Hey folks, I've been looking into Moncton, NB (Canadian living in the US). I haven't done business here before, any notable differences for dealing with here versus the US, things on my mind in no particular order:
1) What are typical insurance providers that you work with ? This would be for > 4 units multifamily
2) How about title companies, is this usually done through title company or attorneys ? Do you have examples ?
3) I assume that contracts would typically have an inspection contingency
4) How much is the earnest money deposit compared to the purchase price ?
5) Any specific landlord-tenant laws I need to be aware of ?
6) Have you invested here from out-of-province, what has been your experience ?
Feel free to mention any other information that you feel is relevant.
@Ahmad D. and @Larry Morehouse
1) If you have a residential residential property, then you want a Landlord specific insurance policy. I would recommend you contact Nicole Morgan at A.P. Reid Insurance as part of your search.
2) Real estate transactions in NB (and Canada in general) are Closed by attorneys. A title search is part of the process. Title companies as you find in the U.S.A. do not exist.
3) Inspection and financing contingencies are standard in residential real estate contracts. In commercial transactions the diligence is both broader and deeper. Inspections will include not just a physical inspection of the property, but also engineering assessments; environmental assessments; zoning and permit inspections; leases and service contracts and finances (3-5 years, preferable prepared by an accountant).
You should also have a condition permitting you to collect estoppels from the tenants and use the information collected to verify the leases and financial information reported by the Vendor.
4) When it comes to Earnest Money (more commonly called simply a Deposit here), you should consider a minimum of 5% - 10%. I know that $1K - $2K deposits seem to have become common on residential properties, but if you were to drop such a deposit on an apartment building, neither you nor your agent (who allowed you to do it) are going to be taken seriously.
5) Absolutely! You need to be aware of the Residential Tenancies Act in the jurisdiction in which you are acquiring property. The NB Residential Tenancies Act can be found here. Just as important as the Act itself is learning how the Residential Tenancies Tribunal (RTT) {formerly the Office of the Rentalsman} applies the law and the regulations which accompany the law. Good news for you, NB has a fairly balanced Landlord - Tenant regulatory environment; particularly in comparison to jurisdictions such as Nova Scotia, Québec or Ontario.
@Ahmad D. and @Larry Morehouse
1) If you have a residential residential property, then you want a Landlord specific insurance policy. I would recommend you contact Nicole Morgan at A.P. Reid Insurance as part of your search.
2) Real estate transactions in NB (and Canada in general) are Closed by attorneys. A title search is part of the process. Title companies as you find in the U.S.A. do not exist.
3) Inspection and financing contingencies are standard in residential real estate contracts. In commercial transactions the diligence is both broader and deeper. Inspections will include not just a physical inspection of the property, but also engineering assessments; environmental assessments; zoning and permit inspections; leases and service contracts and finances (3-5 years, preferable prepared by an accountant).
You should also have a condition permitting you to collect estoppels from the tenants and use the information collected to verify the leases and financial information reported by the Vendor.
4) When it comes to Earnest Money (more commonly called simply a Deposit here), you should consider a minimum of 5% - 10%. I know that $1K - $2K deposits seem to have become common on residential properties, but if you were to drop such a deposit on an apartment building, neither you nor your agent (who allowed you to do it) are going to be taken seriously.
5) Absolutely! You need to be aware of the Residential Tenancies Act in the jurisdiction in which you are acquiring property. The NB Residential Tenancies Act can be found here. Just as important as the Act itself is learning how the Residential Tenancies Tribunal (RTT) {formerly the Office of the Rentalsman} applies the law and the regulations which accompany the law. Good news for you, NB has a fairly balanced Landlord - Tenant regulatory environment; particularly in comparison to jurisdictions such as Nova Scotia, Québec or Ontario.
@Roy N. @Larry Morehouse thanks for the input !
Roy, regarding your input on engineering assessments, etc do you do that for every property you buy ? If so, I would love to take a look at what checklist you have
Note that I don't plan to have financing for any purchases, so there's no lender at play here to require such assessments
Ahmad:
It normally starts with the physical inspection of the building(s). If specific concerns are raised (structural, moisture, electrical, etc) then the engineers or other specialists/trades are brought in for a more thorough examination. However, on larger buildings one might order an engineering property condition assessment (PCA) from the get go.
For this reason, you need a diligence period which corresponds to the size of property - or the ability to extend your diligence period when a deeper investigation is warranted. Naturally, if you are looking at a smaller building (residential or 5-10 unit) you will need less time than if you are examining a 50-unit building to cover both the physical building and, examine leases, gather estoppels, etc.
Environmental Assessments (EAs) are a fairly common ask of lenders and, at times, insurance providers when transacting commercial properties. If you will not be using a lender, then you may still want an environmental assessment in certain situations: viz. if there are indications of current/past oil-fired heating plants and the possibility of underground storage tanks (USTs) - either active or abandoned.
1. I would recommend Hub Insurance, and Park Insurance.
3. You should include an inspection contingency even if you don't have a lender. This is to protect your investment. Don't assume it is part of the contract. If you don't include it as a condition, and your agent doesn't, then it may not be included.
The other things I would check on is:
Do you physically have to be here in person to sign the closing documents or will they allow electronic signature and affidavit from out of province/state?
Are there any withholding tax considerations?
1. I would recommend Hub Insurance, and Park Insurance.
HUB insurance does operate in NB (about 5-years now) through what appears to be an affiliation or acquisition of local brokerages (they weren't terribly competitive when we last shopped our insurance). Park Insurance does not operate here, but they may underwrite nation wide.
Hey all, thanks for all the input so far.
On the topic of attorneys. Is it typical that the buyer and seller have their separate attorneys ? What if it’s a dual agency scenario where the agent is representing both ?
I also see that HST would also apply - quick glance shows 15% for NB. Would there typically be a tax rebate for the amount paid ?
Hey all, thanks for all the input so far.
On the topic of attorneys. Is it typical that the buyer and seller have their separate attorneys ? What if it’s a dual agency scenario where the agent is representing both ?
I also see that HST would also apply - quick glance shows 15% for NB. Would there typically be a tax rebate for the amount paid ?
An attorney would decline to represent both parties in the transaction - as it would violate the right to independent counsel.
HST only applies in instances where you are a) purchasing a commercial property (i.e. strip mall, office building, etc) or b) where you are purchasing a new building (or one that has been renovated to such an extent that the CRA deems it essentially "new"). In general there is no HST on the purchase of residential rental properties - similarly, you do not collect HST on residential rent.
@Roy N. do attorneys only get paid after closing, or even during due diligence/offer period to review the agreement ?
Ahmad
You will normally receive an invoice from your attorney along with your closing package. If there are funds remaining in escrow, you will also likely received a letter of direction to pay your legal fees from those funds.
If something arises during diligence which cannot be resolved and the deal falls apart, you still may have incurred some cost from your attorney's efforts.
Other provinces allow dual presentation as well.
If the agent is willing and able to do duel rep, they will disclose that to you. If an agent is doing duel rep, they will act on the sellers best interest, not yours. There are things you might tell your agent and they may or may not share it with the seller. However if it is the same person, they are obligated to tell the seller. Keep in mind, you and the seller can use 2 different agents but they are from the same firm. This to me a big of conflict as well. They spend time in the same spent, overhear conversations, etc.
Your agent represents your interest. So get an agent that is not just a transactional agent.
I'll diverge a little from @Huong Luu's take on dual agency. If the agent is double ending the deal, s/he will furnish a disclosure of such to both the vendor and purchaser. There is also code of conduct by which the agent is to abide during the transaction.
While I am certain some agents will act on the vendor's best interest (or their own), my experience has been you can do well as a buyer in this situation.
@Roy N. @Huong Luu thanks for your thoughts on this