April 28 2012
Buying a cottage unlike other real estate transactions
The beginning of the cottage season is a good opportunity
for a reminder that recreational real estate transactions are unlike any other
property dealings.
Speaking to about 1,000 real estate lawyers at a Law Society seminar earlier this month, Midland lawyer Fred Hacker pointed out that the main difference in cottage deals is the emotional fervour that surrounds the transactions. “Buyers aren’t buying a piece of real estate,” Hacker said. “They’re buying their sanctuary, their retreat, the focus of their family life, a lifestyle and the stuff of dreams.
"And sellers aren’t just disposing of real estate; they’re
parting with memories, sentimental attachments, their history, and, in many
cases, the best years of their lives.”
With this emotional context as a background, Hacker spelled
out a number of pitfalls that distinguish cottage real estate.
Perhaps the biggest issue is whether a cottage property has
proper access by public road, private road, unauthorized roads across private
property or Crown land, or by the use of launch ramps or marinas for properties
with water access only.
Making sure the deed describes the entire property the
purchaser intends to buy is another big issue. Septic beds, wells and even all
or part of the cottage itself may be located on a neighbour’s land due to
historical sloppiness in marking property boundaries.
The critical need for a land survey is often overlooked. A
survey will disclose whether the cottage is built entirely on the owner’s land
underneath it, whether there is a shore road allowance, and whether the water
frontage has decreased due to erosion or increased as a result of land fill.
“Waterfront” properties may not extend to the water’s edge,
and a 66-foot shore road allowance is often owned by the municipality or a
third party, with the cottage, dock or boathouse sitting on top of it. Docks or
boathouses are frequently built on government-owned lake beds, usually without
permits.
Previous owners may have “shored up” the water boundary to
prevent erosion or to increase their lot size. Typically, the “filled lands”
are not owned by the seller.
Hacker pointed out that low water levels on the
As if these problems are not enough, cottagers may have to
deal with contaminated soil, environmental restrictions, endangered species
protection areas, development limits, aboriginal land claims, zoning bylaws,
and illegal construction of cottages or septic systems without permits.
Sewage is a major issue in cottage country, and some buyers
express shock when they find out that their new island cottage is not connected
to municipal or any other system.
Many buyers assume that cellphone service, Internet service,
land-line telephone service, cable television, garbage and snow removal,
natural gas and other subdivision staples will be available at a cottage. In
fact, not even hydro service is a given and electric generators or propane
appliances may be necessary.
Furniture and personal effects are often sold with a
cottage, but unless the offer is very well drafted, problems can arise when the
agreement simply says something like “all contents as viewed.”
Hacker also noted that if buyers have a principal residence
elsewhere, the cottage will be subject to capital gains tax on a sale unless
title is held in the name of an owner who can legally declare it a principal
residence.
Hacker’s main point was that the types of issues that are
confronted in cottage country may vary from region to region, and are very
different from those in urban real estate transactions.
If you’re buying or selling a cottage this year, make sure
that your real estate agent, insurance broker and lawyer have a firm grasp of
the complexities of recreational property transactions.
Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.
Visit the Toronto Star column archives at http://www.aaron.ca/columns for articles on this and other topics or his main webpage at www.aaron.ca.