Buying and Selling a Home

Why should I hire a real estate lawyer early in the process?

The purchase of a home is one of the largest and most important financial transactions most people will make during their lifetime. It pays to ensure that all of your legal rights are protected whether you are buying or selling a house.

Should I have a lawyer review the Agreement of Purchase and Sale before signing it?

The short answer is absolutely. The Agreement of Purchase and Sale is the legal contract that sets out all of the conditions of the sale. It’s full of fine print and legal terms, and if you sign it without legal representation, you risk agreeing to terms you don’t understand or that you are unable to comply with. Once the Agreement is signed, you are bound by its terms and there is no further room for negotiation.

A lawyer becomes particularly important when buying a new home or condominium that has yet to be built. These agreements are often 20+ pages in length and deal with everything from what constitutes upgrades, to rules for extending the closing date. Many buyers are often surprised to learn that the sales incentives presented at the design centre appear very different once they are written into a legal contract.

A lawyer can also help you determine exactly how much it will cost to buy the house. In addition to the price you are willing to pay for the home, there are many extra costs including land transfer tax, title search fees, registration costs, legal fees, as well as monies you will need to reimburse to the vendor for pre-paid property taxes or utility bills for example. Knowing these costs upfront can help you make an informed financial decision.

As a seller, a lawyer will help you to ensure that conditions and warranties are properly worded, and that you know what your obligations will be, should for example, the stove that you sold with the home break down one week after closing.

What happens after the Agreement is signed?

Once the Agreement of Purchase and Sale has been finalized, your lawyer will need to undertake many steps on your behalf to get ready for the closing.

If you are the Buyer, these steps involve making a number of important legal inquiries, ensuring the accuracy of the documents and facts, and searching records to make sure that you end up with good title to the property.

If you are the Seller, you will need to supply your lawyer with a number of items to ensure that you are relieved of all legal liabilities in relation to the home once the deal closes. This involves providing your lawyer with: proof of payment of your property taxes, confirmation that you have advised the utility companies of the date for the change in ownership and arranged for any final meter readings, details of any mortgages or lines of credit secured against the home so that these may be discharged on closing, copies of any surveys of the property, and finally a key to the home that will be given to the buyer on closing.

What is Title?

“Title” is the legal term that means you have legal ownership of property.

In a real estate transaction, you obtain title to the property when the owner/seller signs the “deed” over to you. In Ontario, title is then registered electronically in the government’s Land Titles System.

What are the different ways I can take Title to the Property?

There are basically three ways of holding title to your home: sole ownership, tenants in common, and joint tenants with right of survivorship.

If you are single, or wish to be the only owner of the property, you will take title to the property in your name alone. There are no special tax or other advantages of holding title in sole ownership. When the sole owner dies, the property will be subject to the probate process. For this reason, it is important to have a valid Will setting out who is to receive your assets on your death.

Co-owners of property can own property as either “joint tenants” or “tenants in common”.

Joint tenants have identical and indivisible interests in the property with a right of survivorship. This means that the surviving joint tenant owner automatically inherits the entire ownership of the property on the death of the other, thereby becoming the sole owner.

Tenants in common by contrast, have defined shares (which can be any combination of percentage interests equaling 100%) and are distinct and separate individual owners of the property. Since tenants in common own their respective shares of the property separately, it is the surviving beneficiaries of the deceased tenant in common that are entitled to the deceased’s interest in the property, and not the surviving tenant in common.

Why is it important to have good title?

Good title is important because it makes certain that you are the actual owner of the property, that no one else has a claim to it, and that it is accurately described in official documents and properly registered. Also, in order to be able to sell your home in the future, it is crucial that you have good title.

One of the most important aspects of your real estate lawyer’s job is to make sure you end up with good title to the property. There are two basic ways that your lawyer can take to assure you of good title, namely, a lawyer’s opinion on title, or Title Insurance. The choice on which way to proceed is yours.

What is a lawyer’s opinion on title?

Traditionally, in Ontario, home purchasers have relied upon their solicitors for an “opinion” as to title. Giving this opinion involves making a variety of due diligence investigations, some of which involve searches of title, and some of which involve off-title investigations, such as enquiries of the municipality to ascertain whether there are any zoning violations, outstanding work orders, etc. This can often be a lengthy and costly process as enquiries with authorities are often not responded to within any reasonable time frame, and each enquiry is met with a processing fee.

What is title insurance?

Title insurance is an insurance policy which protects homeowners and their mortgage lenders against losses related to the title of the property or your ownership in it. It is not to be confused with your home or fire insurance policy which protect the structural integrity and contents of the home. From a financial point of view, proceeding by way of title insurance usually results in cost savings. The typical cost of a title insurance policy for relatively new properties where the purchase price is under $500,000 is approximately $375.00 at the present time.

What does title insurance cover?

For a one-time fee (also known as a “premium”) which is paid on closing, a title insurance policy may provide protection against the following, among other items:

  • Unknown title defects, such as encroachments which would only be revealed by an up-to-date survey
  • Title or mortgage fraud
  • Outstanding work orders
  • Unpaid property taxes or local improvement charges by a prior owner
  • Liens against the property
  • Contravention of subdivision, development or other agreements

Is there anything not covered by title insurance?

Each policy is unique to the property in issue and must be carefully reviewed so that you are fully aware of what is covered and what is excluded by the policy. For example, the policy will not insure against defects in title which are known to yourself but not to the insurer. Accordingly, should you be personally aware of an outstanding defect, for example, items such as breach of the building code revealed by a home inspection commissioned by you, will not be covered by the policy.

Environmental hazards (e.g. Soil contamination), native land claims, and zoning bylaw violations from renovations or additions to your property or land that you are responsible for creating are further examples of what is not covered by the title insurance policy.

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