Terminology When Buying And Selling Land In Alberta
There are many different understandings that the average person may have for some common real estate terminology in Alberta. We thought that because many people are unsure, that we would provide a glossary of terms described in layman’s terms. If there are any others that you are unsure of, feel free to contact us and we would be happy to add them to the list.
Glossary of Alberta Agricultural Real Estate terminology
Addendum – An addendum to an Agreement is an additional document or page(s) that form a part of the whole agreement. Each Addendum must be signed or initialed by both parties to the transaction.
Amendment – An Amendment to an Agreement is something that is signed AFTER a contract has already been signed by both parties. Any changes that are negotiated after that time must be recorded in writing and be signed by both parties in order for them to become a legally binding addition to the Contract.
Back up Offer – During the time that a seller has entered into a Purchase Agreement with conditions (we refer to it as a Conditional Sale), the Seller can accept another Offer and enter into another Purchase Agreement that contains a Seller’s condition whereby the contract is conditional upon the first contract collapsing.
Brokerage – The legally licensed entity that is responsible for the registration of real estate professionals. When a buyer or seller enlists professional help in their real estate transactions, they are actually entering into a contract with the Brokerage. There are 2 types of Brokerages in Alberta: Common Law Brokerages (often smaller offices with just a few agents registered), and Designated Agency Brokerages (typically larger offices with many agents registered). When you begin working with any brokerage they will go over the different types of relationships available in working with their agents. This is a vitally important element that affects the responsibilities that a real estate professional has to you and it is important to understand this whenever pursuing the purchase or sale of property with a real estate professional. Hansen Land Brokers is a Common Law Brokerage, and as such the entire Brokerage is working for you when you choose us in your pursuit of buying or selling Alberta Land.
Client – This is the term for the Buyer or Seller if they have entered into an agency relationship with the Real Estate Brokerage. As a client there are often preferable responsibilities that an agent is required to uphold over the lesser requirements to a customer. More information is available here: (https://www.reca.ca/wp-content/uploads/2019/03/Consumer-Relationships-Guide-Form-New-logo-2018.pdf)
Closing Date – This is the date that the Seller gives over all rights to the Purchaser upon the receipt of funds at the lawyer’s office and the transfer of registration of title into the Buyer’s name. Also referred to as Possession Date.
Closing on Protocol – This allows the Buyer to have possession of the property, the Seller to receive the Proceeds from the Sale and for the Realtors to be paid their Commissions, even though the actual Transfer of Land and Mortgage have not yet been registered. This is possible because of the undertakings the lawyers take to complete the necessary requirements.
Conditions – This is an important part of a Purchase Contract where typically the Buyer has certain rights that they would like to exercise in determining that they will go ahead with the purchase. Often they negotiate Conditions to the sale that must be met such as a property inspection that is favorable to the Buyer (No defects that are of major cause for concern). Other common conditions are for Approved financing, verification of adequate water supply and quality, clear environmental reports, verifying approvals for subdividing off a portion of land if that is needed, satisfactory review of documents pertaining to the property, etc. If there is any reason that would impede on the Purchaser going forward with a purchase, it is vital that those be added as Conditions to the Purchase Contract prior to final acceptance with a specific amount of time in which they can work to satisfy those requirements. The Contract will be null and void if they do not waive (sign off) the conditions within the time that was agreed upon in the contract. Typically if a buyer does not waive their conditions, most contracts are written as such that their deposit is returned to them without penalty. For the period of time that there are Conditions in place and after a deal has proper signed acceptance, that deal is referred to as a Conditional Sale which may or may not be advertised as such. Sometimes the Seller chooses not to advertise that their property has a conditional sale but instead to continue actively marketing to other potential buyers.
Deposit – This is the amount of money that a Purchaser offers to secure their interest in the property they are purchasing. This money is held in a Trust account and is applied to the total sum due upon closing on Closing Day. It is important that the correct amount is sent in the form indicated on the contract (example: bank draft) and that it is received by the stipulated Trust Account holder within the time expressed in the Purchase Contract.
Down payment – This is a term associated with anyone securing financing for a property. The lender requires a down payment that they have established with the Purchaser. It is important to note that often larger percentages are required as down payments in the acquisition of bare land in Alberta than would be for a house in an urban center.
Escrow – This is not a term that is used in Alberta Land transactions.
Exclusive Listing – This is what most people refer to in Real Estate as a Listing Agreement. When a person chooses one specific Brokerage (or agent within a brokerage) to represent them in selling their property, they sign a Listing Agreement. Within the specifics of the contract, the responsibilities are defined for the Agent to market the property, to advertise, and to hold showings and Open Houses as well as negotiate on behalf of the seller with any potential buyers’ agents. Once the property has sold and the Seller receives the money, a commission is paid to the Brokerage for their services.
Firm deal – This is a legally binding real estate contract in which the purchaser has delivered the agreed upon deposits within the timeframe specified in the contract and there are no remaining conditions. Although the seller may still be living at or using the property, there is a set Possession day upon which time the Purchaser will take ownership of the property.
MLS – Multiple Listing Service. This is the cooperative on-line service that real estate professionals utilize for collaboratively displaying their listed properties for sale with established informational criteria, including the compensation that they are contractually obligated to pay to any cooperating broker that would bring a successful buyer transaction.
Pocket Listing – Sometimes real estate agents have a listing that the Seller does not want to have advertised on the MLS or in the paper or to have signs up. The agent will in these cases have more discreet tactics to try to find the right buyer for the property.
Possession Date – This is the date that the Seller gives over all rights to the Purchaser upon the receipt of funds at the lawyer’s office and the transfer of registration of title into the Buyer’s name. Also referred to as Closing Date.
Real Property Report – Also referred to as the RPR, it is a legal document that an Alberta Land Surveyor prepares. It’s a highly detailed drawing of the property, the boundaries, and the buildings and structures on it. It clearly defines exactly what the Buyer is purchasing.
Surveyor’s Report – Another term for Real Property Report.
Terms – People often confuse Terms and Conditions. Conditions are something that needs to happen in order for the deal to go ahead. Conditions are a way that the contract could fall apart or collapse if certain conditions are not met within a certain time frame. Terms are not conditional. Terms are elements that are intrinsic to the contract and form a part of the essential expectations mutually agreed upon by both parties.
Vendor Financing – Sometimes the Seller is able to provide financing to the Purchaser. While this rarely occurs in residential Real Estate, it is more common in the sale of Alberta Ranch Land, Alberta Farm land, and Alberta developmental land. These can be complex agreements that need to be drawn up by the lawyers to layout clearly the terms of financing including but not limited to the interest rate, the amortization schedule, the payment schedule, the terms for registration on title and the rights of each party in relation to early payout or faulting on a payment, etc.
Zoning – Municipalities must plan the use of land for future development, even in rural municipalities referred to as Counties. Each County assigns zones to specific geographical areas designated for residential or commercial or industrial or agricultural purposes. There may be restrictions on lot size, placement of structures, size and height of structures, how many lots or density of lots, etc, in order to achieve the desired use of land and create strategically cohesive communities.