News Articles

Moving Day Blues

If you bought a house and on moving day were told you could not move in, would you enjoy sleeping in the moving van?  This sounds nasty but it could happen and does on occasion.  The problem is that your lawyer has not sent the purchase money to the seller's lawyer, and so the seller's lawyer will not release the keys to let you move into the home yet.

Why doesn't your lawyer send the money to the seller's lawyer?  Your lawyer cannot send the money, which includes the mortgage proceeds, to the seller's lawyer until title is registered in your name and the mortgage is registered on title at the land titles office.

Why would title not be registered in your name yet?  Basically the answer to this question is that the documents have not been at land titles long enough to be processed.  The reasons may be many.  Did your lawyer get the instructions from your financial institution with sufficient time to prepare the documents?  Did you attend at your lawyer's office early enough to allow sufficient time to register after your attendance?  Did you provide your lawyer with the down payment early enough?  Is the land titles office slower than normal?  The land titles office can register documents in one day or can be as slow as eight to ten business days depending on how busy they are and whether staff is on holidays.

Regardless the reason you are late in paying the seller there can be some serious consequences.  If funds are not provided on time the seller can treat that as a breach of contract and refuse to complete the transaction.  If the seller agrees to accept late funds most real estate contracts contain a term that the buyer will have to pay interest on the amount owed.  Interest in the standard form real estate contract used by the Red Deer Real Estate Board is the prime rate charged by the Alberta Treasury Branches plus three (3%) percent.  This creates a bit of a penalty for the buyer because this rate will be higher than the rate the buyer will be paying on the mortgage (unless your banker is named Guido) and it will be paid on the entire amount owing to the seller not just on the amount of your mortgage.  In addition to paying the seller the late interest, the seller has no obligation to give the buyer possession of the property until the balance of the purchase price is paid.

Lawyers will advise sellers that if they give possession of the property to a buyer before the money is received the lawyer cannot protect the seller against a buyer who cannot or does not complete the transaction and damages the property.  Lawyers can do up a tenancy agreement and set out responsibilities but cannot guarantee that the parties will live up to those responsibilities.

Unless the seller trusts the buyer enough to disregard the lawyer's advice the buyer will likely not be sleeping in the new home if there have been any delays in the process.

The Law Society of Alberta agreed to insure that banks will not lose any money if the lawyers advance the mortgage funds and pays the seller prior to documents being processed at the land titles office.  This would solve many of the delay issues, however only the Alberta Treasury Branches has agreed to such a process.

By Glen Cunningham
June 25, 2003