zoning bylaws. In some areas where tourism is promoted (for example, in areas near a ski resort) daily rentals are allowed. Some recreational properties are purchased solely to provide rental accommodation.
In some areas there are no formal restrictions on short-term rentals; however, bylaws are subject to change. Make sure that you know what the municipal bylaws and zoning restrictions are pertaining to your property.
New-home warranties
There are pros and cons to consider when deciding whether to buy a new recreational home or a resale. Buying a new recreational home means that you may be able to choose or upgrade the finishing materials, flooring, cabinets, and electrical features. As well, the building will comply with the latest building and electrical codes and energy-efficiency standards, which will result in lower maintenance costs.
But more important, recreational home-buyers may want the security of new-home warranty programs that are available in most provinces. Contact a new-home warranty office or visit its website for a list of registered builders in the area where you are considering purchasing. Although warranty coverage varies from one province to another, typically the programs guarantee labour and materials for your new home for at least one year after completion. The warranty also ensures that major structural defects will be corrected for a minimum of five years (and up to ten years in some provinces).
At present, warranties are required by law in Ontario, Quebec, and British Columbia, and are voluntary in most other provinces. In British Columbia, the law requires consumer coverage to be provided in the form of home warranty insurance, which is a bona fide insurance product that can only be sold by government-approved insurance companies.
Comprehensive warranties on newly built recreational homes are readily available and easily obtained. Even in provinces where the warranty is not mandatory, many lenders will not grant you a mortgage unless you obtain a warranty. Clearly, a warranty is a good thing to get, as it offers you peace of mind.
Homes Directly for Sale by the Owner
Sometimes you will find that a recreational property you are interested in is being sold by the owner, as a “For Sale by Owner” (FSBO, pronounced “fizbo”), usually because the seller wants to save on agents’ fees. You should be aware of the advantages and disadvantages of purchasing a FSBO.
First, FSBOs tend to be priced according to what the owner would like the homes to sell for, rather than what the market is willing to pay. If you are looking at various types of properties, including FSBO properties, make sure that your agent provides you with a comparative market analysis (CMA) to verify if the price is within fair market value.
Second, it is common practice for sellers to hire the services of a listing agent. The listing agent has a code of ethics to which he or she is bound. He or she is also bound by the laws of the country and has a fiduciary duty to inform his or her client who is selling a property about the legal importance of full disclosure. It is also the listing agent’s responsibility to verify the accuracy of the information being given to the potential buyer. Not having an agent working on behalf of the seller may raise questions regarding the disclosure of water damage, mould problems, and other serious health and safety issues.
Buyers’ agents, in seeing that there is no listing agent to represent the seller, may find purchasing a FSBO a potential risk because there may not be any confirmation about the history of the property or the accuracy of what is disclosed. A buyer’s agent has a fiduciary duty to protect the client’s interests, and the seller of a FSBO may not be aware of his or her duty as an owner to disclose all information. So, if you are buying a recreational property for the first time, retain a buyer’s agent to ensure that your interests are protected at all times.
There are perhaps only two reasons for purchasing a FSBO. First, both parties can save on agents’ fees because there is no commission to be paid. This may influence both parties in coming to an agreed-to price, which may or may not be lower than fair market value. Second, a bidding war is unlikely to happen. Because the property is not listed on the MLS, the chances of people finding out about it (unless it is very well advertised) are reduced. Go to the following websites for more information regarding FSBOs:
• www.fsbo.ca
• www.homesellcanada.com
• www.forsalebyowner.com (US website)
2
Types of Recreational Properties and Types of Ownership
There are many different types of recreational housing structures, and determining which is right for you will largely depend on your lifestyle, your budget, and how you would like to use your property. Recreational-home purchasers need to determine exactly what their needs and desires are, as there are many possibilities — for example, a chalet at a ski resort, a floating home on a lake, a log cabin in a forest, or a mobile or manufactured home in a new development. Each housing structure has its positive and negative qualities. You may not find something that meets all of your expectations; some compromises may become necessary.
Cottages and Summer Cabins
What do you want your cottage or summer cabin to be like? Would you like a small, cozy cottage that comfortably fits two people — or a big summer cabin that fits 12? You can find a rustic cabin with an outhouse and an old wood stove, or you can find one with large picture windows looking out onto the lake, with electricity, hot and cold running water, satellite tv, and all the comforts of a residential home.
When you are considering buying a property for seasonal use, you will need to factor in the costs and arrangements for security and maintenance during the off-season — for example, if it is only to be used during the summer. Ask your neighbours or those in a similar situation what type of arrangements they make. Perhaps your cottage is in a development that already provides year-round security guards patrolling the neighbourhood on a regular basis, and perhaps there is a cottage association that has a management company that will take care of your maintenance needs.
Floating Homes
A floating home is a special type of houseboat without a motor. If you are considering purchasing a floating home, it must be sold in conjunction with a water lot in order to qualify as real estate. Without an attachment to land, however, it remains simply a “boat,” which is considered a chattel — and agents are prohibited from selling chattels.
Most water lots are leased but some allow for private ownership, sometimes called “fee-simple ownership,” which means the owner has the right to control, use, and transfer the property. Water lots are usually divided into strata-titled units, and they are registered in the land registry office.
Many floating-home owners would say that aside from the sheer beauty of living on the water, the lack of yard work (such as mowing the lawn or trimming hedges) and the close ties that develop within the floating-home community are some of the benefits.
A problem you may find when considering buying a floating home is that many financial institutions are reluctant to give a mortgage for this style of housing because it is still perceived as unconventional. There are also monthly marina fees to consider, which help pay for dock maintenance and services such as sewage and water.
When considering purchasing a floating
