IN THIS SECTION
- THE ROLE OF A LAWYER IN A HOME PURCHASE
- REVIEW OF AGREEMENT
- NEW HOMES
- TITLE AND OTHER SEARCHES
- COST OF SEARCHES
- MORTGAGES/SECURED LINE OF CREDIT
- CLOSING PROCESS
- AFTER CLOSING
WHAT IS THE ROLE OF A LAWYER IN A HOME PURCHASE?
The real estate lawyer’s job is to make sure you’re getting what you’re paying for.
The real estate lawyer will:
- Review the purchase contract and point out any issues that might become a problem.
- Explain the various timelines which are involved, how they will impact you and the lawyer’s work, and how these timelines are dealt with.
- By doing a title search, make sure that the seller has the right to sell the property to you, and that any mortgage or other legal claim against the property is dealt with so that it doesn’t become a problem for you.
- Make sure that the seller does everything that the contract requires of them.
- Usually handle the legal aspects of any mortgage or line of credit which you arrange for funding your purchase.
- Meet with you shortly before closing to go over the documents which will need your signature and discuss the
final closing accounting.
- Follow up with the seller’s lawyer after the transaction has been completed, to make sure that all loose ends are
completed. This can sometimes take up to 6 months or more.
- Send you a written report with all of your final papers, including your transfer of ownership, mortgage, and so on.
SHOULD I HAVE MY LAWYER REVIEW MY AGREEMENT OF PURCHASE AND SALE?
It’s a really good idea to have your real estate lawyer review your Agreement! Better still, have your lawyer review the offer
before you sign it.
Your real estate lawyer will review topics such as:
- the survey, if any
- any specific work that the seller is required to do
- any rental contracts (such as the hot water tank) that the seller may want you to take over
- warranties about physical aspects of the property, water potability, closing costs, et cetera)
- title insurance
The offer may have conditions and warranties:
- Conditions are about things that are so important that if they aren’t met, you can back out of the deal. Examples include arranging a mortgage and your satisfaction with the results of a home inspection.
- Warranties are about things that are important, but not so much that the deal can be cancelled; instead, these can be handled by adjusting the price, getting something fixed, et cetera.
If the offer is conditional upon financing or on something else, such as a home inspection, or on the sale of other property, your lawyer will probably wait until the condition has been met before beginning work.
The real estate lawyer may also be able to tell you whether you can do what you want in the house. e.g. rent out a basement apartment, conduct a home-based business, or install a pool in the back yard. Unless your agreement says that the seller is guaranteeing that you will be able to do these things, you will have no way of getting compensation or cancelling the transaction if, before closing, your lawyer discovers that in fact, you can’t legally do them. For this reason, it is extremely important that you share your plans with your real estate lawyer before you sign the offer so that the agreement can include such guarantees.
Builders’ offers contain a lot of things that you won’t see in a resale offer. You usually have less room to negotiate these things.
- Delay of closing if the house isn’t ready in time.
- Changes in the colour of brick, siding, flooring, countertops, tiles, shingles, and so on.
- Extra costs, such as for water meter installation, hydro connection, boulevard tree planting, development charges, local improvement charges, Tarion warranty program enrollment. These can sometimes add thousands of dollars to the price of the house.
- Restrictions on any changes in the grading until the entire subdivision is finished, including landscaping, fences, pools, decks, and so on.
- Restrictions against finishing your basement.
- Restrictions against TV dish antennas, clotheslines.
- Limitations on pets in a condominium.
- How HST is dealt with.
- And much more!
You purchase exclusive ownership of the unit and a percentage interest in common with other unit owners in the
rest of the complex.
- If the building is new and is being built for you, you have ten days to back out of the deal for any reason at all or for no reason. This is not the case with the purchase of a resale condominium.
- There are restrictions on what you can do with and in your unit.
- The Tarion New Home Warranty Program also applies to new condominium units.
TITLE AND OTHER SEARCHES
The real estate lawyer will examine the title by reviewing the online title records and examining any surveys. The purpose of this is to make sure that the seller owns all that you want to buy, and that they have the complete right to sell it; sometimes other people’s consents are needed. Arrangements will be made to take care of any mortgages, back taxes or other liens that you haven’t agreed to take on so that these don’t become your problem.
The lawyer doesn’t carry out any physical tests of the property. You should negotiate the right to inspection by experts in the Agreement. If there are problems you will have to negotiate their resolution with the seller.
The lawyer will also check other issues, which can include property taxes, zoning, other rights to the property, and whether there are any municipal orders to repair or clean up the property.
In purchases of rural properties, we can check for unregistered hydro easements and whether a use permit was issued for the septic system, and whether there any issue with a conservation authority such as the NVCA.
There is no absolute right at law to inspect the property before closing to make sure that it’s in the same condition as when you signed the offer. Make sure that your Agreement includes the right of a final inspection.
COST OF SEARCHES
Disbursements (out-of-pocket expenses, apart from title insurance premiums) for an older home average $600.00, and about $450.00 for new homes. In the case of rural properties, or properties in older neighbourhoods, the search costs can be considerable. No two titles are the same, and therefore the costs will be different from one transaction to the next.
Purchasers will also have to pay Ontario Land Transfer Tax. Click on the link below to calculate the amount of tax you will have to pay in most cases:
A survey is absolutely essential if the real estate lawyer is going to do a complete investigation. Surveys reveal the extent of the Vendor’s title and all physical claims against it. Surveys are also necessary for getting a comment by the City or Township on whether the house and the lot and anything else such as a deck or porch or pool comply with zoning regulations.
Rarely do sellers provide surveys nowadays, as they are often old, or have not been provided by the previous owners. Title insurance policies can provide some coverage against the risk of not having a current survey. In the absence of a contractual stipulation, a seller has no automatic legal obligation to give you a survey if they do not have one.
As mentioned above, most often, new surveys aren’t available, and since they are so expensive, many purchasers do not want to pay for a new one. In that event, a policy of title insurance will be advisable. Where you are arranging for a mortgage or line of credit, the lender will insist upon title insurance to protect it. Therefore, it will make sense to obtain a title insurance policy to protect your ownership rights as well.
Keep in mind that title insurance does not give you perfect protection against all legal risks, however.
MORTGAGES/SECURED LINE OF CREDITS
Banks (and other commercial lenders) typically rely on the mortgage lawyer to guarantee that the security for the loan to you is
perfectly legal in every respect.
The mortgage lawyer prepares the mortgage the way the bank wants it, makes sure it is registered properly, and sends a written report to the bank.
Most institutional mortgages charge discharge penalties for paying the mortgage off early. They also require you to keep the property insured, forbid you from selling the property to an unqualified purchaser, or making major renovations or a change of use without the bank’s approval, and anything else that affects the security for the loan. Any default will entitle the bank to an eviction order against you, after which they will sell the house to pay back the loan (“power of sale”).
A few days before your closing date, you will meet with your lawyer to review and sign the closing documents. Your lawyer will explain all the documents you must sign.
One of the documents to review is the Statement of Adjustments. This determines the amount of money remaining to be provided to the seller on closing. Sometimes, these figures are not determined until just before your completion date. If this happens, the lawyer’s office will probably estimate the closing adjustments.
Your lawyer will also calculate the amount of money you need to provide them for closing. This will include the balance of your down payment, as well as Land Transfer Tax, adjustments to the purchase price, legal fees and disbursements, title insurance and any other closing expenses.
Next, your lawyer will close the transaction with the other real estate lawyer. The transfer/deed (change of ownership) and the mortgage/secured line of credit, if applicable, will be registered electronically. Once this is completed, you will be advised of the completion of the transaction and where you can retrieve the keys. Frequently, keys will be left in a lock box on the property, and the lawyer will give you the code.
WHEN WILL YOU GET YOUR KEYS?
The Ontario Real Estate Association agreement of purchase and sale template (which is the document most often utilized by real estate agents) does not stipulate a time of day at which the transaction is to be completed and when the keys will be available to you. Instead, it states that the transaction will be completed by no later than 6:00 PM.
This creates uncertainty as to when the keys will be available. Keys will not be available to you until the real estate transaction is completed. Most transactions are completed in the mid to late afternoon due to a number of factors. Our office strives to completed all real estate transactions in a timely fashion and as soon as possible.
After closing and all loose ends have been dealt with, the real estate lawyer sends you a report telling you about tax and mortgage payments, confirming information about the title, and giving you the Transfer, mortgage, and other papers.
Bear in mind that the above notes are extremely general, are not intended as legal advice, and may not apply in every case. Each home purchase is as unique as you are. Please consult your own real estate lawyer before relying on anything contained herein. We would be pleased to answer any questions you may have regarding your home or real estate purchase.
Please feel free to contact us directly.
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