THE CONTRACT OF PURCHASE & SALE (CPS)

An Explanation & Guide

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Go here>> For a Quick Explanation Video by The BC Real Estate Association...

Information About The Contract

The Contract of Purchase & Sale document is important because it’s a legally binding contract between the buyer and seller when purchasing a residential property.

Here are some key points to keep in mind:

1. Read the document carefully before signing it. Make sure everything that has been agreed upon is in writing.

2. Deposits are held by a brokerage and released only with both parties’ written agreement. If a party doesn't remove conditions, both parties must agree to release the deposit or go to court.

3. Completion is when the buyer pays the purchase price to the buyer’s lawyer or notary, and the buyer’s lawyer or notary deposits the signed title documents in the land title office. It is advisable to complete the sale two days before the completion date.

4. The buyer should arrange possession through their realtor. Sellers typically won't allow buyers to move in before they've received the sale proceeds.

5. The buyer is responsible for checking the property’s title and ensuring that there are no encumbrances or environmental hazards before becoming legally bound. If taking out a mortgage, the buyer's mortgage company may refuse to advance funds if there are issues with the property.

6. There are additional costs involved in most circumstances, including lawyer/notary fees and expenses, land title registration fees, mortgage costs, fire insurance premium, sales tax, and property transfer tax.

7. Closing documents will be prepared by the buyer’s lawyer or notary and provided to the seller’s lawyer or notary for review and approval.

8. The buyer should arrange for insurance to be effective as of 12:01am on the completion date.

9. This contract is designed primarily for the purchase and sale of freehold residences, and additional provisions may be necessary for other circumstances.

10. The buyer’s realtor must disclose any personal interests they have in the transaction in writing.

11. The buyer and seller should consult with their lawyer/accountant regarding residency and citizenship status and the tax implications thereof.

12. All designated agents with whom the seller or the buyer has an agency relationship should be listed. If additional space is required, list the additional designated agents on an addendum to the Contract of Purchase and Sale.

Sections of the CPS

1 PURCHASE PRICE:

The document states the purchase price of the property and the amount the buyer must pay if they change their mind and cancel the sale during the Home Buyer Rescission Period Regulation.

If the buyer does cancel, they must pay the Rescission Amount to the seller within 14 days of exercising their right to cancel. It is important to understand and agree to these terms before purchasing the property. Make sure to initial and sign the sections that require it, especially the section about the Rescission Amount.

A Consumer’s Guide to Understanding the Home Buyer Rescission Period

2 DEPOSITS AND RESCISSION

This section of the document talks about the deposit that the buyer must pay when purchasing a property.

The deposit is an amount of money (typically 3%-5% of the price) that is part of the total purchase price, and it must be paid within 24 hours of acceptance of the offer, unless otherwise agreed upon (If there are “subjects” then within 24hrs of final subject removal).

The deposit will be held in trust by a third party (the Buyers Agents Brokerage), who will act as a stakeholder, until the completion of the transaction, in accordance with the Real Estate Services Act.

If the buyer fails to pay the deposit or is late with the deposit, then the seller has the option to terminate the contract. The third party holding the deposit can pay it to the buyer's or seller's conveyancer (legal representation) without further direction, as long as the conveyancer is a lawyer or notary.

If the buyer decides to use their right to rescind the contract within the prescribed period, the amount required will be paid to the seller from the deposit, and the balance will be returned to the buyer.

If the deposit is less than the required amount, the buyer must pay the difference to the seller according to the Home Buyer Rescission Period Regulation and this Contract of Purchase and Sale.

3. TERMS AND CONDITIONS

This section allows the Real Estate Agent and their Clients to insert terms and conditions. They can be taken from the library of the the BC Financial Services Authority and/or the Agent’s brokerage library. The section also gives the flexibility for Unique terms

4. COMPLETION Section 4 of this legal document states that the sale of the property will be completed on a specific date, which should be filled in with the year. In real estate transactions, "completed" means the date when all of the necessary legal and financial requirements for the sale or purchase of a property have been fulfilled, and the transfer of ownership from the seller to the buyer has taken place.

5. POSSESSION Section 5 outlines when the buyer will take possession of the property. This includes the exact date and time when the buyer will receive the keys and have full control of the property. It is important to note that the property must be vacant and free of any previous occupants or tenants at this time. Additionally, any necessary inspections or verifications regarding the condition of the property must be completed before the buyer takes possession.

6. Adjustments: In real estate, adjustments refer to the expenses that need to be paid for the property such as property taxes, utility bills, and other fees. These expenses are calculated based on the number of days that the buyer will own the property and are divided accordingly. For example, if the buyer takes possession of the property halfway through the year, they will only be responsible for paying half of the annual property taxes.

7. Inclusions and Exclusions: This section pertains to the items that are included or excluded in the property you are interested in purchasing.

Included in the purchase are the following: all fixtures, fittings, appliances, and any other items that were present and available for inspection at the time of your visit. This also covers any decorations, blinds, and curtains that are currently installed.

However, it is important to note that some items are excluded from the purchase. These include any personal belongings or furniture that are not part of the property itself, such as the seller's artwork, rugs, or any other items that they plan to take with them when they move out.

Please review this section carefully and let me know if you have any questions. If you are satisfied with the terms, we will need to obtain your signature and initials as required by the document.

NOTE: In real estate, "fixtures" and "chattels" are two terms used to differentiate between types of property that are included or excluded from a sale.

Fixtures are items that are physically attached to the property and cannot be removed without causing damage to the property, such as built-in bookcases, light fixtures, and window coverings.

These items are considered part of the property and are automatically included in the sale unless otherwise stated.

Chattels, on the other hand, are movable personal property items such as furniture, appliances, and artwork. These items are not permanently attached to the property and are not automatically included in the sale unless specifically stated in the purchase agreement.

It's important to distinguish between fixtures and chattels because the buyer may have different expectations about what is included in the sale. It's common practice for buyers and sellers to create an inventory of fixtures and chattels included in the sale to avoid any confusion or disputes.

8 VIEWED This section states that the property and all items that are included in the sale should be in the same condition on the date of possession as they were when the buyer viewed the property on a specific date mentioned in the document. This means that the seller should not damage or remove anything from the property before the buyer takes possession of it. Both the buyer and seller need to initial this section to show that they agree to these terms.

9 TITLE of this legal document talks about the title of the property. The title is the legal document that proves who owns the property. The title of the property should be free and clear of all legal issues, such as mortgages, liens or other claims. This means that the property should have no outstanding debts or unpaid taxes. However, there may be certain conditions, restrictions, or rights-of-way that have already been registered or granted by the government or other entities.

These could include things like utility access or public rights-of-way. Any existing tenancies must also be disclosed in Section 5 of the document. It is important to note that the title may have some restrictions, but they should not prevent the buyer from using the property for its intended purpose.

10 TENDER This section of the legal document talks about the Tender process, which is when a potential buyer submits an offer to purchase the property. In this case, the offer must include a deposit, which is typically a sum of money that demonstrates the buyer's seriousness about purchasing the property.

The deposit must be in the form of a bank draft, certified cheque, or trust cheque issued by a lawyer, notary, or real estate brokerage. Essentially, this means that the buyer cannot simply hand over cash or a personal cheque to secure the offer.

The purpose of this requirement is to ensure that the deposit is legitimate and easily traceable. If the offer is accepted, the deposit will be applied to the purchase price of the property. If the offer is not accepted, the deposit will be returned to the buyer.

It is important to note that by submitting a tender with a deposit, the buyer is indicating their intention to purchase the property and is bound by the terms and conditions of the tender.

This section of the document requires no additional initials or signatures, but it is essential to understand the deposit requirements before making an offer on a property.

10 DOCUMENTS this section details when documents are required to be submitted for registration with land titles (4pm on date of completion)


11A SELLERS PARTICULARS AND RESIDENCY this section of the contract talks about what the seller needs to provide to the buyer before the Completion Date.

The seller needs to give the buyer a statutory declaration that includes information about the seller that is required by law to be included in the tax return. The seller needs to give consent to the buyer to include such information.

The statutory declaration also needs to contain a declaration regarding the Vancouver Vacancy By-Law.

This by-law applies to residential properties located in Vancouver, and the declaration states that the property is not vacant.

If the seller is a non-resident of Canada, as described in the non-residency provisions of the Income Tax Act, the statutory declaration needs to include information stating that the seller is not a non-resident of Canada and will not be on the Completion Date.

If the seller is a non-resident of Canada on the Completion Date, the buyer can hold back some money from the Purchase Price according to Section 116 of the Income Tax Act.

11B GST CERTIFICATE of this legal document talks about the Goods and Services Tax (GST) certificate that the seller has to provide to the buyer. If the transaction in this contract is exempt from GST, the seller must give a certificate stating the exemption and the reasons for it, before the Completion Date.

However, if the transaction is not exempt from GST, the seller and the buyer must provide each other with an appropriate GST certificate before the Completion Date.

The GST certificate will help the buyer and the seller understand the GST implications of the transaction, and ensure that they comply with the GST laws. It is important for both parties to read and understand this section of the contract carefully, and sign the necessary initials or signatures where required.

12. TIME This section of the legal document is about the time frame for the completion of the purchase of the property. It states that time is very important and that the Buyer must pay the balance of the payment and any necessary agreements by the Completion Date. If the Buyer fails to do so, the Seller has the option to terminate the contract and keep the money already paid by the Buyer.

This money will not be refunded, and the Seller can take legal action against the Buyer. It is important to note that this section requires initials or signatures from both the Buyer and the Seller to show that they understand and agree to these terms. As a Real Estate agent, it is important to make sure that your client understands the importance of meeting the completion date and the consequences of failing to do so.



13. BUYER FINANCING This section of the legal document talks about the financing process for the buyer when purchasing a property. If the buyer is not able to pay the full purchase price on the Completion Date, they can wait to pay the seller until after the registration of the transfer and mortgage documents.

However, this is only allowed if the buyer has done the following: (a) made a portion of the purchase price available for the seller, (b) registered the mortgage, and (c) provided a lawyer's or notary's promise to pay the purchase price upon registration of the transfer and mortgage documents, and the advance by the mortgage company of the mortgage proceeds.

This promise to pay is based on the Canadian Bar Association (BC Branch) standard undertakings. It is important to note that this section of the document may require additional initials or signatures.

14. CLEARING TITLE This section of the legal document talks about "Clearing Title". This means that the seller is promising that they have the legal right to sell the property to the buyer, without any legal issues or claims from other parties. If there are any legal issues with the property, the seller agrees to fix them before the sale.

However, if fixing these issues would cost more than the agreed purchase price, the seller agrees that the payment will still be made by the buyer's lawyer or notary to the seller's lawyer or notary, on the CBA Standard Undertakings to pay out and discharge any legal issues and transfer ownership of the property to the buyer.

This means that the buyer can be sure they are buying a property with a clear legal title. Both the buyer and seller need to initial this section of the document.

15. COSTS This section of the legal document talks about the costs associated with the purchase of the property. As a buyer, you will have to pay for all the fees and expenses related to buying the property, such as legal fees and taxes. If you need a mortgage, you will also be responsible for any fees associated with that.

On the other hand, the seller will be responsible for paying any fees related to clearing the title of the property. It is important to note that these costs will be separate from the actual purchase price of the property. Both the buyer and seller need to initial this section to show that they understand and agree to these terms.

16 RISK This section of the legal document is about the risk associated with the purchase of the property. It states that all buildings and other items that are included in the purchase will be the responsibility of the Buyer, meaning any damage or loss that occurs after the completion of the sale will be the Buyer's responsibility.

This includes any risks that may arise due to natural disasters, fires, or any other damage. It is important to understand that once the sale is complete, the Buyer will be responsible for any risk associated with the property. This section does not require any additional initials or signatures.

17 PLURAL This section of the legal document talks about the meaning of certain words used in the contract. When the contract mentions a party, it means that party's heirs, executors, administrators, successors, and assigns are also included. When a word is used in the singular form, it can also mean the plural form.

For example, "buyer" can mean one buyer or multiple buyers. Similarly, when a word is used in the masculine form, it can also mean the feminine form. For instance, "he" can refer to both males and females. This helps to ensure that the contract applies to all parties involved and covers all possible scenarios.

18 REPRESENTATIONS AND WARRANTIES This section of the legal document is talking about "Representations and Warranties". It means that there are no other promises, guarantees, or agreements besides the ones written in this Contract and the Property Disclosure Statement. The Property Disclosure Statement will be included in this Contract, and all the promises written in these documents will continue to be valid even after the sale is complete.

This means that both the buyer and the seller must honor all promises made in this Contract and the Property Disclosure Statement.

19 PERSONAL INFORMATION This section talks about the collection, use, and disclosure of personal information by the Brokerages and the Managing Broker(s), Associate Broker(s), and representative(s) of those Brokerages. These people are collectively called "Designated Agent(s)" in the document.

The Buyer and Seller consent to this collection, use, and disclosure of personal information for several purposes, including the transaction in question, compiling statistics if the Property is listed on a Multiple Listing Service, enforcing codes of professional conduct and ethics for members of real estate boards, and for purposes described in the British Columbia Real Estate Association's Privacy Notice and Consent form.

The personal information provided by the Buyer and Seller may be stored on databases outside of Canada.

20 and 20A

ASSIGNMENT OF REMUNERATION & RESTRICTION ON ASSIGNMENT OF CONTRACTS The section talks about the assignment of remuneration and restriction on assignment of the contract. This means that the seller has authorized and instructed the buyer to pay the remuneration (money) to a third party, and that the buyer and seller have agreed that the contract cannot be assigned to anyone else without their permission.

This clause is important because it ensures that both parties have control over who is involved in the transaction and that there are no surprises or complications down the line. It's important to note that these clauses require signatures from both the buyer and the seller to be valid.

21 AGENCY DISCLOSURE This section is detailing and being recognized by all parties the relationships of Agents and Lay People like you acting as buyers and sellers.

22 ACCEPTANCE IRREVOCABLE This section of the legal document states that the contract is being executed under seal, which means that it is a formal and binding agreement. The contract can be signed by hand, digitally or electronically, and this will be evident by the parties inserting their initials in the designated space.

This act is deliberate, intentional, and conscious, and it shows that the parties agree to the terms of the contract. The Seller's acceptance of the contract is irrevocable, and it cannot be changed once it has been signed. The parties cannot cancel the contract or exercise any options mentioned in it without the other party's consent. The use of initials is evidence of the parties' intention to be bound by the terms of the contract.

23 DISCLOSURE OF BUYER’S RESCISSION RIGHT This section of the legal document talks about the Buyer's right to cancel or rescind the Contract of Purchase and Sale if they change their mind about buying the property.

The Buyer has the right to cancel the contract within three business days of the Final Acceptance Date. If the Buyer decides to cancel the contract, they will have to pay the Rescission Amount to the Seller, which is the amount specified in the contract.

If the Buyer has already paid a Deposit, the Rescission Amount will be taken from it, and the rest will be refunded to the Buyer. However, if the Deposit is less than the Rescission Amount, the Buyer will have to pay the difference.

It's important to note that there are some exceptions to the Buyer's right to rescind, such as residential real property that is located on leased lands, a leasehold interest in residential real property, or residential real property that is sold at auction, under a court order or the supervision of the court, or under a Contract of Purchase and Sale to which Section 21 of the Real Estate Development Marketing Act applies.

It's also important to note that the Buyer cannot waive their right to rescind, and the Seller cannot force the Buyer to waive this right. Both parties acknowledge this as part of the disclosure made pursuant to Section 57.1 of the Real Estate Services Rules.

24 LEGAL DOCUMENT -this is a legal document

25 OFFER This section talks about an offer that is being made to purchase a property. The offer will be valid for a certain period of time, and the buyer must agree to the terms and conditions in writing in order for the offer to be binding. If the offer is accepted, it will create a legal contract between the buyer and seller for the purchase and sale of the property.

It is important to note that the buyer is responsible for any risk associated with the property, including any buildings or items included in the sale. Additionally, there are certain legal requirements under the Immigration and Refugee Protection Act that must be met by the buyer. If the buyer fails to meet these requirements, the contract may be terminated.

26 ACCEPTANCE This section of the legal document is about acceptance of the terms and conditions of the sale by the seller. The seller confirms that they have read and agreed to the terms and conditions set out in the document. The terms and conditions include agreeing to pay the commission to the real estate agent as per the Listing Contract, and authorizing the buyer and anyone acting on behalf of the buyer or seller to pay the commission out of the proceeds of the sale. The seller’s acceptance is dated and they also confirm their residency. This is important as it helps to determine the taxes that need to be paid under the Income Tax Act.

Here's an Explanation Video for the Contract of Purchase & Sale by The BC Real Estate Association

For copies of the Buyer Documents (blank templates)
Please >>>Go here

Best Regards,
Solutions Real Estate Group
Keller Williams Elite Realty

So you can feel confident and knowledgeable throughout the Property Buying process, below are descriptions and explanations of the typical documents required for the purchase of a home or property.

Typical Documents include: 

• Disclosure of Representation In Trading Services

• Privacy & Consent

• FINTRAC ID Requirements

• Buyer Agency Acknowledgement

• Disclosure of Expected Remuneration

• The Contract Of Purchase & Sale

• Buyer’s Right of Rescission

• Removal of Subject Appointment of Conveyancer

• FINTRAC - Receipt of Funds

Go here for an Explanation Video of the Standard Forms from BC Real Estate Association

DOCUMENTS UPON SUBMITTING AN OFFER

DISCLOSURE OF REPRESENTATION IN TRADING SERVICES

This document explains the different types of relationships you can have with a real estate agent when buying, selling, or leasing property. If you disclose confidential information to an agent, you should understand what type of business relationship you have with them.

If you are a client of a real estate agent, they work on your behalf and have special legal duties to you. These include loyalty, full disclosure, avoiding conflicts of interest, and confidentiality. You may be asked to sign a written agreement setting out your and the agent's responsibilities.

If you are not a client of a real estate agent, they do not owe you special legal duties. They may represent a client with competing interests to yours and do not have to give you all relevant information. They must share any information you tell them with their clients in a transaction.

Whenever an agent works with you, whether you are their client or not, they have a responsibility to act honestly and with reasonable care and skill. The disclosure form in compliance with sections 54 of the Real Estate Services Rules, which is required by law, is included in the document. The agent must present this document along with the Your Relationship with a Real Estate Professional information page.

If you have any questions or concerns about the information presented, you can contact the BC Financial Services Authority (BCFSA). They are a regulatory agency that works to ensure real estate professionals have the skills and knowledge to provide you with a high standard of service.

Go here to view an Explanation Video from the BCFSA

The PRIVACY NOTICE AND CONSENT form is a legal document that explains how personal information is collected, used, and shared by real estate professionals in British Columbia when selling, buying, or leasing a property. Personal information includes details about you, such as your name, address, phone number, and financial information.

Your personal information may be collected by the real estate agent you work with, the real estate board they belong to, and other parties involved in the transaction. This information will be used to market your property, help you find a suitable property, facilitate the transaction, and conduct statistical analysis.

Your personal information may also be disclosed to third parties, such as photographers, appraisers, and other service providers, and to regulatory bodies, such as the British Columbia Financial Services Authority (BCFSA) and The Canadian Real Estate Association (CREA).

You have the option to opt out of secondary uses of your personal information, such as receiving communication from other real estate professionals or participating in surveys.

By signing the consent form, you acknowledge that you understand how your personal information will be collected, used, and shared. If you have any questions or concerns, you can contact the real estate agent you are working with or the British Columbia Real Estate Association (BCREA).

FINTRAC ID Requirements: 

SHORT: FINTRAC requires Canadian real estate professionals to comply with anti-money laundering regulations by providing government-issued identification during transactions to verify party identity. Non-compliance can lead to significant penalties, making compliance crucial for protecting both professionals and clients.

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is a government agency that aims to combat money laundering and terrorist financing activities in Canada. As part of their efforts, FINTRAC requires that all real estate professionals, including real estate agents and brokers, comply with anti-money laundering regulations when dealing with real estate transactions.

This means that when buying or selling any interest in real estate, it is necessary to provide government-issued identification, such as a driver's license or passport, to verify the identity of the individuals involved in the transaction. This is done to ensure that the parties involved in the transaction are legitimate and not using real estate as a means to launder illicit funds.

In British Columbia and across Canada, failure to comply with FINTRAC's requirements can result in severe penalties and fines.

Therefore, it is essential for real estate professionals to understand and comply with these regulations to protect themselves and their clients from potential legal consequences.

Go here for an Explantion Video from the BC Real Estate Association

BUYER AGENCY ACKNOWLEDGEMENT

This document is called the Buyer Agency Acknowledgement and it is a form that a real estate agent presents to a buyer who is looking for a property to purchase. The form acknowledges that the buyer is asking for assistance from the real estate agent, who is known as the Buyer's Brokerage.

The form designates an agent to act as the sole agent for the buyer and sets out the duties and obligations of the Buyer's Brokerage and the designated agent.

The form also outlines that the designated agent will not disclose any information obtained through the buyer's agency relationship to other licensees who represent other buyers or sellers, unless authorized by the buyer or required by law. It is important to note that the agency relationship only exists between the buyer and the designated agent, and not with the Buyer's Brokerage.

The form also sets out the obligations of the Buyer's Brokerage, such as supervising the designated agent, treating all parties impartially, and holding all monies received in trust.

The form outlines that the designated agent is not obligated to make the buyer aware of all properties that meet the buyer's requirements, and that the Buyer's Brokerage may terminate the agency relationship at any time.

The form also outlines the conflicts of interest that may arise and how they will be handled, such as if the designated agent represents both the buyer and the seller of a property. Finally, the form states that signing it does not obligate the buyer to pay any remuneration directly to the Buyer's Brokerage or the designated agent, unless otherwise agreed to by the parties.

DISCLOSURE OF EXPECTED REMUNERATION

This document explains that the real estate agent must disclose any commission or referral fee they will receive in connection with the transaction.

This includes any payments made directly or indirectly to the agent. The document is divided into four sections: Client Notice, Disclosure of Commission, Acknowledgement of Receipt, and Disclosure of Licensee. The Client Notice section explains that the agent is required to disclose any remuneration they receive.

The Disclosure of Commission section requires the agent to disclose the amount of remuneration they will receive, and who will pay it. The Acknowledgement of Receipt section requires the client to sign the document to acknowledge that they have received and understood the information.

The Disclosure of Licensee section requires the agent to disclose their license information and any other relevant information. The document is necessary to protect the client and ensure transparency in the transaction.

The Contract of Purchase and Sale (CPS) is a legal agreement outlining terms and conditions of real estate property sale in BC. Includes price, deposit, completion date, possession date, terms and conditions/subjects. The contract template was developed & set forth by the British Columbia Real Estate Association & the Canadian Bar Association (BC branch).

For a Quick Video explaining the CPS click here>>>

***Please Go Here >>>for a Detailed Explanation ***

DOCUMENTS BETWEEN AN ACCEPTED OFFER & CLOSING

DISCLOSURE: BUYER’S RIGHT OF RESCISSION

As a buyer of residential real property in British Columbia, you have the right to cancel your Contract of Purchase and Sale by serving a written notice on the seller within three business days after the date on which the acceptance of the offer was signed. This is called a rescission right and cannot be waived.

Your real estate agent is required to provide this disclosure to you when preparing or presenting an offer to purchase. They may also need to provide an updated disclosure if the purchase price is amended during negotiations.

If you exercise your rescission right, you must pay a rescission fee of 0.25% of the purchase price agreed to by the buyer and the seller. If you paid a deposit before cancelling the contract, the rescission fee will be paid to the seller from the deposit and the balance, if any, will be paid to you.

There are exemptions to the rescission right, including residential real property on leased land, leasehold interests, properties sold at auction or under court supervision, and properties purchased under the Real Estate Development Marketing Act.

Your real estate agent will provide you with the necessary disclosure, which requires your initials or signature, and will explain any parts that are unclear.

Go here for an Explantion video from the BC Real Estate Association

REMOVAL OF SUBJECT APPOINTMENT OF CONVEYANCER

The Removal of "Subject to Clause" and Appointment of Conveyancer is a standard form used in British Columbia when buying or selling any interest in real estate. This form is used to remove the "subject to clause" that may have been included in the initial contract, which outlines specific conditions that must be met before the sale can be completed.

Once these conditions have been met, the "subject to clause" can be removed. Additionally, this form is used to appoint a conveyancer, who is a legal professional responsible for facilitating the transfer of ownership of the property.

The conveyancer will ensure that all legal documents are prepared and executed correctly, and that the transfer of ownership is completed smoothly. It is important to work with a qualified conveyancer who is experienced in real estate transactions in order to ensure that all aspects of the sale or purchase are handled properly.

FINTRAC-RECEIPT OF FUNDS

The FINTRAC-Receipt of Funds form is a document used by real estate professionals to comply with federal anti-money laundering regulations.

It requires the buyer and seller to provide information about the source of the funds used in the transaction, including any bank or wire transfer information, to ensure that the transaction is not connected to illegal activities.

It is an important form that helps prevent money laundering in real estate transactions.

For copies of the Buyer Documents (blank templates)

Please >>>Go here

Feel free to reach out if you have any questions, we are always happy to help.

Best Regards,

Solutions Real Estate Group

Keller Williams Elite Realty

As a buyer in BC, Canada, it is crucial to thoroughly read and understand the strata documents before making a purchase. Strata documents provide important information about the building and its management. These documents can reveal potential issues such as ongoing disputes, special levies, or upcoming repairs.

Being informed about the state of the strata will help buyers make a more informed decision and plan for expenses or problems down the road. Ultimately, taking the time to read and understand the strata documents can provide valuable insights and help buyers make a more informed decision about their investment in a property. Provided below is a compilation of commonly found strata documents.

What is a DEPRECIATION REPORT?

What depreciation reports are, is a way to assist strata properties project maintenance and replacement of common properties. The reports create projections over the next 30 years, while estimating costs, and how to finance these costs over that time period.

So in other words, is it estimates when components will wear out, how much it will cost to replace, and best way to pay for that cost.

DEPRECIATION REPORTS & EVERYTHING YOU NEED TO KNOW ABOUT THEM

Home Inspection 101 Inside The Inspectors Head
Featured Blog Post Written By Aaron Borsch from A Buyer’s Choice Home Inspections 

Finally into the warmer months! Last blog I spoke about other aspects of a strata building, now I wish to speak about depreciation reports, and what sort of information we can gather from them.

What is a Depreciation Report?

What depreciation reports are, is a way to assist strata properties project maintenance and replacement of common properties. The reports create projections over the next 30 years, while estimating costs, and how to finance these costs over that time period. 

So in other words, is it estimates when components will wear out, how much it will cost to replace, and best way to pay for that cost.

To understand why they are now the reality, lets take a small review how strata’s work. Any building will require maintenance and replacement of worn components some point of time in the future, which of course costs money. For strata spaces, the cost of these repairs and replacement is shared among all the owners. 

There are two main ways a strata pays for things. Either from money saved up from collecting strata fees, [which is then put in to the contingency reserve fund] or by everyone paying everything at once, or other words, special levy.

Now onto depreciation reports. Before these reports, it was very difficult for a strata property owner to determine what sort of costs would be coming up in the future. The result of that was unexpected special levies assessed to the owners. People generally don’t like to pay a large lump sum at once, and this made many people upset. So, the depreciation report is there – as mentioned previously – to help the strata estimate when components will wear out and how much it will cost to replace them. Ultimately, it helps the strata to budget and try to minimize the amount of special levies that will be put on to the owners.

How often are depreciation reports done?

Legislation came into play that required strata’s to obtain depreciation reports every 3 years, based on public pressure for a method to somehow assist current and future owners manage costs. However, a strata can vote to defer a report, but it requires a 3/4 vote of all the strata to do so. If an annual 3/4 vote is not passed, then strata corporation must obtain a depreciation report no later than 6 months after their AGM.

Now while it is a requirement for a strata to obtain these reports, there are ways to circumvent this. If you have 4 units or less, you are not required to get a depreciation report.

What is included in the Depreciation Report?

There are a few requirements that a depreciation report must have. They are as follows:

• A physical inventory of the common property and assets
• Summary of maintenance and repair work to be done
• Anticipated maintenance and replacement over the next 30 years
• Financial forecast for 3 different funding models
• Current contingency balance and how its funded
• A strata’s errors and omission coverage
• If any one individual owners are to maintain certain components

Note that there is no standard qualification for the author of the report.

Typically companies that prepare these reports are either engineering companies, or appraisal companies.

What to Look for in a Depreciation Report

The information in the report can be fairly daunting. When I read these reports, I typically try and focus on a few items. Here are some tips

Look at the remaining life of some major components. These components are the roof, cladding systems, elevator, parking membrane, windows, large boiler systems, and decks.

The summary will provide a quick description if there are items that should be of concern

Depreciation reports assume 100% replacement cost, but it doesn’t mean 100% replacement needs to happen. For example, it may say decks need to be replaced in 15 years. In reality, what will happen is in 15 years, the decks will be assessed, and determined if they really do need to be replaced as a whole, or if only some need to be replaced.

Just because its on the depreciation report, doesn’t mean it has to be done

Depreciation reports are not required to be followed, it is only information. At the end of the day, strata votes decides what happens. And while not every single item has to be done on a depreciation report, its important to vote on the items you believe need to be done. The strata also votes on how its to be paid. If a strata votes to increase strata fees, or do a special levy.

Common life spans of components of strata buildings

Here are some common life spans of some of the major components of a strata

• Roof: 20-25 years
• Windows: 30-40 years
• Balconies: 10-15 years
• Water lines: 30-40 years
• Cladding (assuming not requiring rainscreen): 25-40 years
• Elevators: 25-35 years
• Underground Parking Membrane: 20-25 years
• Standard Large Boilers: 20-25 years
• Commercial Water Heaters: 8 to 10 years

Why is FORM B important to read?

Moreover, it outlines the strata's financial aspects, specifying the amount in the contingency reserve fund and any special levies/assessments that the building's owners must pay.

For those considering investing, this document also indicates information about any associated rental restrictions.

Strata Fees, Levies and Special Assessments explained.

Regular strata fees are the monthly or annual fees paid by all owners in the strata to cover the ongoing maintenance and operation of the common property. These fees typically cover things like management fees, utility fees for common areas, strata insurance, janitorial, landscaping, snow removal, etc.

Levies and special assessments, on the other hand, are additional fees that are assessed by the strata council to cover specific, one-time projects or expenses. These may include things like repairs to the building's exterior, repairs of the parkade, upgrades to common areas, or the installation of new amenities.

It's important for potential buyers to understand that levies and special assessments are not the same as regular strata fees, and can have a significant impact on the overall cost of ownership. They can also vary greatly from property to property.

When buying a strata property, it is important to review the Annual General Meetings (AGM’s), Special General Meetings (SGM's), and recent Depreciation Report to find information about levies and special assessments. Additionally, buyers should also find out what their unit entitlement is. This information can be generally be found at the end of the AGM in the PROPOSED STRATA FEE SCHEDULE section. You can get an idea of the buyer's % share of levies & special assessments by dividing the unit entitlement by the total entitlement.

When it comes to voting, it's important to note that strata boards make decisions on how to spend the money collected from strata fees and levies, and voting is completed in Annual General Meetings (AGM's) and Special General Meetings (SGM's) and not on a monthly basis. It is important for buyers to understand the voting process and how it can impact the planning for spending on their strata property.

Assumption of Liability for Renos

Once your application has been reviewed and approved, you will need to ensure that all work is carried out in accordance with the approved plans and specifications. This means that you will be responsible for ensuring that all work is done by licensed and insured contractors, and that all necessary permits and approvals are obtained.

In the event that you are purchasing a property that has already been renovated, it is important to understand that you will be assuming liability for any changes made by previous owners. This means that you will need to review any strata documentation or depreciation reports to ensure that all renovations were approved by the strata council and that any necessary permits or approvals were obtained.

It is also important to note that if any issues arise with the renovation work, you may be held liable for any costs associated with resolving those issues, including any legal fees. Therefore, it is essential that you thoroughly review all documentation and conduct a thorough inspection of the property prior to purchasing.

We hope this information is helpful as you navigate the process of purchasing a strata property. If you have any further questions or concerns, please don't hesitate to reach out to us.

Why are the ENGINEERING REPORTS important?

The engineering company hired will assess the building for any deficiencies, allowing the strata council to identify any issues that may need to be addressed within the warranty period. Thus, reading the Engineering Report is crucial to maintaining the structural integrity of the building and preserving its warranty coverage.

Why is it important to Review the STRATA INSURANCE POLICY SUMMARY ?

Some strata properties have experienced a big increase in their insurance costs. This has led to higher deductibles, more expensive strata fees, and owners being responsible for more costs if they make a claim. There are a few reasons why this is happening, such as rules in the Strata Property Act, the fact that properties in BC are expensive, and insurance companies thinking that there is a high risk of claims. Also, there aren't as many insurance companies to choose from.

While the narrative around this problem has focused predominantly on premium increases, the lesser mentioned factor is that some strata corporations are also seeing their deductible amounts skyrocketing to levels not covered by most personal insurance policies. Some water deductibles are as high as $500,000 ...and some even higher at $1,000,000!

For example, if a strata has a $500,000 water damage deductible and an owner can only get $100,000 of home insurance coverage, that owner could be on the hook for $400,000 if there is a loss from within their unit. This is a scary reality, so it’s important that consumers are made aware of these figures and advised to seek advice from a qualified insurance broker.

Why is it important to Review the MEETING MINUTES?

Strata minutes are the official record of meetings and decisions made by a strata council, which govern a strata corporation. They give an idea of current projects and issues in the building. Examples may include security upgrades, noise complaints, special levies, repairs and maintenance. Reading the minutes helps you understand how the council addresses these matters and how proactive they are and provide insight into the current state and future plans of the building they call home.

The council consists of elected or volunteer residents and a property manager who manages the building's finances.

Why are the Strata FINANCIAL STATEMENTS & APPROVED BUDGETS Important?

When considering purchasing a strata property, it's important for buyers to understand the financials of the building. This includes reviewing the strata's budget, expenses, and savings plan. The budget should outline the regular strata fees, as well as any levies or special assessments that may be charged to owners. It's important to understand the difference between these types of fees, as levies or special assessments may be charged for specific projects or repairs that the regular strata fees do not cover.

In addition to reviewing the budget, buyers should also look at the building's Contingency Reserve Fund. This fund is set aside for unexpected repairs or expenses, and is typically funded through a percentage of the strata fees. Understanding how the Contingency Reserve Fund is used and funded can give buyers an idea of the building's financial stability and preparedness for future expenses.

List of Common Strata Terms and Definitions:

Strata Corporation: A legal entity that is established to manage the common property and assets of a strata property.

Strata Council: A group of strata owners elected to govern the strata corporation.

Annual General Meeting (AGM): The most significant strata meeting where strata owners elect the strata council and vote on important matters.

Special General Meeting (SGM): A strata meeting called for a specific purpose, such as voting on a bylaw amendment.

Regular Council Meetings: Meetings where the strata council conducts its business, makes decisions, and implements its plans.

Bylaws: Rules and regulations established by the strata council to govern the strata corporation.

Strata Fees: Monthly fees paid by strata owners to cover the cost of maintenance and repair of common property and assets.

Special Assessments: Additional fees levied by the strata council to cover unexpected expenses.

Maintenance and Repairs: The upkeep and repair of common property and assets, covered by strata fees.

Common Property: Areas of the strata property that are shared by all owners, such as hallways, elevators, and recreation facilities.

Limited Common Property: Areas of the strata property that are for the exclusive use of one or more strata owners, such as balconies and parking stalls.