At David I. Warren Barrister & Solicitor, our highly experienced real estate lawyer can provide timely and effective legal advice related to all your real estate issues. Contact our real estate lawyer to know more about the legal services we provide.
The Role of the Lawyer in Buying a Home
While the role of the lawyer is critical in the purchase of a home, they are not the only professional you need to consult in the process. You will also need to deal with a realtor, a bank or other lender, or a mortgage broker, an insurance broker and possibly a home inspector. The lawyer's role, for example, does not include the budgeting process, as to whether or not you can afford a particular home, which would be your lender or mortgage broker, or the habitability of a particular home, which will be the purview of the home inspector.
Agreements of Purchase and Sale
These are often drafted by realtors, but may be drafted by your lawyer, often if the purchase is a private one and does not involve real estate agents. It is very important, however, to have your lawyer review your draft of Agreement of Purchase and Sale before it is signed and submitted to the vendor or the vendor’s agent. The Agreement is a legal contract and if there are any problems with the Agreement, they can rarely be fixed after signing by the lawyer.
Your offer may have conditions such as a financing condition or a home inspection condition. The offer does not become final until the conditions are waived. In today’s hot market people often choose not to insert conditions to make their offer more attractive to the vendor, but this is not a legal decision but rather a marketing one. Pre-approval of mortgages also eliminates the need for a financing condition.
To Lawyer – Searching Title
Once the offer has been accepted and signed by both parties, you should immediately forward it to your lawyer who will begin the process of searching the title. This confirms that you are buying the property that you expect to buy, free and clear of building or statutory liens, charges or work orders, and that the vendors have the right to sell the property, possibly subject to a mortgage to be discharged by their lawyer.
Various forms of home ownership
Primarily freehold and condominium. Freehold means that one or possibly two people (usually in the case of spouses) own the house and land outright. This may include detached and semi-detached homes, duplexes and townhouses. Condominium ownership means that you own the unit you live in but share ownership rights in common spaces such as corridors, the grounds and special facilities such swimming pools and party rooms. Condominiums are run by condominium owners as an association and your lawyer must contact the association or their designate to obtain legal documents including the condominium organizing documents, its annual budget and a status certificate which confirms such things as whether the condominium is a party to any lawsuits. The lawyer must review these documents carefully.
Your lawyer will send a letter to the vendor’s lawyer known as a requisition letter which will detail any issues needed to be resolved before closing. The most common of these is the discharge of one or perhaps two mortgages. If they are mortgages from the major financial institutions your lawyer can accept the other lawyer's promise to discharge them immediately following closing, so long as the vendor’s lawyer provides a discharge statement from that institution.
Mortgage
If you are utilizing a mortgage to buy your home, you will need to give your financial institution your lawyer's contact information, as they will need to provide him or her with instructions for the preparation and signing of your mortgage prior to closing.
Insurance
You will also need to arrange for home insurance prior to closing. If you are buying with a mortgage, it is your lawyer's legal responsibility to confirm that the lender is covered by your insurance policy.
Title Insurance
It is also recommended that your lawyer obtains Title Insurance for you prior to closing. Title Insurance which is especially useful protecting against title fraud is a onetime charge and is good for as long as you own your home. It also reduces the need for certain other kinds of searches which would otherwise have to be performed by your lawyer such as municipal building and tax searches.
Closing
You will sign the mortgage and other legal documents required for signing, usually a day or two prior to closing. At that time you will need to provide your lawyer with a certified cheque for the balance due on closing, the lawyer fees, and the other closing costs. A document that your lawyer should have received prior to your attendance at his office for signing is the Statement of Adjustments. Adjustments which are things like payment for a full oil tank or for a portion of overpaid taxes by the vendor will be detailed by the vendor’s lawyer. You will also be paying disbursements such as search costs and title insurance. You will also need to pay land transfer tax. In Toronto there is both Municipal and Provincial land transfer tax, elsewhere there is only provincial land transfer tax. If you have never owned a home or portion of a home anywhere in the world you may be eligible for an elimination or reduction of land transfer tax as a first time home buyer.
On closing day, the lender will provide the mortgage money to your lawyer. These funds plus the funds you have provided prior to closing by certified cheque or bank draft, will be enough to pay the balance due on closing to the vendor’s lawyer, the land transfer tax and registration fees, and your estimated legal fees and disbursements. Your lawyer pays the vendor, registers the home in your name, registers your mortgage and advises you and the realtor that the transaction has closed. Usually you will get the keys for the new home directly from your lawyer.
Sometimes your closing has to be extended. It could be that your bank financing is a little slower than you expected, or the vendor could be having difficulty resolving a title issue. If you are requesting the extension, you may have to pay a little more, quite often the interest on the vendor’s mortgage during the period of delay plus his or her increased legal fees. If the vendor is requesting the delay, they may have to give you a small reduction in the purchase price plus pay any of your increased legal fees. Usually this is handled by the lawyer, although occasionally straightforward extensions can be dealt with by amendments to the Agreement of Purchase and Sale and can be handled by the realtors.
Report
Usually a month or so after closing you will receive a detailed report including a copy of your deed, mortgage and other legal documents and an account detailing funds received, disbursed and fees and disbursements. Although people sometimes expect that these documents will be available forthwith after closing, a proper report cannot be made available until after the vendor’s lawyer has discharged any outstanding mortgage on the property and this often takes a month or two.
The lawyer's report will provide a summary of the legal services that they have provided for you. These may include the resolution of any unusual title matters, a copy of your deed and mortgage documents, a copy of the documents signed by both you and the vendor prior to closing with brief explanations of the purposes of these documents. You will also get an account outlining the fees and disbursements charged by the lawyer together with a trust ledger showing funds received from you and the mortgage company, and how these funds were spent, or in legal terms, disbursed. Any balance should be returned to you with the trust ledger.
The Role of the Lawyer in Selling a Home
In today’s hot market, selling a home may seem easy but there are still some decisions to be made.
Agreements of Purchase and Sale
If you are working with a realtor, they will receive offers from other realtors and perhaps private individuals. These offers will generally be made in the form of draft agreements of purchase and sale which will contain information including the proposed purchase price and date of closing. Some of the offers you receive may have conditions, such as financing condition or home inspection condition. The offer does not become final until conditions are waived. Often people choose not to insert conditions to make their offer more attractive to you. However, you should not ignore offers with conditions if they are reasonable and short-lived and if the offer is financially attractive. It may be appropriate to have the lawyer review the agreement of purchase and sale before you sign it, as if there are any problems with the agreement they can rarely be fixed after you have accepted the offer. Your signature is binding, better safe than sorry.
It is possible that your own real estate agent will be making offers on behalf of his own clients. This is known as “double-ending”. It is still legal in Ontario for realtors to do this. You must be very careful to examine any offers brought to you by your own realtor.
It is for this reason you should rely on your lawyer to catch such dealings.
The Role of the Lawyer
Once you have accepted an agreement of purchase and sale, a copy should be forwarded to your lawyer immediately. Aside from the sale price it will contain such details as the requisition deadline, the closing date, and the details of the chattels and fixtures that you are providing along with the home.
Your lawyer will also want your most recent municipal tax bill. If you are selling a condo, you will also need particulars of your monthly condominium fees as well as any special assessments, parking spaces, storage lockers and bicycle lockers. While this is sometimes done by the realtor, often the lawyer is asked to order a ‘Status Certificate’ for the vendor’s lawyer to review. If you are selling a condo this is almost always a condition as the purchasers may be unaware of special assessments or legal liabilities of the Corporation such as outstanding law suits. However, these Status Certificate conditions are usually brief, perhaps two business days, for the lawyer to review the Status Certificate once received.
Statement of Adjustments
The tax bill and condominium fee information are required by your lawyer so that they can prepare a Statement of Adjustments. Adjustments are things like payment for portions of over or underpaid municipal taxes, in terms of the liability for the full year. If your home is heated by oil, you should arrange for a final fill-up on the day before closing and your lawyer will add the cost of the full oil tank to the Statement of Adjustments.
The deposit will also be shown on the Statement of Adjustments. If the deposit is being held by your realtor, your lawyer should also receive a commission statement from the realtor. This will show whether the realtor will owe you money after closing if the deposit is higher than the commission plus HST, or whether you will owe the realtor money after closing if the deposit is less than the commission less than the HST. If you owe money to the realtor, your lawyer will forward it after closing as part of their responsibilities. If the realtor owes you money, however, the lawyer will simply notify the realtor that closing has occurred and it will be the realtor’s responsibility to forward the difference to you.
Discharge of Mortgage
If you have one, or sometimes two mortgages registered on the title of your home, they will need to be discharged as part of the closing process. If any mortgage is to a private individual such as a family member, or even somebody’s RRSP, which may have been arranged by a mortgage broker, these mortgages will have to be completely discharged immediately on closing. Often, in this case, a third lawyer may be involved as the lawyer for the mortgagee. More commonly, if they are mortgages from a major Canadian financial institution, your lawyer can Undertake (promise) to discharge these mortgages immediately following closing. Your lawyer will have to provide a Discharge Statement from the bank and will require the bank’s mortgage reference number prior to closing in order to obtain this Statement. This number is not the same as the mortgage registration number.
Closing
A few days before the closing date you will meet with your lawyer and provide at least one complete set of keys (and garage door openers if applicable) and photo ID. You will sign a number of documents, mostly provided by the purchaser’s lawyer. On the closing day, the purchaser’s lawyer will forward to your lawyer the funds necessary to close the transaction as detailed in the Statement of Adjustments. Once the funds have been received, your lawyer will release the transfer electronically to the purchaser’s lawyer who will then register it. Once the transfer has been registered, your lawyer has the legal authority to release the money in their possession. This means forwarding funds to discharge any mortgages, forwarding funds to pay the balance of commission owing, paying his own fees and disbursements, and forwarding you the balance of the funds.
Report
Usually a month or so after closing, you will receive a detailed report. You will also receive an account detailing funds received and disbursed and fees and disbursements paid to the lawyer. Although sometimes people expect that these documents are available immediately after closing, they cannot be made available until your lawyer has registered the discharge of any outstanding mortgage on the property. Banks often take a month or two to provide these discharges to your lawyer.
Commercial Properties
While the general outline of the process for buying or selling a property are the same as dealing with a residential property, often commercial purchases are much more complex. Often extra searches are required, such as building or fire inspection. Corporate documents may need to be reviewed if the vendor is a corporation. If you are buying a commercial property it may be wise to incorporate and have the property owned separately from your personal holdings. From time to time leases or other contracts need to be reviewed. These issues will affect both the length of time to properly close the transaction and also your lawyer's fees and disbursements.
Cottages and Rural Property
While the general process of buying or selling property outside large urban areas is the same as purchasing city property which need to be considered. The most frequent of these is road access. Your lawyer needs to determine whether your access road is municipal property or privately owned. If privately owned, a purchaser may have to join an existing cooperative or other legal entity for the maintenance of that road.
The most important other issues involve water. Firstly, recreational water such as a river or lake may have similar access issues as a road. You do not want to buy a ‘land-locked’ recreational property. Secondly does the property have a well or is it connected to municipal services? If it has a well is the water potable?
These issues and a number of others must be considered as well as the normal issues that occur in the buying or selling of a property.
Estates
The preparation of a Will deals with your property when you are alive but your property becomes an ‘Estate’ once you have passed away.
The estate of person ‘x’ is in some ways a different legal entity than the person themselves when they were alive. The death must be reported to various government agencies, and the authority of the estate trustee does not come into effect until the person’s will has been probated or other forms of estate trusteeship has been sought if the person does not have a will.
The initial stages of estate administration involve the preparation of government documents which are submitted to the estates court and itemize the estate so that estate administration fees may be paid. Once the court has review the material and approved these document
Refinancing
Most often, people will simply renew a maturing mortgage with the same financial institution. Generally the banks will have their own lawyer to do this, or will even not bother registering a new mortgage as the old mortgage remains legal notice on title that there is a liability or encumbrance in favour of that particular bank.
However, sometimes people will want to discharge a maturing mortgage to one financial institution and register a new mortgage to a new financial institution or to a private individual. Such mortgages are often arranged by mortgage brokers. In that case you will need the services of a lawyer.
The lawyer will write to the old financial institution and obtain a ‘Discharge Statement’. The lawyer will also receive mortgage instructions including any other information required by the new mortgagee, from the mortgage broker or new financial institution. Often the new mortgagee will require your lawyer to obtain title insurance on their behalf so that any problems with title that surface in the future can be resolved with the assistance of the title insurance company. Title insurance is a one-time fee and lasts as long as you have a mortgage to that mortgagee.
When documents have been prepared to the satisfaction of the new mortgagee, funds will be forwarded to your lawyer who will pay them out, pursuant to the old mortgage statement, and also pay their fees and disbursements. They will register the new mortgage, and report to both you and the new mortgagee. If the new mortgagee is a private individual, your lawyer will most likely be reporting to another lawyer acting on behalf of that mortgagee.