Real Estate Defined
Real estate is known in law as real property and it consists of land and whatever is erected, growing upon, or affixed to the land. Land also includes rights related to the land. Real estate is highly regulated and the process by which one buys and sells a home is not like buying or selling something like a car. Why? Because different laws apply to real property and these laws change and get updated on a regular basis. For example, when you sell a home you must, by law, disclose all know latent defects in your home and on your property. If you do not know what a latent defect is, perhaps you are in need of a professional realtor who is required to be knowledgeable on these and many other issues affecting real estate. This page provides some basic info and additional information and tips are available through the links at the left.
Real property is distinct in law from personal property. For example, a mobile home that is located on its own land is dealt with in law as real property, but a mobile home that is located on a rental pad in a mobile home park is dealt with in law as personal property. The mobile home on land may be reflected on the title for the land and a person buying it can apply for a mortgage. The mobile home without land should be registered in the mobile home registry but a person buying it cannot apply for a conventional mortgage because it falls within the provisions of the Personal Property Security Act. The BC Real Estate Services Act governs the sale of real estate in BC. Does all of this sound confusing? Why discuss these examples? The reason is simple. This is a highly regulated industry and it is important to understand what laws apply to real property and which ones do not.
Real Estate Characteristics
Real estate has three characteristics that are fairly unique.
Immobility. The land upon which real property sits is immobile. This characteristic of immobility is the reason for the often voiced phrase “location, location, location” when it comes to the purchase of property. Location is very important and this characteristic is responsible for the local nature of our markets. Very often transactions in one localized area can have little or no impact or relevance on those within a different localized area. Having said this, neither area is completely isolated from the broader economic conditions affecting a local region, or for that matter, the country. A localized area can also be affected by changes that take place nearby. For example, if a coal mining plant is relocated near a single family or a water tower is erected nearby, the changes will affect the value of the home. Location is very important in determining values of improved land. As a result, it is important to know what currently exists and to find out what is planned in a specific area when a person is considering the purchase of real estate.
Durability While land lasts forever (barring some major natural disaster that may destroy it), the value of the land does not and the structures that are placed on the land have a finite life. The life of structures are measured in physical terms as well as economic terms. Buildings are often demolished and replaced with other types of structures before they have physically worn out to make room for a different type of development.
Indivisibility of services. This simply means that the elements of value associated with the land, buildings, and other improvements are thought of as a single unit. British Columbia land, when viewed from the perspective of the law of real property, includes the surface of the Earth and all permanent improvements made to it. However, in financial terms (such as property taxes) the land and the buildings on the land are often viewed as distinct.
Divisibility of ownership This has two meanings. The ownership of a parcel of real estate can be divided both physically and legally. Ownership of land can be divided by creating separate interests in land having either horizontal or vertical boundaries.
Real Estate in British Columbia
Within Canada, the provinces have sole jurisdiction to make laws concerning property. Within British Columbia, there are more than 35 laws that can readily be identified as being applicable to real estate. There are also a significant number of statutory and voluntary organizations that are part of the related industry. Overs the years, this industry has evolved into a very highly one. Historically, our real property law developed based on principles derived from court decisions and those found in legislation. Our law of real property is based on the law of England. English laws, as they existed in 1858 became those of our Province in that year. Over the years there have been many changes to our law and one of the most significant current differences between our real property law and that of England is our land registration system. Our current system is often referred to as a modified “Torrens System”.
When we think of owning land, we think of having unlimited rights to what we buy. This in not exactly the case. When we buy land we are actually buying rights to the land expressed in terms of interests. The “Crown” (government) actually owns the land and this is why land can be expropriated by the government. The government has other rights to land as well. Gold and silver subsurface rights to land were originally reserved in favour of the Crown, and other based minerals other than coal have been expressively reserved since 1897. Coal and petroleum have been reserved since 1899 and gas since 1951. There are other rights as well. For example, in British Columbia, all water except ground water if the property of the government. This is why a water license is required to be entitled to use surface water such as that in a lake being used for the water source in a home.
British Columbia Real Estate laws continue to evolve. The BC Real Estate Services Act and the Real Estate Development Marketing Act came into force in 2005 and the law of Agency was changed in 2012 to what is now known as Designated Agency. These are but a few of the more recent changes. If, like most of us, your home is your most expensive investment, does it not make sense that you would want to maintain an appreciation of the things that could affect it?