in
one (1) year unless written).
Dower act – IMPORTANT only when title
shows only one owner and that owner is
married.
Duty of Care
Special relationship where one party
relies on information supplied by
second party in position of knowledge.
Relationship exists brokerage/client.
Agent MUST represent information
honestly and accurately to others.
Further Considerations
Power of Attorney – (general/specific).
Trustee/Guardian of Mentally
Incompetent (court appointed under
the Dependent Adults Act or other.
Bankruptcy – trustee has power to
deal with land (files caveat on title).
Privity – binding to parties in contract.
Listing Contract
MUST contain essential elements.
MUST contain clear description of 3
Ps (Parties, Property, Price – Property
is professional service of selling).
Other information and documentation
is important as Agent – independently
verify ALL information wherever
possible.
Purchase Contract
MUST contain essential elements.
MUST contain clear description of 3
Ps (Parties, Property, Price – to render
contract “certain” of intentions).
Possession Date, completion date,
adjustment date, payment date or
closing date – ALL same thing.
Deposit NOT required to be binding.
2 Common Seller Financing
Vendor Take-Back Mortgage – title
transfers and mortgage registered.
Agreement for Sale – possession
transfers but title remains in Sellers
name until paid in full.
Seller’s foreclosure procedures are
same, protecting buyer’s interest.
Option/First Right of Refusal
Option – buyer acquires right to
purchase within a specified time (sole
control of buyer – interest in land and
subject to caveat against title).
First Right of Refusal – (not absolute
right to acquire) Two Steps: (1)make
offer to holder and (2)its acceptance
by the holder, or not.
Encroachments
MUST make reference to any
encroachments on real estate
purchase contract if there is any on
title.
Check the standard real estate
purchase contract to ensure that seller
is not providing warranty wrongly.
Commercial Transactions
Unique in nature and encompasses:
Industrial sales
Commercial sales
Investment sales
Sale of businesses and companies.
AREA has customized contracts.
Sale of Assets Versus Shares
Business can be sold by either sale of
assets or sale of shares – different tax
consequences – do NOT give advice.
This field has securities law
implications and must comply with the
Securities Act – obtain legal advice.
Recognize and Be Aware
Business records searches – obtain
and analyse to better advise client.
Employment conditions MUST comply
with the Employment Standards Code.
Non-Competition Agreements – seek
legal advise contracts restricting trade.
Warranties and representations vary.
Commercial Leases
Leasing involves complex negotiations
and contractual terms.
MUST contain specific elements to be
valid and enforceable.
Closely examine lease and confirm
information.
Advise client to seek legal advice.
Land Titles System
Torrens Land Registration System in
Alberta under the Land Titles Act
(1+1+1)
1 one piece of paper
+1 one piece of property
+1 located in one place (North or South
Alberta Land Titles Office – Edmonton or Calgary)
Legal Land Descriptions
Meridians north/south W4, W5 and W6.
Ranges N/S every 6 miles starting meridian line.
Townships E/W every 6 miles apart (#1-126:
1-34 SALS, 35-126 NALS – 36 sq.miles
divided into 36 sections 1sq.mile.
Sections –measurement 1x1 mile (640
acres/259 hectares) (correction lines for earth
curvature).
LSDs (legal subdivisions) divide sections in
Exceptions
Settlement Plans –plans accommodating
settlements (St. Albert, Fort McMurray and Edmonton)
small fixed areas, no fixed pattern.
Metes and Bounds – irregular shape that
is difficult to describe.
Unsubdivided to subdivided, description
is replaced except condominiums.
Principles of Torrens System
1.
2.
3.
Curtain – MUST be registered.
Mirror – WYSIWYG what you see is
what you get (rely on accuracy).
Insurance – Assurance Fund created
to pay for any errors caused by the
Land Titles Office – compensation for
Loss of Rights.
Good to Know
Torrens system provides many
advantages, the most important one is
they system guarantees the state of
the title. Deed registry systems do not.
Land Titles Act provide administrative
framework of Torrens System.
Title search is imperative.
Agent expected to be good detective.
Law of Property Act
Provides remedies to recover security,
protecting the owner personally (except
for CMHC insured or corporate mortgagor).
Foreclosure, Quit Claim, Statement of
Claim, Order Nisi, Final Order for
Foreclosure, “RICE” Order, are all part
of the foreclosure process.
All documents in action are public.
Foreclosure Process
If borrower does not file
Statement of Defence or
Demand of Notice, will
be unaware of action is
being taken and when.
“RICE” Order is last step
for CMHC Mortgagees
allowing lender to pursue
debt recovery.
Condominium Property Act
Every condominium development in
Alberta is governed by the
Condominium Property Act.
Role of Agent is to identify issues and
direct clients to appropriate legal
advice.
Condominium Ownership
Rights allocated to owners via
individual titles with 2 distinct yet
inseparable parts:
100% exclusive ownership of unit.
Co-ownership share as tenant in common
of common property, in proportion to the
unit factor assigned to the unit.
Condo Corporation
Owners are members of corporation.
Governs by board of directors.
MUST maintain common property and
comply with municipal regulations
regarding repairs and work to be done.
MUST enforce bylaws & do all things
in the best interest of all owners.
Regulation
ALL condo corps have a total of
10,000 unit factors.
LTO uses CADS (Condominium
Additional Sheet) to record registered
documents against a Condo Plan.
Reserve funds are MANDATORY and
MUST have a reserve fund study.
Condominium Potpourri
As agent, beware of rental pools –
contract could affect sale of property.
“Condominium” refers to land.
Bare Land Condominiums are popular
with developers because they can
‘phase’ their development.
Potpourri Cont …
Leasehold condominium – where
government does not provide for fee
simple title (national/provincial parks,
crown land, etc.)
Parking – stall MAY have separate title
as may storage facilities.
Restrictive covenants – MAY limit the
freedom of use of the property.
Residential Tenancies Act
If property is residential, the
Residential Tenancies Act governs the
relationship between landlord (seller or
buyer) and the tenant.
Provides for the obligations and
remedies of the landlord and tenants
as well as regarding security deposits.
Definition
Written, oral or implied agreement to
rent residential premises.
Fixed term –ends on specified day.
Periodic tenancy – renewed or
continued without notice.
Commercial, industrial and other types
of tenancies NOT governed by Act.
Termination for Landlord
The landlord’s rights to terminate a
periodic tenancy is severely restricted.
Landlord MUST have prescribed
reason which may make it difficult.
Notice to terminate MUST be in writing
and not until all conditions of an
offer to purchase have been met.
Termination for Tenant
MAY terminate the periodic tenancy by
serving the appropriate notice, with
sufficient time:
Week to week – one tenancy week.
Month to month – 1 full tenancy months
(3 full tenancy months for landlord).
Year to year – 60 full days prior to last
day of year (90 for landlord).
Need to Know!
ANY provision waiving rights, benefits
or protection under the Act is VOID
and unenforceable.
Landlord NOT entitled to deduct from
damage deposit unless beginning
report and final report produced.
Knowledge of the Act is IMPORTANT.
Municipal Government Act
Provides legislative basis to determine
how property may be used.
Province divided into municipalities
(city, town, village, summer village, municipal district).
Required to pass a Land Use Bylaw
which develops plan policies (critical
for Realtors to know).
Land Use Bylaw (Zoning)
Will generally contain:
Section for administrative matters.
General rules applicable to all land
use classes.
Detailed land use classes and
subclasses.
Land Use Control Methods
Zoning Control – specifies every
aspect of how property may be used.
Development Control – allows each
proposed development to be
considered according to its own
merits.
4 Kinds of Land Use Districts
1.
2.
3.
4.
Residential (R)
Commercial (C)
Industrial (I)
Special – catch-all for special needs
For each land use classification the bylaw
lists a number of “permitted uses” or
“discretionary uses”, or both.
Permitted Vs Discretionary
Permitted are uses that entitle applicant to
permit if the development conforms with the
bylaw (inflexible but certain).
Discretionary are uses that are deemed to
be generally appropriate but not necessarily
compatible with the surrounding (may/may
not be approved – flexible but uncertain).
Land Use Compliance Matters
Real Property Report is necessary to
verify buildings comply with sideyard
and setback requirements of the Land
Use Bylaw and shows where they are
relative to the property lines.
Municipality will stamp a compliance
certificate or legal but non-conforming.
Compliance Matters cont …
Burden is generally on the seller to
rectify any problems.
To allow seller to maintain the
structure as is, encroachment
agreement or relaxation is necessary.
Buyer MAY choose to or NOT to
complete transaction.
Permits
Development permit – document
issued under the bylaw authorizing
development.
Building permit – document issued
and required for the actual
construction. If not issued, can be
appealed.
Illegal/Non-Conforming Uses
Illegal use of a property (not allowed
under the Land Use Bylaw) may
require change or removal.
Non-conforming use (not allowed
under the current bylaw but was okay
at the time in came into use – note: if
discontinued for more than 6 months,
the use must stop).
Environmental Law
Environmental Protection and
Enhancement Act deals with
environmental concerns.
Encourage buyers to investigate any
issues of concern to them.
Include a professional environmental
audit as a normal condition to contract.
Common Concerns
Release of Substances, Contaminated
Sites, Conservation and Reclamation,
Groundwater and Related Drilling, Potable
Water, Hazardous Substances Pesticides,
Recycling Waste Management.
Urea Formaldehyde Foam Insulation,
Radon, Polychlorinated Biphenyl, Underground Storage Tanks, Post Tension Cable,
Lead Paint/Plumbing, Farm Disposal Sites.
Be Alert to Types of Land!
Old service station locations.
Industrial site - heavy construction occurred.
Storage sites batteries, tires, scrap metal.
Truck depots, old landfills.
Lumber treating sites (creosote/bluestone
(wood preservative).
Pay attention smells, stains, soil, taste, etc.
Environmental Audits
Three-Phased Approach to analyze to
determine the extent of damage or to
determine compliance.
Sampling and/or Testing required in Phase II
may include Sampling Plan, Analytical Plan,
Health and Safety Plan, then Final Report.
Phase III is remedial action plan. MAY
include Repair, Isolation, Encapsulation, Enclosure,
Removal & Disposal, hopefully limiting a problem of Stigma.
Other Legislation
Fire Prevention Act.
Federal Environmental Protection Act.
Once terms are in contract and agreed
on, investigation and searches begin.
If there is any indications of potential
environmental problems, it is important
to be more diligent.
Municipal Taxation
Property Taxes = Assessed Value
(land and buildings) x Mill Rate.
A “mill” is one one-thousandth of a
dollar (1/1000 of $1).
Taxes due and payable June 30th of
each year.
Tax Adjustment
Taxes are based on calendar year
(January 1 to December 31 but due June 30th).
Before June 30th, Buyer gets tax
credit.
After June 30th, Seller gets tax credit.
Tax adjustment based on #ofdays/365
($yearly taxes x #ofdays/365).
Tax ACCOUNT Adjustment
Tax Account based on tax year (July1-June30).
Tax Accounts are savings for next June 30th .
If assuming mortgage, Buyer reimburse Seller,
Seller gets tax credit, Tax Account remains.
If new mortgage, Buyer creates tax account
with mortgagee so that, combined with the tax
portion of PIT payments left before June 30th,
lender will have sufficient funds to pay.
Adjustment may be in Mortgage Statement, or
not, but it will affect the Cash required to Close.
Municipal Government Act
Once tax notification registered on title for
one year and before three, land can be
offered for tax sale.
If taxes not paid by March 31 of next year,
property for sale by public auction with
reserve bid and Sold.
If reserve not achieved, then Municipality
becomes owner – usually redeemed.
Caution .. Tax Considerations
Business Taxes.
Allocation of Purchase Price (beware
assets that allow high rate of
depreciation).
Income Tax.
Note: principal residence exemption.
Lawyers
The function of Real Estate Lawyers in
residential transactions is VERY important,
timely (always working with deadlines) and
similar, yet each is different.
The real estate agent’s quality of work,
thoroughness and ability to help clients aids
the lawyers in the ease of closing.
Miscellaneous Considerations
Dealing with Estates –have knowledge
about how death affect contracts.
Personal Property Security Act.
Expropriation Act.
Mobile Home Sites Tenancies Act
(similar to Residential Tenancies Act).
Legal Concerns – Land Types
Some types of land requires special
consideration. Some of these
concerns are found in:
Agricultural Land.
New Construction.
National Parks.
Indian Lands.