UNIT4

UNIT 4: Legal Matters and Concerns in Residential Real Estate

Unit Overview

• Emphasizes the importance of understanding structural defects versus aesthetic elements in residential property transactions.

• Highlights the need for real estate professionals to disclose all pertinent property information to buyers to facilitate informed decision-making.

• Covers essential topics: property defects, misrepresentation, property inspections, flood hazard areas, land use bylaws, property ownership, and real estate contracts.

SESSION 1: Property Defects

Session Learning Objectives

• Define property defects and their types.

• Describe disclosure requirements for patent and latent defects.

• Identify situations where property inspections are advisable.

Types of Property Defects

1. Patent Defects

   • Obvious flaws visible on inspection (e.g., cracked wall).

   • Buyers must inspect for these issues.

   • Examples:

     • Minor: Stained ceilings, worn fixtures.

     • Material: Roof needing re-shingling.

2. Latent Defects

   • Concealed issues that are not obvious (e.g., hidden mold).

   • Not disclosed if the seller is unaware; relevant only if proven known.

3. Material Latent Defects

   • Defects hidden from routine inspection affecting property’s use or value (e.g., severe structural damage).

   • Sellers are legally obligated to disclose these if known.

Misrepresentation

• Types: Negligent, Reckless, Intentional

  1. Negligent Misrepresentation: False statement made without thorough verification.

  2. Reckless Misrepresentation: Misstatement due to failure to confirm.

  3. Intentional Misrepresentation: Deliberately false claims.

Residential Property Inspections

• Involves visual examinations by qualified inspectors.

• Purpose: Identify issues for buyer awareness prior to purchase.

• Recommendations to clients about hiring inspectors and interpreting reports.

SESSION 2: Flood Hazard Areas

Session Learning Objectives

• Identify properties in flood-prone areas and relevant flood policies.

• Understand flood hazard mapping.

Components of Flood Hazard Areas

1. Floodways: High-risk flooding regions.

2. Flood Fringe: Areas at lower risk where flooding may occur but at lesser severity.

Due Diligence Activities

• Search flood hazard maps and determine properties’ classifications before transactions.

• Disclose and document any past flooding incidents and related concerns with compliance and damage records.

SESSION 3: Residential Land Use

Session Learning Objectives

• Understand municipal land use classifications and their implications for property development.

• Identify due diligence activities for properties with secondary suites.

Municipal Land Use Bylaws

• Govern land development and uses established under the Municipal Government Act (MGA).

• Types of classifications: Residential, Commercial, Industrial, and Special Use.

Secondary Suites

• Definition: Self-contained units attached to homes.

• Three categories: Legal, Illegal, Non-Conforming.

  • Legal: Complies with bylaws.

  • Illegal: Built without permits, not allowed.

  • Non-Conforming: Previously complied but no longer meets current standards.

SESSION 4: Property Ownership and Rights

Session Learning Objectives

• Describe real property and its rights.

• Identify estates in land and ownership forms.

Types of Estates in Land

1. Fee Simple Estate: Highest form of ownership, inheritable.

2. Leasehold Estate: Right to use land for specific duration under a lease agreement.

3. Life Estate: Use of property granted for the lifetime of a person, reverts afterward.

Forms of Ownership

• Sole Ownership: Single entity on title.

• Joint Tenancy: Equal ownership with right of survivorship.

• Tenancy-in-Common: Ownership shares without survivorship rights.

SESSION 5: Land Titles and Registered Interests

Session Learning Objectives

• Understand the principles and functions of the Torrens Land Title System.

Key Principles of the Torrens System

1. Mirror Principle: Title reflects all claims affecting it.

2. Curtain Principle: Only registered interests affect property.

3. Insurance Principle: Guarantee of title accuracy.

Types of Registered Interests

• Easements, Mortgages, Caveats, Liens, Restrictive Covenants, and Notices.

SESSION 6: Condominium Documents

Session Learning Objectives

• Understand required documents in condominium transactions.

Required Condominium Documents

• For new, phased, and conversion units: Purchase Contracts, Bylaws, Management Agreements.

• Due Diligence: Review and ensure accuracy and completeness of documents presented by sellers.

SESSION 7: Real Estate Contracts

Session Learning Objectives

• Identify elements essential for valid contracts.

Essential Contract Elements

• Capacity, legality, mutual consent, consideration.

• Termination methods and breach remedies (monetary damages, specific performance).

Validity of Contracts

• Importance of having written contracts for real estate transactions.

• Electronic contracts are now valid under the Electronic Transactions Act in Alberta.

Conclusion

• Each real estate transaction involves a complex array of legal, operational, and regulatory considerations that require diligent attention from real estate professionals to protect the interests of buyers and sellers alike.