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Down Payments vs. Closing Costs in a Real Estate Transaction

Down-payments are often confused with closings costs. Here are the differences between the two. 

Down Payment

A down payment is an amount lenders require you to come up with yourself. This amount will be applied towards the purchase price together with the mortgage funds received from your lender. The amount is usually calculated as a percentage of the purchase price.

Lenders generally require you to come up with a minimum down payment of 5% of the purchase price although this amount may be higher depending on the terms of the mortgage. It is often a requirement that the money used for you down payment cannot be borrowed.

Closing Costs

Closing costs represent the total costs involved in completing your purchase. These will include the amounts that are debited from the purchaser such as: the purchase price, Property Transfer Tax and GST, if applicable, title insurance, the cost of obtaining confirmation of insurance coverage, and legal fees and disbursements.

Amounts that will be credited to the purchaser and applied against the debits include mortgage proceeds and the deposit paid to the real estate brokerage, if applicable.

There will also be adjustments between the parties, be it a debit or credit, depending on the date the transaction completes. Annual property taxes will be adjusted along with utilities or strata fees, if applicable.

The difference between the amounts credited and debited to a purchaser will indicate the amount that they must pay to their lawyer in order to complete the purchase. These funds are often referred to as the balance required to complete, and represent both the closing costs and down payment. In most cases, the balance required to complete must be provided by way of a bank draft.

The seller will be responsible for payment of the real estate commissions, their legal fees, and the amount required to payout their mortgage and any other financial charges on title, if applicable. These amounts will be paid out from the sale proceeds and the balance will be paid to the seller.

Supreme Court Declares BC Government’s Limits on Expert Reports Unconstitutional

People injured in car accidents must generally get an opinion from one or more “experts” in order to prove their claims. These opinions most often come from doctors although they can also come from other professionals such as occupational therapists and economists. These opinions must be written down in the form of an expert report.

The type and number of experts needed varies from case to case and depends in large measure on the injuries and losses the person has suffered. For instance, a person who suffers a broken bone will likely need an opinion from an orthopaedic surgeon. A person with a brain injury will likely require the opinion of a neurologist. Someone suffering from depression or PTSD will need an opinion from a psychiatrist. While it would be nice if a single doctor could give an opinion on all of a person’s injuries, ICBC, on the one hand, tends to not put much weight on reports written by family doctors (even if they did, not everyone has a family doctor). On the other hand, ICBC frequently argues that specialists are not qualified to give opinions outside their specific area of expertise. For that reason, a person suffering from multiple different kinds of injuries has to get opinions from multiple doctors if they stand a chance of fully proving their claims.

Until recently, there has never been a hard limit on the number of expert reports a person could tender at trial.

That all changed on February 11, 2019 when the BC Government changed the rules of the Supreme Court to limit the number of expert reports an injured person could rely on at trial. This change was done without warning and, for the first time ever, without having been recommended by the committee of judges and lawyers that oversee the rules of court. These changes were implemented by the Attorney-General who made it abundantly clear that the only reason for the limit was to save ICBC money. As an ICBC representative confirmed, half the expected savings would be “due to lower payments for damages – more expert reports make claims more expensive.” That’s another way of saying the limits were expected to prevent injured people from fully proving their case and, as a result, being fully compensated for their losses.

This was an unprecedented move. Never before had an Attorney General (who just happens to also be the Minister Responsible for ICBC) interceded to change the Rules of Court to favour a single institutional litigant, ICBC, to the detriment of innocent, injured people.

It didn’t take long for such an injured person to challenge the legality and constitutionality of these rule changes. That challenge was heard by the Chief Justice of the BC Supreme Court this summer.

In Reasons for Judgment indexed as Crowder v. British Columbia (Attorney General), 2019 BCSC 1824 and released at the end of October, the Chief Justice agreed that the magnitude of the changes were not authorized by the Court Rules Act, stating that:

[120]     I find that the effect of the impugned Rule is to change the substantive law of evidence that has guided this Court from its inception, and I find that this is not one of the exceptional cases referred to by Justice Lambert where the Rules may create new substantive law. Accordingly, I find that the Rule 11-8 Orders (and with it, the impugned Rule) are not authorized by the Act.

Furthermore, he determined that the limits infringed upon the core jurisdiction of the court and were, therefore, unconstitutional:

[196]     I find that the impugned Rule infringes on the court’s core jurisdiction to control its process, because it restricts a core function of the court to decide a case fairly upon the evidence adduced by the parties. The effect of the impugned Rule is to require the court to play an investigatory function in place of its traditional non-adversarial role, contrary to the principle of party presentation.

As a result, the Chief Justice declared the limits to be invalid and of no force or effect.

Before concluding, another stated reason for the limits on expert reports was that it would save ICBC from having to pay the cost of those reports when they settle a claim or lose at trial. However, ICBC has always had the ability to challenge having to pay for such reports and the Court has always had discretion to disallow some or all of the cost of an expert report if it determines the report shouldn’t have been procured or cost too much.  

Steps in a Real Estate Transaction

  1. Initial Offer

Upon viewing a property and wanting to buy it, a potential buyer will make an offer. The seller may reject or accept the offer, or they may make a counter offer and negotiations will follow. The document containing the offer is called a Contract of Purchase and Sale, and will be amended based on the negotiations. It will also include any subject conditions that must be satisfied before the contract becomes binding.

  1. Investigations

The subject conditions in the contract allow the potential buyer to undertake certain investigations, and confirm the availability of things like financing and insurance, prior to entering into a binding contract. Investigations may include having a home inspection, reviewing a well report, reviewing the title to the property, a property disclosure statement, and a survey, if available.

  1. Deposit

Buyers are normally required to pay deposit towards the purchase prior to completion. The deposit is often paid within a specified timeframe following acceptance of an offer, or following final subject removal.

  1. Subject Removal

After the buyers have satisfied their subject conditions, the conditions will be removed and the contract will be binding. In the event that the buyers are unable to satisfy a condition, such as a satisfactory inspection, they may elect to terminate the contract.

  1. Document Preparation and Execution

The buyer and seller must retain separate lawyers or notaries to act on their behalf to close the transaction.

The buyer’s lawyer is responsible for preparing the majority of the documents, and will send the documents that the seller must sign to their lawyer.

The buyer’s lawyer will receive instructions from their lender, and will prepare the required mortgage documents for execution and registration. They will confirm that appropriate insurance coverage will be in place, and arrange for title insurance, if required.

Appointments for signing usually occur one to two weeks prior to the completion date. It is important for buyers and sellers to let their lawyer know in advance if they will be away prior to complete, or will be signing out of province, as additional arrangements may need to be made.

  1. Closing

On the completion date, the buyer’s lawyer will attend to registration of the transfer and mortgage, if applicable, and supporting documents. The sale proceeds will be sent to the seller’s lawyer on their undertaking to payout any existing mortgages or financial charges, if applicable, prior to releasing the balance of the funds to the seller.

The lawyers also attend to payment of the other associated costs on behalf of their clients, including outstanding property transfer tax and real estate commissions.

The lawyers will notify the real estate agents that the sale has completed, and the real estate agents will arrange for possession and exchange of keys.

  1. Clearing Title

If an existing mortgage or other financial charge, such as a judgment, was registered against title, the seller’s lawyer will be responsible for ensuring that these charges are paid out and removed. They will provide the buyer’s lawyer with confirmation following the discharge of any financial charges.

It often takes between 30 – 60 days for the seller’s lender to provide the seller’s lawyer with the executed discharge of mortgage. It is important for buyers to be aware of this, as it could restrict their ability to immediately sell or transfer the property following their purchase.

  1. Report on Title

Upon clearing the seller’s financial charges, the buyer’s lawyer will report to the buyer and the lender, if applicable, and will provide a State of Title Certificate. The State of Title Certificate will show that the buyer is now the registered own of the property, that any prior financial charges have been discharged, and that the new mortgage, if applicable, appears on title.

Buying and Selling a Manufactured Home

A key difference between the sale of a manufactured home (commonly known as a mobile home) and the sale of an immovable house is that the land that the manufactured home is situated on usually does not change ownership at the time of the sale.

Ownership of land is registered in the Land Title Office, and when title to land is transferred the transfer is processed through the Land Title Office.

Conversely, ownership of manufactured homes is registered in the Manufactured Home Registry, which is a separate entity from the Land Title Office.

Key things to consider in when buying or selling a manufactured home include:

  1. Does the owner own the land the manufactured home is situated on;
  2. Does the owner have the ability to transport the home; and
  3. CSA approval.

These questions should be addressed prior to listing a manufactured home for sale or making an offer.

Sale of Manufactured Homes on Rental Pads

Manufactured Homes are often located on a rental pad in a manufactured home park. In these situations, the land or pad the manufactured home is situated on is owned by a third party. In most cases, the owner of the manufactured home will pay a monthly fee to rent the pad from the owner of the land.

In this case, only the ownership of the manufactured home will change; not the ownership of the land. If the buyer wishes to keep the home on the existing pad, they should always review the lease agreement between the current owner and the property owner, and confirm that the lease can be assigned to them on the completion of the transaction.

Sale of Manufactured Homes and Land

When a manufactured home sits on land and both are owned by the same person, the homes are often de-registered, which means they are no longer actively registered in the Manufactured Home Registry.

In this situation, only the transfer of the land is registered in the Land Title Office, and no updated registration in the Manufactured Homes Registry is required.

In the event that an owner wishes to sell the manufactured home a later date, they will be required to re-register the manufactured home, which can be done through an application to BC Registry Services

Relocation of a Manufactured Home

In order to transport and relocate a manufactured home, a permit must be obtained from BC Registry Services. Following the relocation, owners must submit a Change in Registered Location of a Manufactured Home form to BC Registry Services, updating the registered location of the home.

Prior to moving the manufactured home, owners or buyers should ensure that the home meets all requirements of the municipality or regional district, and the manufactured home park, if applicable, where the home is being relocated to.

CSA Certification

The Canadian Standards Association (CSA) sticker is placed on the manufactured home when it is initially constructed, and certifies that it meets applicable building standards.

Whether registered or de-registered, a manufactured home in British Columbia cannot be sold without a valid CSA sticker. A seller should ensure that the sticker is in place prior to listing a manufactured home for sale, and a buyer should include this as part of their examination prior to finalizing an offer.

In situations where a CSA sticker has been removed or cannot be located, an inspection must be carried out and an application made to confirm the home meets the provincial standards.

What is a “Minor” injury?

After April 1, 2019, all motor vehicle accidents that occur in BC will be subject to a new set of legislation that places a cap on damages for people who suffer “minor” injuries. Crucial to this determination is the definition of minor injury.

According to the BC Government’s new and draconian ICBC legislation, a minor injury includes sprains, strains, general aches and pains, cuts, bruises, road rash, persistent pain, minor whiplash, TMJ disorder, mild concussions, and short-term mental health conditions. They further elaborate that an injury may later be determined not to be minor if it continues to impact your life for more than 12 months and, for concussions or mental health conditions, if those injuries result in a significant impairment beyond 16 weeks.

The actual legal definition of what a minor injury is can be found in the Insurance (Vehicle) Act. Specifically, a minor injury is a physical or mental injury, whether or not chronic, that does not result in serious impairment or permanent serious disfigurement, and is one of the following:

  • Abrasion, contusion, laceration, sprain or strain
  • Pain syndrome
  • Psychological or psychiatric condition
  • Concussion that does not result in incapacity
  • TMJ Disorder
  • Whiplash Associated Disorder

If an injury does fall into one of the above categories it will be classified as a “minor” injury unless it results in a serious impairment. An injury is defined as causing a serious impairment if it is:

  • not expected to improve substantially,
  • is primarily caused by the accident, and
  • results in a substantial inability of the injured person to perform the essential tasks of their employment, related to their education or perform the activities of daily living.

What a “substantial inability” to perform work and education tasks and daily living activities is not known as it is not defined in the legislation. Without the BC Government having defined that phrase, it will be open to ICBC to interpret it however they want until clarification is provided.

Disturbingly, even a permanent and chronic injury that is expected to cause ongoing pain for the rest of someone’s life could still be “minor” and subject to the cap on damages.

It is important to understand that the how we commonly construe these types of injuries is not necessarily how they are defined by the new ICBC legislation. As an example, most people would consider a strain to be a minor pain in their muscles associated with over-stretching or excessive use that quickly resolves. Similarly, most would consider a sprain to be a twisted ligament like what happens when you twist your ankle while running. However, under the new ICBC legislation, a strain is any injury to a muscle and will be designated as minor unless all the fibres of the muscle are torn. Along those same lines, a sprain is any injury to a ligament that will be minor unless all the fibres of the ligament are torn. Therefore, even if someone suffers a near complete tear of any ligament such as a rotator cuff or ACL, that requires surgery to repair, the BC Government’s new ICBC legislation would still label that injury as minor and subject to the cap.

The timing of when the impact of these injuries is assessed will be crucial as the likelihood of an injury improving is often directly related to what treatments have already been attempted and the length of time an individual has been suffering from the injury.

While physicians will still be responsible for diagnosing injuries, it is ICBC that first decides whether they are “minor” or not. If an individual disagrees with ICBC’s assessment that their injury is “minor”, they may make an application to the Civil Resolutions Tribunal for a determination.

How does the CRT work?

The Civil Resolutions Tribunal (or CRT) is far less formal than the usual court process. This is because the vast majority of the tribunal’s work is done entirely online.

For ICBC claims, an individual can only initiate a claim with the CRT by completing an online application through the tribunal’s “Solution Explorer”. The Solution Explorer asks individuals multiple pre-programmed questions about their potential claim. Once the application is submitted and served on ICBC, ICBC will have an opportunity to respond by filing a dispute notice. After that, a tribunal case manager will assume conduct of the file. The case manager does not decide the claim itself, but has significant discretion to determine the evidence that will be heard at a hearing, the manner in which the hearing will be conducted, and the jurisdiction of the tribunal to hear various issues in the case.

If the matter is not resolved in the case management stage, it is then assigned to another tribunal member for a hearing. Most hearings are comprised of online submissions to the tribunal. Only in rare cases will the tribunal consider holding oral hearings via telephone or Skype. Following the hearing, the tribunal member renders a decision that is binding upon all parties.

While deciding a case based on written statements may seem easy and effective, it denies people their “day in court”. That denial is more significant in ICBC injury cases. Without the opportunity to have a face-to-face hearing, it is very difficult to see how tribunal members will be able to fully appreciate the multiple ways in which an accident has impacted a person’s life. The inevitable result, as envisioned by ICBC and the BC government, is that people will not be fully compensated for their injuries and losses.

There are further problems that come with not having in-person hearings. For instance, it’s difficult to see how tribunal members will grapple with and assess difficult concepts such as credibility and reliability of witnesses without ever seeing them testify in person. This is going to be a big problem when it comes to assessing liability or fault for accidents which regularly turn on which party or witness is more credible and reliable.

Similarly concerning is that the standard rules of evidence, which have been developed over hundreds of years and remain in place for good reason, do not apply at the CRT. For that reason alone, the CRT is likely to become the proverbial “Wild West” of tribunals. This demonstrates a lack of fairness and seriousness towards injured claimants.

What is the Civil Resolution Tribunal (CRT)?

The Civil Resolution Tribunal (or CRT) is an administrative tribunal established by the BC government in 2012 to handle disputes between strata councils and property owners. In 2017, the tribunal’s jurisdiction was expanded to allow them to hear small claims disputes of $5,000 or less.

The current BC government has drastically expanded the tribunal’s jurisdiction to decide several matters related to ICBC and motor vehicle accidents. Specifically, as of April 1, 2019, the CRT now has exclusive jurisdiction to decide:

  1. Whether a person injured in a car accident is entitled to ICBC no-fault or Part 7 benefits;
  2. Whether a person’s injuries are “minor” as defined by the BC government; and
  3. Claims of $50,000 or less.

With these new additions to its jurisdiction, the CRT – which currently only has 8 full-time adjudicators – will be solely responsible for deciding between 60% to 80% of all ICBC claims involving accidents that occur after April 1, 2019. To put the enormity of that expectation into perspective, approximately 95,000 people were injured in accidents in 2017.   

It’s important to remember that the CRT is not a court. It is an administrative tribunal. Unlike court hearings that are presided over by judges, CRT hearings are presided over by “members” who are not required to have legal education, experience, or training.  

Concerns about potential bias have also been raised about the CRT. This is because CRT members are only appointed for 2-year terms. If they want to keep their job beyond those 2 years, they must be reappointed by the province’s Attorney-General who, currently, just so happens to also be the Minister response for ICBC. The appearance of a conflict-of-interest is clear. This concern does not arise with judges who, once appointed to the bench, can sit until they turn 75. With that security of tenure, judges remain independent of the Executive Branch of government and can decide cases on their merits without fear of retribution.

Steps in a Lawsuit: Collecting on a Judgment

For a plaintiff, a successful trial will result in a judgment against the defendant. If the defendant has insurance for the type of loss that was sued over, that insurance will satisfy the judgment. However, if there is no insurance and the defendant refuses to pay the judgment voluntarily, the plaintiff has several ways of getting what they are owed by the defendant, now called the debtor. In all cases, the judgment is good for 10 years after which time the plaintiff must sue on the judgment to keep it valid.

Payment Hearing/Subpoena to Debtor Hearing

Before you can decide on the best way to collect on your judgment, you should know the debtor’s financial situation. One way of determining this is at a payment or subpoena to debtor hearing. This hearing is done in court and allows you to ask the debtor questions about his financial situation. The purpose of the hearing is generally to (a) identify assets owned by the debtor that you can go after using one of the other methods talked about below, or (b) put a payment schedule in place that says the debtor has to pay you a certain amount at a certain frequency. Once a payment schedule is in place, if the debtor is abiding by it you can’t do anything else to collect on your judgment. For that reason, if you find out that the debtor has assets you can go after, it’s better not to ask for a payment schedule and simply adjourn the hearing.

Garnishment

Garnishment is a tool that allows you to intercept money owed to the debtor by other people. Essentially, you’re telling those people to pay you instead of paying the debtor. The most common things to garnish are wages and bank accounts. Once served with a garnishment order, the person has to pay the money into court. You then have to make a court application to get the money paid out to you.

There are rules that have to be strictly followed including giving the debtor notice that you have received a garnishment order. As well, there are limits on what and how much money you can garnish in some circumstances. For example, EI or social assistance benefits can’t be garnished.

Seizing and Selling Personal Property

You can hire a bailiff to seize and sell a debtor’s personal property. The cost of hiring a bailiff can be expensive so you want to make sure that the debtor has property valuable enough to justify the process. The most common things to seize are motor vehicles or shares in a company.

There are limits on what can be seized. A debtor is allowed to keep household goods, work tools and motor vehicles up to a certain value. You also can’t seize and sell necessary clothing, medical aids, or anything that the debtor jointly owns with someone else.

Registering Your Judgment Against Land

If the debtor owns land, you can register your judgment on title to the property. This prevents the debtor from selling or mortgaging the property without first dealing with your judgment. Unlike your judgment itself which is good for 10 years, the registration is only good for 2 years.

You can make a court application to have the property sold to satisfy your judgment. However, this can be a complicated and costly process so should only be done if you have a large judgment. In all cases, the debtor will be able to keep a certain portion of the equity they have in the property if it is their principal residence.  

Steps in a Lawsuit: Appeals

If, following a Supreme Court trial, a party is unhappy with the decision of the judge, they have the right to appeal the decision to the Court of Appeal. This must be done within 30 days of the decision being rendered.

The two typical grounds on which a party would appeal a trial decision are either that the judge got the law wrong or got the facts wrong. The level of scrutiny the Court of Appeal will give to the decision depends on which of those two grounds are alleged. This is called the standard of review. The Court of Appeal expects that judges will get the law correct and, as such, will more heavily scrutinize their decision to make sure they got it right. When it comes to the facts of a case, the Court of Appeal is more deferential to trial judges because, of course, they got to sit through the trial and hear the evidence. It’s only when the judge clearly got a fact wrong and, had they not, the decision would have been different, will the Court of Appeal intervene.

The appeal process consists of the appellant filing a notice of appeal. They will then be responsible for ordering and filing a transcript of what was said at the trial and books of exhibits that were entered into evidence. The appellant and the other party resisting the appeal, called the respondent, will then file factums that set out their position on the appeal.

The parties will then make arguments before the Court of Appeal. The Court of Appeal will consist of a panel of judges, usually 3 although in important cases 5 judges will hear the appeal. The appellant makes their submissions first followed by the respondent. The appellant is then offered an opportunity to respond.

As with trial judges, the Court of Appeal will usually reserve making their decision to a later date and, when that time comes, issue written reasons. The Court of Appeal’s options are generally to allow the appeal in whole or in part, or dismiss the appeal. If the appeal is allowed, the Court of Appeal can overturn the trial judge’s decision on the issue under appeal and replace it with their own decision. Another option is to send the matter back to trial to have the issue re-determined.

Steps in a Lawsuit: Costs and Cost Assessments

Once a lawsuit has settled or been decided after a trial, the parties must still deal with the matter of court costs. Known simply as “costs”, these are an amount of money meant to compensate a party for the time and expense of having to participate in a Supreme Court case. When a party has a lawyer, costs help offset the party’s legal fees. Generally, only the party who is successful is entitled to costs, which are payable by the unsuccessful party. A party does not have to win at trial to be successful. If a case settles before trial and involves the payment of money from the defendant to the plaintiff, the plaintiff is still entitled to costs. Conversely, if a plaintiff discontinues a lawsuit against a defendant, the defendant would be entitled to costs. The amount a successful party will receive for costs depends on the stage of the litigation at which the case resolves and the difficulty of the case. For each step in the litigation, the Supreme Court Civil Rules provides a range of units that the successful party can claim. The more time spent or work done on a particular step, the more units the party can rightfully claim. Those units are then multiplied by one of three set dollar amounts. The more difficult the case, the higher dollar amount the party can attempt to claim. The product of this equation is the amount of money the party will receive as costs for that particular step. For example, if a party claims 5 units for exchanging documents at a rate of $110 per unit, the party could be entitled to $550 + tax for the time and expense of having to exchange documents. If the parties cannot agree to the amount of costs payable, they can apply to a Registrar of the Court to assess the amount of costs the successful party should receive. It should be noted that there are a number of rules relating to a party’s entitlement to costs, the amount, and when they are to be paid.