RESIDENTIAL SALES AND MORTGAGES

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1 RESIDENTIAL SALES AND MORTGAGES

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3 Saskatchewan: Bar Admission Program Real Estate Residential Sales and Mortgages ACKNOWLEDGMENTS This paper was originally prepared for the Bar Admission Course by Dwayne Walters while at Quon Ferguson MacKinnon and Walters. In 2002, Randy Sandbeck of Olive Waller Zinkhan & Waller reviewed and updated the paper. In August 2003, Rick Carlson of Cuelenaere Kendall Katzman & Watson reviewed and updated the paper. In December 2005, W. Kevin Rogers of Leland Kimpinski LPP reviewed and updated the paper.

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5 Saskatchewan: Bar Admission Program Real Estate Residential Sales and Mortgages i TABLE OF CONTENTS I. INTRODUCTION...1 II. THE PARTIES INVOLVED IN THE CONVEYANCE...1 III. THE MAJOR STEPS IN A CONVEYANCE...3 A. PRELIMINARY STEPS Use a checklist Acknowledge receipt of instructions from realtor and lender by letter or fax Communicate with your client and obtain necessary information If you are acting for the buyer If you are acting for the seller...5 B. REVIEWING THE OFFER TO PURCHASE AND ACCEPTANCE AND PROPERTY CONDITION DISCLOSURE STATEMENT...5 C. SEARCHES A search of title of the property Writ Registry A tax search at the relevant municipal tax office A search for the Surveyor's Certificate or Real Property Report A Personal Property Registry search...11 D. PREPARE DOCUMENTS - SELLER Direction for payment and acknowledgement Declaration of possession Conflict form Certificate of exempt supply of real property Application of summary discharge Transfer authorization Retainer agreement Statement of adjustments Interest authorization Discharge of mortgages...15

6 ii Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages E. PREPARE DOCUMENTS - BUYER Irrevocable assignment of mortgage proceeds and authority and direction Declaration of possession Conflict form Affidavit of identity Survey requirements Declaration of examination of Surveyor's Certificate or Real Property Report Building information abstract - zoning compliance certificate Mortgage approval document - disclosure document Mortgage Agency and retainer agreement Statement of buyer's funds required Tax certificate Certified copy of insurance policy Title print Mortgage assumption statement...19 F. INTERVIEWING THE CLIENT...20 G. CLOSING THE TRANSACTION...20 IV. USING TRUST CONDITIONS...24 A. GENERAL RULES...24 B. RELEVANT STATUTES...25 C. RELEVANT CASES...25 V. WESTERN CONVEYANCING PROTOCOL...26 Glossary of Real Estate Conveyancing Terms...28

7 Saskatchewan: Bar Admission Program 1 Real Estate Residential Sales and Mortgages RESIDENTIAL CONVEYANCE I. INTRODUCTION Residential sales, purchases and mortgages are divided into four steps: a) searching; b) document preparation; c) trust conditions; and d) reporting. To the unwary the practice of real estate law in Saskatchewan would seem routine. This is true in many cases but care must be taken to anticipate problems and minimize mistakes. Every step in the real estate transaction has a potential for mistakes and the methods for avoiding mistakes involve: a) the use of checklists; b) the use of forms; c) communicating with your client; and d) lawyer control of the file. The following comments are written from a Saskatoon perspective. It must be kept in mind that every transaction is unique. In addition, each area of the province has slightly different practices in conducting a real estate transaction. II. THE PARTIES INVOLVED IN THE CONVEYANCE A residential real estate conveyance is the transfer of title to land from the seller to the buyer based on the terms and conditions usually set forth in a written agreement called the offer to purchase, and acceptance.

8 2 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages The usual terms of the offer will state that the buyer undertakes on closing date to pay the seller the agreed upon purchase price for the property. In return the buyer is to receive vacant possession and a registrable transfer authorization which will place registered ownership in their name. The seller undertakes on the closing date to grant to the buyer vacant possession of the property and to provide the buyer a registrable transfer of title to the property. Once registered at the Land Registry ( ISC ) a title is to issue free and clear of all encumbrances save and except for those assumed by the buyer in return for payment of the agreed upon purchase price. The seller usually retains the services of a real estate agent (to whom a commission is payable) and a real estate lawyer to prepare the conveyancing documents. If there is a mortgage registered against the seller s title the seller must deal with their lender and pay off the mortgage, unless the buyer has agreed in the offer to assume it. If the taxes are in arrears or not paid for the current year, arrangements must be made to have the arrears paid and current years taxes adjusted. The seller may have judgments registered against their names or encumbrances registered against their property at the Writ Registry. If this is the case, arrangements must be made to have these creditors satisfied before the seller can transfer the property to the buyer. These are all steps the seller s lawyer will be involved in. The procedure for the buyer is similar. The buyer may use the services of a real estate agent to find a property for them. They will also retain a real estate lawyer to complete the purchase and any required mortgage documents. If the buyer is obtaining mortgage financing to purchase the property, the lender will usually forward the mortgage papers to the buyer s lawyer for completion. The buyer will also require the services of an insurance agent to place insurance coverage against the property. The buyer may also require a Saskatchewan Land Surveyor to conduct a survey of the property if there is no survey in existence or if the existing survey is not satisfactory to either the buyer or their lender.

9 Saskatchewan: Bar Admission Program 3 Real Estate Residential Sales and Mortgages In summary, the seller s obligation is to transfer clear title (subject to agreed encumbrances) and vacant possession of the property to the buyer on the closing date. The buyer s obligation is to pay the purchase price to the seller upon transfer of title. III. THE MAJOR STEPS IN A CONVEYANCE A lawyer should follow these steps in a conveyance file: A. PRELIMINARY STEPS 1. Use a checklist A checklist is the road map of the real estate conveyance. It shows you the route to take to completion, it shows you alternative routes and it aids you if you become lost. Without the checklist (map) you are doing nothing more than commencing a mystical tour (which will not be magical) and encountering unexpected turns, detours, delays and liabilities. Every law office should have their own form of real estate checklist. Some offices will have separate checklists for a sale, a purchase and a mortgage. Others will have an all inclusive checklist. Using a separate or an all inclusive checklist makes no difference, what is important is that you use one. A good starting point is the detailed Law Society checklist which extensively reviews the steps required to conclude a residential real estate transaction in Saskatchewan. 2. Acknowledge receipt of instructions from realtor and lender by letter or fax The purpose of the acknowledgment letter or fax is to advise the real estate agent that you have received the instructions and to confirm what immediate steps you will take. Acknowledging instructions from the real estate agent is a matter of courtesy and more importantly is a matter of communication.

10 4 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages The purpose of acknowledging the mortgage instructions from the lender is to advise the lender that you have received the instructions and to indicate whether you can comply with the strict terms of their instructions. You must determine if you can supply the lender with the title opinion in the form that they require to complete their mortgage. Some mortgage instructions originate outside the province and are based on laws that are not applicable to Saskatchewan. You must carefully consider your position as the lawyer for the lender and the opinion which your client, the lender, requires from you. If you are unable to supply the lender with the form of title opinion that they require, advise the lender of your concerns, indicate what you are able to supply by way of title opinion and what qualifications must be made to your opinion. Remember that you are not the guarantor of the title and you should not certify to the lender information received from a third party when that third party, such as the local tax office or zoning department, will not. 3. Communicate with your client and obtain necessary information Advise your client what steps you will be taking to conclude their transaction, (your retainer with your client), what steps are beyond the scope of your retainer and what information you require from them to complete your task. This is accomplished by a telephone call or by sending your client a letter detailing the steps required to close the deal. You should detail the documents which will be executed by the client. 4. If you are acting for the buyer You will need to know the names to appear on title, whether the buyer wishes to take title as joint tenants or tenants in common, whether they will be living on the property or not, and in those jurisdictions which have two school systems, whether they will be public or separate school supporters for the property tax.

11 Saskatchewan: Bar Admission Program 5 Real Estate Residential Sales and Mortgages 5. If you are acting for the seller You will need to know their new address, if they have a Surveyor s Certificate or Real Property Report for this property, and if there are any tenants residing in the property who will remain after closing. B. REVIEWING THE OFFER TO PURCHASE AND ACCEPTANCE AND PROPERTY CONDITION DISCLOSURE STATEMENT You should review the Offer to Purchase and note any special requirements, time frames and financing arrangements. The form usually used is the Residential Offer to Purchase, developed by the Saskatchewan Real Estate Association, although some parties will utilize a form prepared by their real estate lawyer. The offer is normally used in conjunction with a Property Condition Disclosure Statement. If the offer is a photocopy of the third carbon copy that has been faxed once or twice before being sent to you, portions may be unreadable. Contact the real estate agent immediately to clarify any ambiguities and unreadable portions of the contract so there will be no misconceptions or possible litigation later about what is the agreement of the parties. The contract must contain the following basic elements: a) The parties to the contract The contract must set out the names of the sellers and the buyers. b) A description of the property The Offer may already set forth the correct civic address. Possibly you may have the luxury of having both the correct legal description and the civic address inserted into the Offer. The problem is that sometimes the legal description does not correspond to the civic address. You may want to review the title as it existed just prior to conversion to the Land Registry. This can be a useful crosscheck to determine the parcels created on conversion.

12 6 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages c) The price to be paid The offer will indicate what the purchase price is, how much of the price is to be paid by deposit, by mortgage financing and what is the balance of the downpayment. The offer may also indicate how many days prior to the possession date the downpayment monies are to be paid. d) The possession date In most circumstances the buyer requires vacant possession of the property on possession day. If tenancies are to be assumed, then name of the tenants, the term of the tenancy, the rent to be paid and details of any prepaid rent and security deposits should be set out in the Offer. If the buyer is to obtain vacant possession of the property then the seller, if there are tenants, must give the required notice to the tenants pursuant to The Residential Tenancies Act. Usually the possession date and the adjustment date are the same. e) The deposit In transactions where real estate agents are involved, the matter of the deposit will have been determined before the concluded agreement reaches your desk. There are three points of view dealing with the amount of the deposit in any transaction. (i) (ii) (iii) The seller requires a deposit as large as possible. The reason for this is that the buyer may have a number of conditions in the Offer, such as making the Offer subject to financing and/or a property inspection. This of course will take time, time in which the seller s property is effectively removed from the market. The seller wants to make sure that the buyer proceeds with the transaction and a substantial deposit will put more onus on the buyer to satisfy conditions. As well, if the buyer abandons the transaction after conditions are met, the deposit is retained as damages. The buyer will wish to deposit the least amount of money as possible. The buyer will not want a large amount of money tied up for a considerable period of time. This is why in some offers you will find deposits of $1 or $100. A seller who accepts such an offer is probably in a situation where the property has been on the market for a considerable period of time and the seller is desperate for the sale. The second party who wishes a deposit as large as possible is the real estate agent. If the buyer should back out of the transaction after fulfilling all conditions, the deposit is usually forfeited. The forfeited deposit is divided between the real estate broker and the seller.

13 Saskatchewan: Bar Admission Program 7 Real Estate Residential Sales and Mortgages As a matter of practice you must ensure that all moneys paid to your office on a real estate transaction are paid either by bank draft, certified cheque or lawyer trust cheque. Do not deviate from this practice because if you do the only person who will be hurt if the cheque does not clear will be you. Post dated cheques are meaningless. A lawyer who does not have client s cheques certified is inviting trouble. f) The contract may also contain terms dealing with the following: (i) Conditions as to the obligations of the parties to complete, such as mortgage financing, the sale of another property or repairs to be completed by the seller prior to possession date. (ii) Various warranties on the part of the seller, (which may be contained in the Property Condition Disclosure Statement) such as clauses dealing with urea formaldehyde foam insulation, asbestos insulation, insect infestation and water seepage. Many sellers will not think twice when it comes to completing the Disclosure Statement. The Statement may be construed as a warranty on their part. If the seller does not have the knowledge to give a warranty then none should be given. (iii) A listing of all chattels remaining with the property. An accurate description of the chattels remaining with the property must be set out in the Offer. Incomplete descriptions only result in bad feelings on behalf of both the seller and the buyer, with the solicitors involved bearing the brunt of the criticism. A properly completed Offer to Purchase specifying which drapes are to remain with the property and which drapes do not, whether the tool shed in the yard stays or not, will eliminate headaches further on in the transaction. Consider the problems incurred in dealing with a central vac that stays but nothing is mentioned in the Offer of the chattels, that is, the hoses and accessories. This issue is covered in a realtor s offer, but may not be in private sales.

14 8 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages (iv) A clause dealing with the residency of the seller. If the seller is deemed to be a non-resident of Canada then under the provisions of the Income Tax Act (Canada) the seller must either obtain the appropriate clearance certificate or the buyer is entitled to retain the appropriate portion of the purchase price and remit it directly to Canada Customs and Revenue Agency. If there is any question about residency you should have the seller complete a Declaration of Possession, indicating under oath whether the seller is a resident Canadian. (v) Acceptable Encumbrances. The Offer states that the title being purchased by the buyer is to be free and clear of all encumbrances except those expressly accepted. Consider the situation where there are building restriction caveats and easements registered on the title and consider the situation where the buyer is buying this specific property with the intention of building a pool in the backyard. Obviously the buyer should have searched these encumbrances before entering into the offer, including having the utility lines staked to ascertain if the encumbrances are acceptable. Unfortunately such interests are not always searched in advance. (vi) Interest payable by the buyer to the seller (Clause 4 of the Offer). The standard realtor offer refers to Bank of Canada Overnight Rate plus 4%. It is suggested this should be used as a standard. In the absence of an express agreement to the contrary, the buyer must pay interest to the seller where the buyer takes possession and purchase funds are outstanding from the date of taking of possession. See: Tam v. Pemco (1981) 3 W.W.R. 655 at (vii) New mortgage to be arranged by the buyer. The amount in this clause may be the gross amount of the mortgage and not the net amount. This will be slightly deceiving to the buyer, who may believe that they are obtaining a mortgage for $80,000 and that the total amount will be available for the purchase. Usually at the time of preparing the Offer the buyer does not consider that deducted from the total mortgage proceeds will be mortgage insurance fees, appraisal fees, built-up tax account, legal fees, land titles fees and other disbursements. As to the obligation of the buyer to use their best efforts see: Dynamic Transport Ltd. v. O.K. Detailing Ltd. (1978) 6 ALTA. L.R. (2) 156, (1978) 2 S.C.R

15 Saskatchewan: Bar Admission Program 9 Real Estate Residential Sales and Mortgages (viii) Adjustment Clause. If the buyer assumes the existing mortgage they may also assume a sizable tax account, which must be reimbursed to the seller. This amount will not be reflected in the Offer to Purchase and is one of the little surprises left for the lawyer to explain to the unwary buyer. If taxes are paid in full for the year, the buyer must reimburse the seller for that portion of the year that the buyer will receive a benefit. Usually this amount is not taken into consideration prior to the completion of the Offer. See Handsaeme v. Dyck (1982) 26 R.P.R. 9. Where the full purchase price is not paid to the seller due to a mutual mistake in the statement of adjustments, the seller can maintain an action for the balance of the purchase price. (ix) The Offer to Purchase may indicate that the seller must obtain and supply the buyer with a Surveyor s Certificate or Real Property Report. If the seller does not have a Surveyor s Certificate or Real Property Report in their possession and if you are acting for the seller then check with the seller s lender. By this time you will have requisitioned both a land title s search and a tax search so you will have the name of the seller s lender and the mortgage reference number. Some mortgage companies will not give out a copy of the Surveyor s Certificate or Real Property Report prior to discharge of the mortgage because of copyright laws. If the buyer requires a Surveyor s Certificate or Real Property Report the buyer should qualify that the survey must be acceptable to the buyer's lender. The survey that the seller has may be outdated and will not include construction completed after its preparation such as an attached or detached garage. In the absence of a Survey, most lenders will accept a title insurance policy instead. This may reduce costs but you should verify the lender s requirements.

16 10 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages (x) The Offer usually indicates that the seller is responsible for all utilities up to and including possession date. If the seller is moving out of the city or the province and the utilities are being supplied by the city or town, then unpaid utility accounts may follow the land as a tax. The result may be that the buyer will be required to pay the seller s unpaid utility accounts in full. The last utility account may not be available for the property until after possession has been granted to the buyer and the transaction finalized. To avoid problems like this, it is prudent to do a utility search especially if the home that is being purchased has been vacant for a considerable period of time or if your client, the buyer, is buying a house that has tenants. C. SEARCHES As soon as possible, you should conduct: 1. A search of title of the property Information Services Corporation ( ISC ) allows searches based on many different search criteria. A search of the legal land description will identify the registered owner of the title. A crosscheck of registered owners can be undertaken using the name search capacity under the Land Registry. The title search will identify interests that that will remain on the title. A search of interests should be undertaken in order to ascertain if there are any specific items that should be brought to the attention of your client. 2. Writ Registry A search of the Writ Registry is only necessary in relation to the purchaser. Any writs that have not specifically attached to the seller s title will not attach as a result of the transfer process. Search the buyer s names exactly as they intend to take title to determine if there are any writs of execution which will auto attach. If any writs of execution arise which do not relate to either the seller or the buyer, there is a summary discharge procedure that is available if the writ does not relate to the party.

17 Saskatchewan: Bar Admission Program 11 Real Estate Residential Sales and Mortgages 3. A tax search at the relevant municipal tax office The tax search will ascertain the current years taxes, whether the taxes are paid or not and if applicable, what is the current phase-in as a result of reassessment. Order a Tax Certificate if taxes have been paid as this is usually required by the lender. Otherwise, wait until taxes are paid (if required by the buyer s lender in the mortgage instructions) and then order it. Tax searches may be conducted by computer, telephone or fax. No particular form is required, but you must include all information that is required by the municipal tax office to complete your request, such as civic address, legal address and name of the registered owner. Some municipalities such as Saskatoon and Regina now permit on-line searches 4. A search for the Surveyor s Certificate or Real Property Report The offer may indicate that the seller is to supply a copy of the survey to the buyer. Sometimes the survey may be in the possession of the seller. Other times the survey may be held by the seller s lender. If acting for the seller obtain a copy as soon as possible and forward it to the buyer s lawyer as it will be required to complete the buyer s mortgage documentation so mortgage funds can be advanced. If representing the buyer, consider whether to obtain an up-to-date Real Property Report for current status of the property, and to address privity of contract and copyright concerns that arise when relying on old surveyor s certificates. 5. A Personal Property Registry search Do a search at the Personal Property Registry if you are acting for either the seller or the buyer on a mobile home transaction or if the purchase price includes major chattels that have serial numbers. This search is necessary to ascertain if there are any encumbrances registered against personal property.

18 12 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages D. PREPARE DOCUMENTS - SELLER Some of the documents required to complete the transaction on behalf of the seller include: 1. Direction for payment and acknowledgement The Seller s Direction for Payment is your client s instructions as to what is to be done with the sale funds. This form allows you to make undertakings to the buyer s lawyer without the threat of the seller changing their mind later. It is very similar to the buyer s Order for Payment. The direction is the seller s authorization to you as the lawyer to deal with the sale money. The acknowledgement is the seller s confirmation that they understand what their position will be if the transaction should collapse after possession and title is granted to the buyer and prior to their receiving the balance of the sale funds. You can include any standard client warnings in such a document. 2. Declaration of possession The Declaration of Possession acts as a checklist for the buyer or seller to reinforce the obligations they are assuming in order to close the sale. It eliminates some of the responsibility that has come to fall on the lawyer s shoulders and places it back on the parties to the contract, the buyer and the seller. 3. Conflict form This document is completed if you have received instructions to act for both the seller and the buyer on the transaction advising your clients that if prior to the conclusion of the transaction there is a major dispute between the seller and the buyer that cannot be reconciled, (which rarely happens), you will not be able to act for either side.

19 Saskatchewan: Bar Admission Program 13 Real Estate Residential Sales and Mortgages 4. Certificate of exempt supply of real property Sellers are to advise their buyers as to the GST status of the property; is the sale exempt or subject to GST? Unless covered by an exemption, all sales of real property are subject to GST. Most sales of a used residential complex will be exempt from GST. A residential complex is considered to be used if it is sold by someone other than a builder. Having the sellers complete a GST Exemption Certificate will protect the buyer if the sale ultimately is subject to GST. 5. Application of summary discharge The Writ Registry maintains a record of orders registered against parties. The Writ Registry is essentially limited to money judgment orders. Writs of Executions will no longer register against the title to land where the owner has a similar name. An auto attach feature exists, but it will only automatically attach the Writ of Execution where there is a character for character match between the name recorded on the Writ of Execution and the name to be recorded on the title. As parties can now search names, there is a specific attach feature wherein any party desiring so can specifically attach a Writ of Execution as an interest against a specific title, whether or not the name is similar. If the Writ of Execution has been attached, a notice goes out to the registered owner and there is a summary discharge procedure that is available where the owner can assert that they are not the party identified in the Writ. 6. Transfer authorization A transfer authorization is the document that will authorize the transfer of ownership of the property from the seller into the name of the buyer. This document must be submitted as part of the documentation to effect the change in ownership information. The Land Registry bases its registration fees on the dollar amount of a conveyance. It is therefore necessary to file an affidavit of value, which is normally the responsibility of the seller.

20 14 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages The Homesteads Act affidavit is not required to be filed, but compliance with The Homesteads Act, 1989 is still a legislative requirement. In practice, a buyer s solicitor will generally file the affidavit behind a begin attachment sheet as part of the transfer documentation, in order that it can be maintained on the Land Registry database. 7. Retainer agreement This document sets forth your responsibilities as the lawyer for either the seller or the buyer, what steps you will be taking to help conclude the transaction for your client and what steps are outside the scope of your retainer. If your client wishes you do searches that are outside the scope of your retainer agreement, then these extra steps will be subject to additional legal costs. Also as these are your client s instructions to you, your client cannot at a later date claim that you did not do everything that a competent lawyer should have done, especially when it was the client who gave you written instructions including an acknowledgment of what was outside your retainer. 8. Statement of adjustments This document sets forth the approximate costs of the transaction and what the net proceeds will be. As the lawyer you must itemize all costs so the seller will know exactly what they are paying for and why and what the seller will net from their sale. The Statement of Adjustments for this transaction will be prepared from information provided by provincial and municipal government offices, realtors, mortgage companies and others and although believed to be correct, you must advise the seller that its accuracy cannot be guaranteed and if the figures are in error further adjustments will be required between the seller and the buyer. 9. Interest authorization This sets out the calculation of the funds necessary to pay out and obtain a discharge of the mortgage.

21 Saskatchewan: Bar Admission Program 15 Real Estate Residential Sales and Mortgages 10. Discharge of mortgage It is prepared by the mortgage company and forwarded to the seller s lawyer after the mortgage has been paid in full. As the interest discharge authorization is a fairly straightforward document, it may be prepared by the solicitor for the seller and forwarded to the financial institution. However, each financial institution will have its own procedure for document preparation and execution. It is best to simply request the discharge. If the lender needs assistance they can request it. E. PREPARE DOCUMENTS - BUYER Some of the documents required to complete the transaction on behalf of the buyer include: 1. Irrevocable assignment of mortgage proceeds and authority and direction This document is the buyer s written instructions to the mortgage lender to send the mortgage funds to your office and the buyer s written instructions to you as to what is to be done with the mortgage funds. It also directs the lender to deduct any CMHC or GEMICO fees directly from the mortgage proceeds and any other amounts that the borrower may owe the lender. 2. Declaration of possession This document contains various undertakings that the buyer swears to be true in order to complete their purchase. The main undertakings are that the buyer will place fire insurance on the property, will have the utilities placed in their name prior to taking possession, that if there are structures built over any underground utility lines located on the property the buyer acknowledges that they may be responsible for the cost of relocating these lines. The buyer also confirms that the buyer will be using their mortgage funds to purchase this property that will serve as their principal residence.

22 16 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages 3. Conflict form Usually you will be acting for both the buyer on the purchase and the lender on the preparation of your mortgage documents. The buyer must be made aware that if there is a dispute between the buyer and the lender that cannot be reconcile before mortgage funds are advanced, (which rarely happens), you will not be able to act for either side. 4. Affidavit of identity See the comments above under the seller s documents. 5. Survey requirements Most mortgage companies require a Surveyor s Certificate or Real Property Report of the property being secured before advancing the mortgage funds. The survey indicates that the house and any other permanent buildings, such as a garage, are located on the land the buyer is purchasing and not encroaching on adjoining land. The survey report is certified by the surveyor who prepared the certificate. The survey that the seller may have may not show all the improvements located on the property the buyer is purchasing and may not be acceptable to the lender. For your protection, you should strongly recommend that the buyer should consider the obtaining of a current Surveyor s Certificate for the property showing the current exact dimensions of the property and the location of all improvements. If there is no survey then title insurance may be an option. 6. Declaration of examination of Surveyor s Certificate or Real Property Report Most lenders will not accept an old survey or a survey that does not show all the present buildings. Lenders will sometimes accept an affidavit from the buyer stating that the buyer has compared the old survey to the present location of the buildings and that in the buyer s opinion the old survey is a correct representation. If there is a garage on the property or additions to the house not shown on the survey and if the buyer elects not to obtain a new surveyor s certificate or

23 Saskatchewan: Bar Admission Program 17 Real Estate Residential Sales and Mortgages real property report, prepare an affidavit that states that in the buyer s opinion the additions are within the boundaries of the lot that the buyer is purchasing. If this affidavit is acceptable to the lender, a new survey may not be required. 7. Building information abstract - zoning compliance certificate Abstracts are now very rarely required by lenders. Their usefulness is now limited due to disclaimers put in place by the issuing city. Despite this, if the lender requires one it must be obtained. 8. Mortgage approval document Disclosure Document The mortgage approval is prepared by the lender and contains the terms and conditions under which they may advance mortgage funds to the buyer. Some lenders are required to disclose prior to the advancement of mortgage funds what deductions they will make before advancing the balance of the funds to the lawyer, what the buyer s prepayment privileges are and how much will be owing on the mortgage come renewal time. Some lenders will require the buyer to sign these documents at their offices and others will require the buyer to sign them at the lawyer s office. 9. Mortgage There are two types of mortgage documents, the CMHC or High Ratio form and all the rest. The CMHC form is a standard mortgage that can be used by any financial institution in circumstances where the mortgage is being insured by CMHC or GEMICO, unless the lender has received permission to use an alternative form. If the mortgage is not a high ratio insured loan, then the financial institution may use their specific form that must contain the basic elements of a Saskatchewan Land Titles mortgage along with any specific terms that the financial institution may require.

24 18 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages The Mortgage is the document signed by the buyer that gives the lender security in the home. Based on this security, which is registered at the Land Registry, the lender advances the mortgage funds which are used to purchase the home. The Mortgage contains the buyer s obligations to the lender, such as making mortgage payments on time and describes what the lender can do to the buyer and their property if the buyer breaches any of the terms of the Mortgage. The Mortgage may also contain prepayment options and options that allow the buyer to increase their mortgage payments. The Mortgage is prepared from the conditions contained in the mortgage approval document prepared by the lender. An application for interest registration must be prepared. For this document you will require the lender s client number. Many lenders will give you this information, together with their instructions, as this number is connected with specific address information the lender has provided to Information Services Corporation. Also, a mortgage interest can be described directly on the application for interest registration form. However, unless there is a reason for confidentiality in relation to the document, the general practice will be to file the Mortgage behind a begin attachment sheet. 10. Agency and retainer agreement By signing this document the buyer is employing your office to act for the buyer on the purchase. The document is similar to the seller s retainer agreement. 11. Statement of buyer s funds required This document sets forth the total costs of the purchase. The typical closing costs in buying a residential property are: (i) (ii) (iii) Legal fees, disbursements and GST. Surveyor s Certificate/Real Property Report/Title Insurance, if required by either the buyer or the lender. Costs of the Mortgage, including appraisal costs, accrued interest, mortgage insurance and tax holdback.

25 Saskatchewan: Bar Admission Program 19 Real Estate Residential Sales and Mortgages (iv) (v) (vi) (vii) Interest to seller if agreed to be paid by the buyer. Tax adjustments. Applicable Goods and Services Taxes. Land Registry costs to register Title Authorization; Mortgage; Miscellaneous Interest. There will be Land Registry costs to register the transfer, surrender and setup, and any interest registrations required (most commonly a mortgage interest). (viii) All disbursements 12. Tax certificate The Tax Certificate sets out whether taxes have been paid up to a certain date. It protects the buyer against the possibility of property taxes not being paid by the seller. 13. Certified copy of insurance policy This certifies to the lender that insurance has been placed on the property effective the date shown. 14. Title print The general practice is to print the new title following verification of registration. To verify the interest registration, the lawyer can certify a comparison of the original document with the image copy of the interest as registered. This confirms registration of interest. At some point in the future, depending upon the lender, it may be possible to report to the lender simply identifying the interest registration number of the Mortgage, without providing any further information. 15. Mortgage assumption statement This document is obtained from the mortgage company if the buyer is assuming the seller s mortgage. It sets out the amount of the Mortgage effective on the closing date of the sale.

26 20 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages F. INTERVIEWING THE CLIENT 1. Meet with your clients to sign documents. Thoroughly explain all documents provided. In order to have a record of your meeting with the client when the documents are executed, a standard form of interview sheet should be used. No important matter is missed if you follow the form. 2. If acting for the buyer, obtain the balance of funds required to close and explain how the adjustments were made. Review the trust conditions, Statement of Funds Required, the mortgage documents, the transfer authorization, and any other documents when you receive them from the seller's lawyer. Have your client approve the adjustments. 3. If acting for the seller, give your client an estimate as to how long it will take the Land Registry to register the documents and when the seller may receive their funds. Have your client review the mortgage payout statement and approve payment of the mortgage and real estate commission. G. CLOSING THE TRANSACTION The sequence of events for closing is usually the following: (a) The seller s lawyer sends the transfer authorization to the buyer s lawyer prior to possession day, on the trust conditions that the buyer's lawyer sends back either: (i) the balance of the purchase price after registration of the documents, OR (ii) the balance of the purchase price less the mortgage proceeds on the closing date and the mortgage proceeds after registration of the documents together with applicable interest, together with a confirmation the buyer has fire insurance in place.

27 Saskatchewan: Bar Admission Program 21 Real Estate Residential Sales and Mortgages (b) (c) (d) (e) The seller s lawyer must undertake to discharge any encumbrances, especially a Mortgage not being assumed. If the buyer s lawyer can comply with those trust conditions, they will send the cash to close to the seller s lawyer and forward the transfer authorization (and Mortgage, if required) to the Land Registry. In a converted district, the transfer authorization and any required interest, such as a Mortgage, will be forwarded to the Land Registry. The seller s lawyer will then telephone the seller s Realtor to release keys to the buyer s realtor. The buyer and their real estate agent will do a walk through of the house to check for any damage done since that date of the offer or articles which were to be included in the purchase price and are now missing. The seller s lawyer should follow these steps in closing the transaction: (a) (b) (c) Confirm that the transfer authorization is signed and that the seller has reviewed and approved the Statement of Adjustments and the disbursement of trust funds. The seller should be advised about maintaining insurance coverage until the transaction is closed and to have all utility meters read. Send the transfer authorization and Statement of Adjustments to the buyer s lawyer on the appropriate trust conditions as used in the jurisdiction where the land is located. Consider the use of trust conditions approved by The Law Society of Saskatchewan. Upon receipt of the trust funds from the buyer s lawyer, deposit these funds in trust for the seller. Advise the realtor to release the keys to the buyer s realtor and advise your client that the keys are releasable.

28 22 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages (d) (e) (f) (g) Upon receipt of the full price and notification that funds are releasable, confirm the mortgage payout amount, pay out mortgage, pay out real estate commission, pay out any outstanding taxes and other encumbrances, pay your legal fees and disbursements, and forward the balance of the trust funds to the seller. Request a mortgage discharge from the seller s lender. Make your final report to the seller, including the balance of the cash, your account and the final adjustments. Upon receipt of the interest authorization to authorize discharge of the interest from the mortgage company, register the discharge at the Land Registry. When the discharge has been registered, advise the buyer's lawyer. Close file. The buyer s lawyer should follow these steps in closing the transaction: (a) (b) (c) Confirm that the lender s requirements are satisfied and that all documentation is signed. Receive purchase funds and deposit them in the trust account. It is necessary to receive the purchase funds from your client at least one day before completion. To avoid problems, it is best to ask the client to bring in a certified cheque or a bank draft. It may take some time to register documents in the Land Registry, so have the client bring in the funds and sign all documents as early as possible. Once you have received the transfer authorization and other conveyancing documents from the seller s lawyer on trust conditions, review the trust conditions to ensure you can comply with them. Confirm that with the seller s lawyer and provide the cash to mortgage and insurance confirmation.

29 Saskatchewan: Bar Admission Program 23 Real Estate Residential Sales and Mortgages (d) (e) (f) (g) (h) (i) Do a final review of the transfer authorization and the other conveyancing documents needed to complete the transaction. The documents to be submitted for registration at the Land Registry are the transfer authorization and the Mortgage. Taking a few minutes to review the documents a final time is well worth it. The Land Registry will not accept documents with defects, and if corrections are needed, the documents will be rejected and completion of the transaction will be delayed at the buyer s cost. Do a final review of the transfer authorization and the other conveyancing documents needed to complete the transaction. The documents to be submitted for registration at the Land Registry are the application for transfer (single title) or the surrender and setup forms, with the appropriate transfer authorizations and the interest registration documents (being the application for interest registration with the Mortgage attached following the begin attachment sheet). Taking a few minutes to review the documents is important. Land Registry staff do not review any terms of the Mortgage. Prepare your Packet Cover Sheet, which identifies the number of pages and applications in the Packet, and provides client information. Determine what is appropriate for conditional registration. Review the interests registered and determine whether they are acceptable or what further steps need to be taken. Submit the documents to the Land Registry for registration. Review the confirmation message and the title once everything has registered to ensure everything was registered according to your instructions and that the Land Registry has charged the correct fees. Obtain a copy of the new title, requisition the mortgage proceeds and provide the lender with a signed copy of the Mortgage. The preliminary report is your request to the mortgage company for the mortgage funds. It is important that the Mortgage be registered and an adequate Surveyor s Certificate/Real Property Report or Title Insurance, if required by the lender, be included in your report. Double check the lender s mortgage instructions.

30 24 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages (j) (k) (l) (m) (n) (o) Receive mortgage funds from the lender. Pay mortgage proceeds to seller in accordance with the Statement of Adjustments. For example, depending on the transaction and on the instructions you have received from your client, it may be necessary to pay property taxes or late interest on the balance of the purchase price. Give the seller s lawyer a copy of the new title, as they will need the new numbers for the seller s mortgage they are paying off and discharging. Provide an interim report to buyer on completion of the transaction and include your account. Enclose a copy of the new title. Provide a final report to your client. This final report should not be sent to the client until the transaction is complete and any unacceptable encumbrances have been discharged. Send a copy of the new title to the client, and after that you are ready to close the file. Provide a final report to the mortgage company. After the seller s Mortgage has been discharged, obtain a new Title Print Result and send it to the mortgage company with your Final Report on Title. With this final report to the lender, include the documents not forwarded in the preliminary report. IV. USING TRUST CONDITIONS A. GENERAL RULES The purpose of trust conditions is to complete the transaction in accordance with what the parties have agreed to in their offer and acceptance. As lawyers, we are bound by what our clients have agreed and cannot make changes unless these changes are consented to by all parties in writing.

31 Saskatchewan: Bar Admission Program 25 Real Estate Residential Sales and Mortgages Generally, you should follow these rules when dealing with trust conditions: (a) (b) (c) (d) Do not impose a trust condition that you would not accept. Do not accept a trust condition that will not be possible for you to honour. Set forth your undertakings in your trust letter. If you cannot accept a trust condition, do not use the documents but return them to the sender if you cannot agree to changes. Each jurisdiction will have their own form of trust conditions developed over the years which for that jurisdiction have worked quite adequately. Use the trust conditions employed by lawyers practicing in the jurisdiction where the land is located. It is strongly suggested that you consider using The Law Society of Saskatchewan s Uniform Trust Condition Format. B. RELEVANT STATUTES There are no statutes that deal with trust conditions in Saskatchewan. You should, however, be aware of The Law Society of Saskatchewan Code of Professional Conduct, especially Chapter 16, Responsibility to Lawyers Individually. C. RELEVANT CASES A seller is not obliged to hand over a transfer authorization to the buyer in exchange for a promise to pay which is founded on a Mortgage to be placed on the property by the buyer, unless so agreed to by the seller. Norfolk v. Aikens (1990), 2 W.W.R For a discussion of problems created when trust conditions change the contract entered into by the parties see: Milburn & Klippenstein v. Dueck (1992), 6 W.W.R For a discussion of the legal nature of trust conditions see: Guay v. Dennehy (1994), 5 W.W.R. 738; Witten et al v. Leung et al 148 D.L.R. (3d) 418.

32 26 Saskatchewan: Bar Admission Program Real Estate - Residential Sales and Mortgages V. WESTERN CONVEYANCING PROTOCOL The Protocol is an agreement between all four western Provinces which tries to provide for a standard form of opinion to be provided to financial institutions when dealing with real estate. One of the primary goals is to allow for funds to be used on the possession date, even if registrations have not been completed at the provincial Land Titles offices. The Protocol applies to existing, single-family, residential property, including existing condominiums. It applies to opinions being provided to participating financial institutions. As of 2005 the participating institutions are the Bank of Montreal and the Credit Unions in the province. The Protocol can also be used for cash purchases. The Protocol does not apply to new construction, commercial financing/refinancing and farm mortgages, including acreages. There are no special fees charged for using the Protocol, and from the client perspective the process appears simpler and more efficient. The Protocol does require additional searches to be made, however the basic idea is that by searching title and the Writ Registry immediately prior to submission to ISC, you can submit on a conditional basis and provide a standardized opinion to the lender. Under agreement with the financial institution, as long as the Protocol is followed the lender will allow the mortgage financing to be used on the date of possession, even if ISC has not yet completed the registrations. The Protocol allows you to avoid the registration gap of ISC processing time, and it allows you to discontinue the collection of interest from purchasers to cover that gap. An extensive amount of work has gone into developing the Protocol, starting as far back as As part of the process, the Saskatchewan Practice Checklist prepared by The Law Society of Saskatchewan and Saskatchewan Legal Education Society Inc. has been updated to reflect the Protocol. Those practice standards form the basis of the Protocol Checklist. A standardized trust letter has also been prepared for use.