Selling Your Home in BC: What Your Lawyer Handles From Offer to Payout

Accepting an offer feels like the finish line, but for a seller it starts a few weeks of legal work. The mortgage has to be paid out and cleared from title, the documents signed, the adjustments settled and the money routed through trust accounts in the right order.

This guide walks through that work from the seller's side, from the days after acceptance to the tax filings that can follow a sale, so you know what to have ready and when.

Before the deal is firm: the contract and the rescission window

The BC Financial Services Authority (BCFSA) notes that buyer and seller usually each retain their own lawyer or notary to prepare the transfer documents. Involve yours early: a lawyer who sees the contract before completion week can check that the completion, possession and adjustment dates work with your mortgage and your next move, and that the subject clauses and included items say what you expect.

For most residential sales the buyer also has a legal right to back out during the home buyer rescission period. It is the buyer's right, not yours, but it affects your planning:

• It runs for three business days after acceptance. Weekends and holidays do not count, and the buyer must give you written notice before it ends.
• A buyer who rescinds pays you a fee. The fee is 0.25% of the purchase price. If the brokerage is not holding a deposit, BCFSA suggests sellers get legal advice on how to collect what is owed.
• Neither side can waive it. Some sales are excluded, including leasehold interests, sales at auction and sales under a court order.

Until the rescission period has ended and the buyer has removed all subjects, treat the sale as conditional.

Clearing title: your mortgage and anything else registered

Your lawyer searches title at the Land Title and Survey Authority (LTSA) for every registered charge that must be cleared before the buyer takes title: your mortgage, any line of credit secured on the home, and anything else, such as a lien or judgment. Your lawyer then asks each lender for a payout statement showing the exact amount owing on the completion date, including any prepayment charge your mortgage terms allow.

Your mortgage is paid from the sale money on completion day, once the buyer's lawyer has released the proceeds to your lawyer. That happens after the transfer has been submitted for registration, not after it is registered; final registration may follow later. The buyer's lawyer relies on your lawyer's professional undertaking to pay the lender from those proceeds and have the mortgage discharged. Most lenders file the release electronically with the LTSA, and your lawyer follows up until it is off title. If you have a secured line of credit, tell your lawyer early: the lender may need written instructions to close it so that it can be discharged.

The documents you will sign

A few days before completion, you meet your lawyer to confirm your identity and sign the closing documents. Expect to see:

• The transfer. The Land Title Office form that moves ownership to the buyer.
• The statement of adjustments. This sets out the price, the deposit already paid, and adjustments for costs that run with the property, such as property taxes and strata fees, divided at the adjustment date in the contract. For example, if you have paid the full year's property taxes and the adjustment date is 1 October, the buyer would normally credit you for the last three months of the year.
• A residency declaration. You confirm whether you are a resident of Canada for tax purposes. The buyer's side needs this because of the federal rules described below.
• Strata paperwork, if it applies. For a strata home, BCFSA notes that the lawyer obtains the strata corporation's information certificate (Form B), its certificate of payment (Form F) and its insurance certificate.

Your lawyer also gives you a statement showing where the money will go: mortgage payouts, any commission still owing under your listing agreement, legal fees and disbursements, and the balance that comes to you.

Completion day: the order the money moves

On completion day, documents and money move between the two lawyers under undertakings. The usual order is:

• The buyer's lawyer, holding the buyer's funds and any new mortgage money, submits the transfer to the Land Title Office electronically.
• After the transfer and any new mortgage have been submitted for registration, and the required title searches and trust conditions are satisfied, the buyer's lawyer releases the proceeds to your lawyer. Final registration may occur later.
• Your lawyer pays out your mortgage and any other charges, pays the brokerage any commission not already covered by the deposit it holds, and sends you the balance.
• Your lawyer then confirms that the discharges are registered and reports to you.

BCFSA points out that completion and possession are not necessarily on the same day, so check the dates in your contract and plan your move around them. For the same process seen from the other side, see what a buyer's lawyer does before completion day.

If you are a non-resident of Canada

Every seller signs a residency declaration because of section 116 of the federal Income Tax Act. A non-resident seller must notify the Canada Revenue Agency (CRA) of the sale within 10 days, generally on Form T2062, and pay or secure the tax before the CRA issues a certificate of compliance. Late notice can bring a penalty of $25 a day, with a minimum of $100 and a maximum of $2,500.

Without that certificate, the buyer can become liable for the seller's tax and is entitled to withhold 25% of the price (50% for some types of property). In practice, expect part of your proceeds to be held back until the certificate arrives. If there is any doubt about your residency status, raise it with your lawyer and an accountant before you accept an offer.

Tax filings that follow the sale

Your lawyer's work ends at completion, but some obligations follow you into tax season:

• Principal residence. The CRA requires you to report the sale of a home that was your principal residence on Schedule 3 and Form T2091(IND) for the year of sale, even if the whole gain is exempt. It allows the exemption only if you report the sale and the designation. A late designation may be accepted, but a penalty can apply.
• BC home flipping tax. If you owned the home for less than 730 days, you may have to file a BC home flipping tax return within 90 days of the sale. The Province requires a return even when no tax is owing, unless your exemption is one it lists as not needing a return. Our guide to BC's home flipping tax explains the rates and exemptions.
• Speculation and vacancy tax and Vancouver's Empty Homes Tax. If either tax covers your home, keep up the declarations for the time you owned it. The City of Vancouver says the seller should make the Empty Homes Tax declaration before the transfer when a sale closes during the declaration period. Unpaid speculation and vacancy tax stays with the seller, not the buyer, but can lead to a provincial lien that shows on title.

Selling and buying at the same time

Many sellers are buying their next home at once. Line up the two completion dates so the sale money is available when the purchase closes, and ask your lender early about bridge financing if the purchase has to close first. Using the same lawyer for both files lets the sale proceeds move straight into the purchase. Above all, do not remove subjects on your purchase until your sale is firm.

Accepted an offer? Bring your lawyer in before completion week

Our real estate lawyers can review your contract, obtain the payout figures, prepare your closing documents and handle the sale proceeds on completion day.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.