Thinking about selling your property? Great! Here are three important things you need to take a look at before you get going.
Step One: Clearing your Title
When was the last time you took a look at the title search for your property?
A title search tells you who the registered owners of the property are, and lists other people or entities who might have an interest in your property.
Other people can register charges, liens or judgments on your property without formally notifying you, so it’s important to see if anything has changed, or been added to your title since you bought the property.
Before you even list your property, you should get a current title search for your property, so you can see if you need to do any “clean up” work before you put the property on the market.
This is the legal equivalent of “decluttering”.
Some examples of things that might need cleaning up are:
Removing deceased owners from title
If one of the owners registered on title to the property has recently passed away, you will need to remove their name from the title before you can sell the property.
If you owned the property with the deceased person as a true joint tenant, then this is a relatively straight-forward process.
If you did not own the property with the deceased person as a true joint tenant, it gets a little bit more complicated – probate might be required.
How do you tell? When you look at the title search, you will see a section called “Registered Owner in Fee Simple”. Here are three examples:
This is an example of a title registered in the name of one person by themselves.
This is an example of a title registered in the name of two people as joint tenants.
This is an example of a title which is NOT registered in joint tenants – if the title doesn’t say “joint tenants”, that means the owners are registered as tenants in common.
If owners are registered on title as tenants in common (in other words, the ownership does NOT say “joint tenants”), then probate will likely be required in order to remove the deceased owner from title.
If you have a deceased owner on title, contact us before you list the property so we can determine how to remove that person from title to the property.
Clearing Old Mortgages Off
There are two parts to the paperwork involved with mortgages – the paperwork at the bank, and the paperwork at the Land Title Office.
Whenever you pay off a mortgage, the bank will give you a receipt for that payout, to show that you have cleared your debt with the bank. They are also supposed give you a document (a “Release”) that you file at the Land Title Office that clears the charge on the Land Title Office records.
Many people pay their mortgage off at their bank, but then forget to get (or lose) this Release. That means their mortgage stays registered on title to their property even though it was paid off.
As the seller of property, you are required to “clear the title”. This means that you must remove these mortgage charges on title before it is transferred into the names of your buyers.
If there is still a mortgage registered on title, even though you haven’t been paying your mortgage off for years, we will need to get that charge removed – that can take several weeks to get organized, depending on how old the charge is.
Returning Duplicate Certificates of Title
Ever played Monopoly? Where you have a card (a “title deed”) that you have to hand over to the next owner when you sell the property?
This is one kind of title system, where the owners keep their own title deeds in their personal possession, and they must surrender them when they sell their property. But there are a lot of flaws with this system – what happens if you lose your title deed, or it gets destroyed in a fire?
How will your buyer know that you are the right person to own this property – that you haven’t stolen the title deed from your great aunt Gertie?
Our system in BC is different – in our system, the provincial Land Title Office keeps all of the title deeds – individual owners never have them in their possession, so they never get lost or stolen.
One of the ways that people can protect their title against fraud in BC is to “remove the duplicate certificate of title”.
While you can never have the original certificate of title, if you have clear title (no mortgages or other financial charges on your title) you can ask the Land Title Office to give you something called a “duplicate certificate of title”.
You might put that duplicate certificate of title in your safety deposit box, in a bank vault (as security for a loan), or in your basement.
When you order the duplicate certificate of title from the Land Title Office, your title is frozen – you can’t transfer, sell or mortgage that property.
If you have asked the Land Title Office to issue you a duplicate certificate of title, the Land Title Office will make a notation on your title to indicate where the title was sent.
Returning the duplicate certificate of title must be done before you can list your property for sale – if you have lost the duplicate certificate of title, you will have to replace it, and that process can take several months (and quite a bit of cost) to work through.
Certificates of Pending Litigation and other charges
If you have not been making payments under your mortgage, or you are in the process of getting divorced, you may have a “Certificate of Pending Litigation” registered on title to your property.
This means that someone is in the process of making a litigation claim against your property.
A certificate of pending litigation will need to be removed from the title to your property before it gets transferred into the name of the buyer. Depending on the nature of the litigation, it can take some time to sort out this charge.
Step Two: Think about Taxes
There are several kinds of taxes which you will need to think about when you are transferring or selling your home. It is extremely important that you speak with an accountant if you have any questions about any of these taxes.
The sale of all property in Canada is subject to GST, unless that sale falls within an exemption.
The most common exemption people use when selling their home is the exemption for “used residential property”.
In other words, if you were living in this property as your principal residence, you weren’t using it for business purposes, and it wasn’t a piece of inventory you are selling, you may be exempt from having to collect and remit GST on the sale of this property.
Determining whether your property is subject to GST is not a simple question, and you should get an accountant’s advice before you decide to list the property, as to whether you should be collecting and remitting GST on the sale of the property.
The sale of residential property is generally exempt from PST in BC.
However, you may be required to collect and remit PST to the provincial government if you are selling goods and services separate and apart from the sale of the property.
For example, if you sell all the patio furniture separately from the home itself, then you may be required to collect and remit PST on the sale of that patio furniture.
Again, always discuss PST with an accountant if you are not sure whether PST applies in your situation.
Municipal Property Taxes
If you have not been paying your municipal property taxes, and there are outstanding arrears, then those arrears will need to be paid off from the net sales proceeds.
If you have a Land Tax Deferment Act Agreement registered on title to your property, that Agreement will need to be removed on closing – usually we will pay the amount outstanding on that agreement with your net sales proceeds, in the same way we would pay off any mortgages.
If you have sold the property “short” – meaning you are not going to receive enough money to pay these costs from the sales proceeds, you will need to find a way to pay these amounts on closing.
Vancouver Empty Homes Tax
Vancouver has a municipal bylaw which imposes a tax on empty homes.
Each year, owners are required to file a declaration which states whether they are living in the relevant property as their principal residence – if they are not, then they must pay a tax to the City of Vancouver.
This tax “runs with the land”, meaning the City of Vancouver can seek repayment of any outstanding amounts against the buyer of the property if you (as the seller) have not paid the tax properly (or signed the declaration).
If your property is in an area covered by this tax, you will be required to make a declaration as to whether you have filed the appropriate paperwork and paid the taxes for the property. In some cases, your buyer may require a holdback until they are satisfied that the taxes have been paid.
BC’s Speculation and Vacancy Tax
BC also has a new provincial tax called the Speculation and Vacancy Tax.
This tax applies to a number of properties throughout the province. If your property is in one of the areas covered by this tax, you are required to file a declaration with the provincial government stating whether you are living in this property as your principal residence. If you are not living in this property as your principal residence, you may be required to pay a tax, or claim an exemption from that tax.
This tax does NOT run with the land, which means the Province will come after you, as the seller, to pay any outstanding taxes.
If you sell property, you must disclose the sale of that property to the federal government in your income tax returns.
If you sell your principal residence, you may be exempt from capital gains taxes on that property.
If you are selling an investment property, or a recreational property, you may be required to pay capital gains taxes on the sale of that property.
Here is a difficult topic – non-residency issues.
If you are a resident of Canada, that’s great. But if you are a non-resident of Canada (meaning very generally that you live in another country as your home even if you are a Canadian citizen), your buyer is required to think about something informally called “non-residency taxes”.
This is a very complicated topic, and one which you must get an accountant’s advice on well before you think about listing the property for sale. It can be very difficult to determine whether you are a resident of Canada or not, and residence is NOT the same thing as citizenship. You can be a citizen of Canada at the same time you are a non-resident.
A buyer who thinks that a seller may be a “non-resident” is required by the Income Tax Act to hold back a portion of the purchase price until you get something called a Compliance Certificate from CRA stating that all of your Canadian taxes relating to this property have been resolved.
Getting a compliance certificate can take months to do, and so it is crucial that you get this process started as soon as you possibly can.
Step Three: Think about Timing
There are several timing issues you should think about when you are considering selling your home.
Availability of Net Sales Proceeds
It is quite rare that you will have the net sales proceeds available on the completion date.
There are several things which happen in the completion of a sale which are not in your control, and not in the control of your BC Notary or lawyer.
For example, if your buyer is using a mortgage, and their lender decides not to fund the mortgage until very late in the day, or even the next day, that will delay receipt of the funds significantly. The buyer may have done all of the things they are supposed to do, and still their lender doesn’t fund until late in the process.
If your buyer is in another community, it may also take some time for the net sales proceeds to be delivered to us to give to you.
Expect that the net sales proceeds will not be available to you on until at least the next business day, possibly longer.
Avoiding Back-to-Back Deals
If you are expecting to use the proceeds from your sale to fund the purchase of a new home, please make sure to give at least one day between the sale of your old home and the purchase of your new home.
This gives us enough time to make sure that we get the funds from your sale in time to pay for your new property.
If you can’t avoid arranging the completion of your sale and your purchase on the same day, please consider getting bridge loan financing for your purchase to ensure that you won’t have any difficulties funding your purchase.
Don’t Leave Town Just Yet!
If you are moving to another community or town, please make sure that you are still in town until at least your completion date.
If you have to leave town early, we will need to send documents to you for signature, and that will mean additional time and costs for meeting with a notary in that other location.
If you are leaving the country, remember that we will be issuing you a cheque for your sales proceeds in Canadian funds – you will still need to deposit those funds into a Canadian account, so don’t close out all of your accounts until you have processed those funds.
If you are selling your home, have us or your Realtor pull a copy of your title before you list it for sale, so we can discuss these issues with you.
Talk to your accountant about which kinds of taxes you might have to deal with.
Looking at these issues before you list the property can save you a lot of time, cost and heartache on Closing Date.