THE CONTRACT OF PURCHASE & SALE (CPS) ...An Explanation & Guide

THE CONTRACT OF PURCHASE & SALE (CPS)

An Explanation & Guide

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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)
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Best Regards,
Solutions Real Estate Group
Keller Williams Elite Realty