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Posting about legal issues affecting British Columbians.

Posted by Craig Taylor and Trisha Taylor on November 15, 2017

Dealing with real estate in BC after death

In this article we look at 3 different circumstances in which British Columbia real estate is dealt with after a person passes away.

Transmission to Surviving Joint Tenant

Many British Columbians own property in joint tenancy with another person, often with their spouse. A joint tenancy is a special type of ownership that arises when the title to the property specifically states that it is owned in joint tenancy.

If the words “joint tenants” are not specified on title, then ownership will not be in joint tenancy. When two or more people are on title and the words “joint tenants” are not present, the law presumes another type of ownership, called a tenancy in common. For tenancies in common, when one owner dies, that person’s share passes through their estate, not to the surviving owners.

In a joint tenancy, when one joint tenant dies, the surviving joint tenant is automatically entitled to the deceased’s share of the property. Although the right is automatic, it is necessary to file paperwork with the BC Land Title and Survey Authority (LTSA) to make the transmission effective. Generally speaking, this includes filing the original death certificate and accompanying LTSA filing form (typically, a Form 17 Fee Simple) with the Land Title office, along with payment of a processing fee.

After the LTSA processes the application for transmission to surviving joint tenant (this process may take a few weeks or more), the deceased owner’s name will be removed from title, leaving the surviving joint tenant as the sole owner.

If there is a mortgage on title, the surviving joint tenant will normally contact the lender that one of the joint owners has died. Depending on the terms of the mortgage, the lender may have further questions or in some cases, review the mortgage documents. For these reasons it is usually a good idea to speak with a lawyer or notary whenever a joint tenant passes away, to ensure the appropriate steps are taken.

Sale by Estate

Commonly, a person will give their executor the power to sell their property after they die, with the intention that the executor will distribute the proceeds among the deceased’s children or beneficiaries. This power is usually specified in a will.

After a person dies, and before the executor can deal with the deceased’s real estate, the executor must be registered on title as the owner of the property. This requires a grant of probate from the Supreme Court of BC.

Once a grant of probate is obtained, the process to transmit title to the executor is fairly simple and is done by application with Land Titles. After the executor becomes the registered owner of the property, they are able to sell or otherwise deal with the property, subject of course to their duties to the estate as executor and to the deceased’s will, if any.

Transfer to Named Beneficiary under a Will

When a person names someone in their will who receive a gift of real estate, additional steps are required before the beneficiary can become the legal owner. Whenever real estate passes through the estate, the executor must first go through the process outlined above, including obtaining a grant of probate and applying to become the registered owner of the property.

If the will names someone to receive a gift of property, the executor is generally obligated to transfer the property to the named beneficiary. This process can take some time, as the law restricts the executor from transferring real estate to a beneficiary for 210 days following the grant of probate. This rule is intended to protect persons who may have a wills variation claim if they were not adequately provided for in the will. There is an exception when all of the beneficiaries consent to the early transfer of the property before the 210 day period expires.

In practice, this means that a person who is named in a will to receive real estate in BC may have to wait a year or more before title can be transferred to them. This is because of the time it takes the executor to obtain a grant of probate (often 4-6 months after death) and the 210 day mandatory waiting period after the grant of probate is issued.

Administering an estate can be complicated work, and executors are often exposed to personal liability when handling estates. Accordingly, it is almost always a good idea to seek professional advice before accepting the role of executor.

Posted by Craig Taylor and Trisha Taylor on August 18, 2017

Understanding title when buying real estate

Obtaining and reviewing the title of a property is one of the most important steps to be done when buying real estate. This is often a step that will be performed by your realtor, lawyer and/or notary as part of the conveyance engagement. The buyer’s lawyer or notary will usually wish to discuss the items on title with their client to ensure the client understands exactly what they are buying. On the other side, the seller’s lawyer or notary will usually review title to understand which charges they will need to remove, or discharge, from title when the property passes hands.

What is a title search?

Title records for properties in British Columbia are managed by The Land Title and Survey Authority of British Columbia (“LTSA”). Anyone can request a title search for any property in British Columbia by attending the LTSA’s office. Certain professionals, such as lawyers, notaries and realtors, have access to the LTSA’s online database where they make these searches on your behalf. Because this can be done online (as opposed to in person at the LTSA office), it is the most efficient and timely way to obtain the title for a property. 

Each parcel of land in British Columbia is identified by a legal description which includes a parcel identifier number (“PID”). The PID is a nine-digit number unique to each parcel of land which is required to search title through LTSA. The PID can usually be found through BC Property Assessment. If you have any questions about how to find this number, your realtor, notary or lawyer will be able to assist you.

Once a title search has been obtained through LTSA, you will be able to see a listing of all the financial and non-financial charges that are registered against the title to the property. Information on each charge can then be obtained from LTSA for a nominal fee.

What information is on title?

In addition to showing who owns the property, the title will also show financial and non-financial encumbrances (i.e. legal interests) registered against the title. These can include:

  • Mortgages

    Loans taken by the owner of the property and secured against the property as collateral.

  • Statutory Rights of Way

    These are interests in land, typically placed on title by public bodies (i.e. government, municipal corporations or utilities) to give these parties access to and rights on the land. These are fairly common to see on title and are often of little concern to buyers. However, certain statutory rights of way can significantly impair the use of the property, and your expectations of how you are going to use the property may not align with the right of way in place.

  • Easements

    These are interests in land where the owner of a property has rights over an adjoining property, such as access rights or encroachment rights. If you are buying a property with an easement, it is important to understand how this easement may limit or impair the use of your property.

  • Certificates of Pending Litigation

    These are certificates issued by the court and filed at LTSA. These typically arise if a proceeding has been commenced by the court where there is a claim for an estate or an interest in land. These certificates can affect whether or not title can transfer to a buyer, and therefore if one is on title you should contact a real estate lawyer to discuss your options.

  • Caveats

    These are registered on title based on a court request and typically last for 60 days, unless removed. Similar to a certificate of pending litigation, these encumbrances typically prevent any transfers of title and must be addressed before a conveyance can be completed. If you note a caveat on title, you may wish to contact a real estate lawyer to discuss your options.

In addition to the encumbrances mentioned above, there are a number of other charges that can be found on title, such as statutory covenants, builders liens, leases and various court judgments. Often, particularly with commercial real estate transactions, there may be claims to the property that are not identified on title. Many of these charges can have a significant impact on the use and enjoyment of the property, as well as on the ability to conveyance the property from seller to buyer.

The importance of understanding your title is why a realtor will almost always include a condition in the contract of purchase and sale stating that the purchase is subject to a review of title to the buyer’s sole satisfaction. Before removing subjects and going “firm” on a real estate deal, it is strongly recommended that you have a real estate lawyer or notary review your title and discuss the encumbrances or charges identified.

Posted by Craig Taylor and Trisha Taylor on August 1, 2017

Dying Without a Will – Intestacy Primer

Today we are looking at what happens when you die without a Will in BC. We have broken this down into two main topics: (1) what happens to your property when you die without a Will in British Columbia; and (2) who will manage and administer your estate when you die without a Will in British Columbia.

What happens to my property if I die without a will?

When you die without a Will, you are said to have died “intestate”. When people refer to “intestacy”, they simply mean the state of dying without a Will. In BC, the rules of intestacy are governed by Part 3 of the Wills, Estates and Succession Act (WESA).

When you die without a Will in BC, the general rule is that your property will be distributed to your family in the following priority:

  1. Spouse
  2. Children
  3. Grandchildren and their descendants
  4. Parents
  5. Brothers and Sisters
  6. Nieces and Nephews and their descendants
  7. Grandparents
  8. Uncles and Aunts
  9. Cousins and their descendants
  10. Great-grandparents and their descendants

If there are survivors in any one category, then the distribution typically stops at that category—in other words, if you die without a spouse or children, but have grandchildren alive, your parents will not get anything (there will be no further distribution to the next category). There are exceptions. For example, between categories 1 (Spouse) and 2 (Children) there are specific rules for splitting the estate between your spouse and children who are alive when you die. These rules are discussed briefly in Examples 4 and 5 below.

Another exception is where a person who would have been entitled to your estate dies before you but leaves children behind. In this case, that person’s children would share in whatever entitlement their parent had in the estate.

Note: if you encounter an estate where there is no Will, it is always a good idea to contact a wills and estates lawyer to seek legal advice. The rules of intestacy can be complicated. There are many variables that can change the way an estate is distributed, and the outcome can vary widely from what you might expect from the examples set out below.

These are a few examples of what can happen when a person dies “intestate” or without a Will in BC, according to Part 3 of the WESA:

Example 1: die intestate with no kids and no spouse

If you die with no spouse or kids, the WESA provides that your estate will be split equally between your parents. If only one parent is alive when you die, everything goes to your surviving parent.

If your parents are not alive when you die, the estate is distributed (in the following order):

  • equally among your siblings who are alive when you die,
  • if none of your siblings are alive when you die, equally among your nieces and nephews who are alive (and so on down the chain of your siblings’ descendants),
  • if you don’ t have any siblings, nieces or nephews, then your estate would be split between your grandparents, or if they are dead, among your uncles and aunts and their descendants.

The chain of intestate succession continues until all avenues have been exhausted to the 4th degree of separation—in other words, the process continues until there is no one alive among your great-grandparents or any of their descendants. If all of these avenues are exhausted without locating a living relative, everything you own reverts to the Government.

Example 2: die intestate with a spouse but no kids

  • Entire estate goes to your spouse.

Example 3: die intestate with kids but no spouse

  • Everything split equally among your children.

Example 4: die intestate with a spouse and kids (where the children are yours and your spouse’s)

  • The first $300,000 of your estate, your household furnishings, and the right to purchase your family home goes to your spouse.
  • The remainder, if any, is split into 2 parts: 1/2 to your spouse and 1/2 split equally between your children.

Example 5: die instate with a spouse and kids (where all the children are yours—i.e. your spouse does not have any children)

  • The first $150,000 of your estate, your household furnishings, and the right to purchase your family home goes to your spouse.
  • The remainder, if any, is split into 2 parts: 1/2 to your spouse and 1/2 split equally between your children.

The above scenarios are examples of how your property might be distributed when you die without a Will in BC. However, a number of variables can change the outcome. For example, circumstances such as the presence of adopted children or blended families have created uncertainty as to who inherits when a person dies without a Will.

Of course, the easiest way to avoid uncertainties or any unwanted outcomes of dying intestate is to visit a lawyer or notary and prepare a Will.

Who will be my executor if I die without a Will?

When you die without a Will, generally speaking any person can apply to the court to administer your estate. However, the court must give priority among applicants according to section 130 of the WESA in the following order:

  1. Your spouse or a person nominated by your spouse.
  2. Any of your children, with the consent of a majority of your children.
  3. Your child’s nominee, with the consent of a majority of your children.
  4. Any of your children, without the consent of a majority of your children.
  5. Any other person entitled to your estate, with the consent of the successors representing a majority interest in your estate.
  6. Any other person entitled to your estate, without the consent of the successors representing a majority interest in your estate.
  7. Anyone else the court considers appropriate, including the Public Guardian and Trustee.

Contrast this with a will, where you are free to choose who you want to be your executor.

Summary

It is easy to see why Wills are such an important part of a good estate and succession plan. When you make a Will, you have tremendous freedom to decide how your property will be dealt with when you die. Conversely, if you die without a Will, provincial legislation (the WESA) will dictate who administers your estate and to whom it will be distributed. In many cases, the WESA’s default rules of intestacy will not align with your personal goals and wishes.

Disclaimer: This article is not a substitute for legal advice. If you have questions about the distribution of an estate you should contact an estates lawyer.

Posted by Craig Taylor and Trisha Taylor on July 11, 2017

Update on the Civil Resolution Tribunal

Earlier this year we posted about the Civil Resolution Tribunal (CRT). Now that the CRT is in full swing, we wanted to provide an update.

The CRT is British Columbia’s (and Canada’s) first online tribunal. Its purpose is to help people resolve strata and small claims matters (under $5,000) cheaply and quickly, and usually without lawyers. This should come as good news to anyone with a claim under $5,000, as eligible claims no longer have to be processed through the Provincial Small Claims court.

Solution Explorer – A Useful Tool on the CRT Website

The CRT’s website contains a lot of very useful information. Perhaps the most useful source of information is the “Solution Explorer”. The Solution Explorer is an online tool that guides you through questions to help identify your legal issue and find potential solutions. Users can access the online solution explorer from the CRT home page.

Here’s an example of how the Solution Explorer works: suppose you are a strata owner and are having difficulty with a loud neighbour. Through the Solution Explorer, you can explore solutions ranging from contacting the neighbour directly, contacting strata, requesting a hearing, or making a formal claim to the CRT. The tool presents options in a straightforward manner, and even provides template letters for routine matters (e.g. bylaw complaint letters, hearing request letters). Access to the Solution Explorer is free, and includes access to the template letters. The tool even saves your progress and provides an access code to pick up where you left off, so long as you do so within 30 days.

The Solution Explorer isn’t just limited to strata disputes. It also offers help with small claims matters involving things like employment, loans and debts, buying and selling goods and services, construction and renovations, insurance, personal injury, and contracts.

Claim Limits and Fees

When it comes to using the CRT to resolve a claim, the maximum amount for an eligible claim is $5,000. If your claim is above $5,000, you can either reduce the amount of the claim (and permanently abandon the amount of the claim above $5,000) or move into provincial small claims (up to $35,000) or Supreme Court (claims higher than $35,000).

The fees for filing a CRT claim are listed on the CRT website. In most cases, a $25 discount is available if you submit your claim online. Currently, the fee to initiate proceedings ranges from $100-$150 for small claims disputes ($75-$125 if submitted online) and $150 for strata property disputes ($125 if submitted online).

However, before filing a formal claim you may want to explore other solutions proposed by the Solution Explorer, such as writing a letter, contacting parties directly, contacting strata (for strata property disputes), or contacting insurers or relevant government bodies.

Once a claim is before the CRT it will be decided by a Tribunal member. You can research past tribunal decisions which are published on the CRT Decisions website. While the list of decisions is small at the moment, it will grow over time and provide increasingly more benefit to CRT users.

You can read more about the CRT at civilresolutionbc.ca.

 

 

Posted by Craig Taylor and Trisha Taylor on May 30, 2017

Buying and Selling a Business: Shares or Assets?

The Structure of the Transaction

When a business is bought or sold, there are usually two potential structures for the deal:
1. The buyer purchases the assets of the business; or
2. The buyer purchases the shares of the operating company that runs the business.

Other less common options include amalgamations and plans of arrangement, however these are not discussed in this blog.

Taxes and liability are the usually driving factors in determining whether a transaction is structured as an asset or share deal. It is always advisable to engage an accountant early on in the process to perform a tax analysis to determine the tax impacts and benefits of each structure based on the particular circumstances. However, as a general rule, buyers usually prefer to buy assets, and sellers usually prefer to sell shares.

Considerations for the Buyer

From the buyer’s perspective, purchasing the assets of a business (instead of the shares) may have advantages. For example, the buyer can choose which assets to buy, thus potentially reducing the overall purchase price by avoiding purchasing unneeded assets. However, it really depends on the unique circumstances of the transaction – for example, if there are significant transfer taxes payable for assets such as real property and buildings, or sales tax on equipment or inventory, it may be more advantageous for a buyer to purchase shares.

Another consideration is that usually the liabilities of the company do not transfer to the buyer with the sale of assets. This means that a buyer who only buys assets would typically not be responsible for future tax liabilities or other contingencies incurred by the company prior to the purchase by the buyer. However, there are a number of exceptions to this, one being environmental liability which transfers to the owner of the asset, as well as liabilities to union employees under employment and labour law. If you are concerned about which liabilities you may be responsible for as a buyer, you should seek the advice of a lawyer.

Also, a buyer of assets does not have to take on non-union employees (unless the purchase agreement requires otherwise). This gives the buyer greater flexibility in determining which employees to retain, without necessarily being liable for severance pay for those employees who will not be hired on.

Moreover, the buyer can write up the value of purchased assets to their fair market value (as opposed to taking them on at their depreciated value through a share sale). In doing so, the buyer can create a larger depreciation base, and thus receive a higher capital cost allowance tax benefit going forward as the assets are depreciated annually for tax purposes.

Considerations for the Seller

As mentioned above, usually it is more advantageous for a seller to sell the shares of the company. Provided the shares qualify as capital, the proceeds are taxed as capital gains, meaning only 50% is included as income to the seller.

When an individual sells shares, they may qualify for the lifetime capital gains exemption in Canada (currently $835,714), provided that certain conditions are met such as the individual has not previously claimed this exemption and there is a disposition of “qualified small business corporation shares”. An accountant will be able to advise on whether or not a seller will qualify for the lifetime capital gains deduction.

In a share sale, the assets and liabilities remain with the company. This may transfer substantial risk to the buyer of shares. Therefore, in a share purchase agreement, a seller will normally be asked to make detailed representations and warranties about the company, in order to allocate risk between the buyer and seller, or else risk having a buyer walk away from the deal.

Overall Considerations

Because there can be significant implications for a buyer and seller depending on which structure is negotiated (assets or shares), the purchase price is sometimes modified to reflect the advantages one party is receiving over the other. For example, if a buyer insists on an asset deal, the seller may require a higher purchase price to offset a lost tax benefit of selling shares. Or, a buyer may be willing to pay a greater purchase price for assets in order to avoid assuming unknown liabilities.

Determining the structure of a deal and negotiating an appropriate purchase price is complex and usually involves a lawyer, an accountant, and in some cases a business valuator. If you are considering purchasing or selling a business, you should meet with the appropriate professionals to discuss your options.

Contact a Lawyer at Taylor & Taylor Law Corporation.   Contact Us >

222 - 8661 201 St
Langey, BC V2Y 0G9
Tel: (604) 398-3988
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