When a client is selling a property and using the sale proceeds towards the purchase of their new property, coordinating dates is essential! There are three important dates to keep in mind with a real estate transaction:
- Completion Date – This is the date that ownership and risk transfers from the seller to the buyer. The standard form Contract of Purchase and Sale transfers risk at 12:01am on the Completion Date (which is why a buyer’s insurance is to take effect at that time). Ownership of the property transfers when the “Form A Transfer” is electronically filed with the Land Title Office and money transfers from the buyer’s lawyer to the seller’s lawyer.
- Possession Date – This is the date that the seller must give physical possession of the property to the buyer. Sometimes the Contract of Purchase and Sale will give a specific time, and other times it will be tied to registration/receipt of sale proceeds.
- Adjustment Date – This is the date that we use to adjust costs related to the property to ensure that the seller and buyer are only responsible for costs for the portion of the applicable billing period that they own the property. For example, property taxes, periodic utilities and strata fees.
Turning our attention to Completion Dates, staggering Completion Dates by a day or two when a client is relying on sale proceeds to purchase a property can be a great idea. Here are a few reasons why:
- Avoiding Breach of Contract:
The buyer and seller are required to be ready, willing and able to complete the transaction on the scheduled Completion Date. The biggest piece on the buyer side is ensuring that the buyer’s lawyer has sufficient funds to complete the transaction on the scheduled Completion Date.
If a client is relying on sale proceeds to purchase their new property, the sale needs to complete before the purchase can complete. The tricky part is that there are many forces at play that cannot be controlled. For example, delays in receiving mortgage money by the buyer of the client’s sale property, fires/floods triggering a “force majeure” clause, death, power outage/system failure at the bank and/or Land Title Office, the sale is piggy-backing on a number of other back to back sale/purchases.
If a client does not receive sale proceeds in time to complete their purchase, they will be in breach of their purchase contract. This does not only have potential legal ramifications, but it can also cause practical delays (Ex. the client’s moving truck is sitting outside of the new property waiting for possession “upon registration”.).
Keeping timelines in mind is even more important when clients are selling in BC and buying elsewhere in Canada as the time difference can make a huge difference and some provinces have fixed deadlines for completion (Ex. in Alberta all transactions must be closed by 12:00pm noon AB time which is 11:00am BC time)!
Another scenario that requires additional consideration for timelines is when a client is using a smaller lender/credit union for their purchase. Some smaller lenders and credit unions require that registration of the purchase transfer occur before mortgage proceeds are requested. Funds can take several hours to arrive after being requested. Also, each lender has their own policy with respect to a deadline for requesting funds (which can be quite early if the lender is located in eastern Canada).
2. Holding onto Negotiating Power:
Surprises happen and can lead to last minute negotiations. For example, a final walkthrough can uncover damage that may open discussions regarding credits/debits from one party to another, holdbacks etc.
If a client needs sale proceeds to complete their purchase and the other party makes last minute requests/demands, the client may feel additional pressure to “give in” simply to keep things moving and avoid breaching their purchase contract.
3. Your Lawyer Will Love You!
We really do appreciate having a little bit of time between back-to-back sale/purchases to ensure that everything goes smoothly for our clients!
It should be noted that just because Completion Dates are staggered doesn’t mean that clients will be left in limbo with all of their worldly possessions between closing their sale on one day and closing their purchase on the next day. Possession dates can be staggered as well. For example:
- Sale property: Completion Date = Monday / Possession Date = Tuesday or Wednesday
- Purchase property: Completion Date = Tuesday / Possession Date = Tuesday or Wednesday
Every real estate transaction is unique. If you have questions regarding your real estate transaction, dates, or anything else, please do not hesitate to reach out.
Author: Danielle (Dani) Brito
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (778) 940-3768 or any of our lawyers practicing in the area of real estate law at the following:
Jennette Vopicka: jennette@acornlaw.ca
Danielle (Dani) Brito: [email protected]
