- A Legal Perspective
- Taking Title of Land in Ontario
- The Role of the Solicitor in a Real Estate Transaction
- Costs Related to a Real Estate Transaction
In some cases, problems are discovered relating to the title of the property of which the vendor was unaware. For example, a new addition added to the house may not conform with zoning requirements or a building permit was never discharged by the city. Of more serious consequence are the situations where the vendor thought he owned more land than is indicated by his Deed or a Judgment has been rendered against him in an unrelated court action that acts like a lien against the property.
It is the function of the solicitor for the vendor to rectify these problems so that the purchaser acquires exactly what he bargained for: a house free and clear of any residual charges relating to a person who owned the house before him.
Typically, the vendors's lawyer will pay out any existing mortgages or charges from the funds received from the purchaser on closing and register a discharge of those mortgages with the Registry Office. He or she will also be responsible to insure that municipal taxes and utilities are paid in full to the date of closing.
The calculations to effect these payouts are done through a Statement of Adjustments prepared by the vendor's lawyer where both the vendor and purchaser are either credited or charged for the use they have respectively made for the services supplied to the property.
For example, in the event that the vendor has paid all the municipal taxes for a given year and the property is to be sold prior to the end of that year, the vendor will receive a credit for those taxes paid for the period after possession is transferred to the purchaser. This will result in an increase in the price the purchaser must pay on the day of closing.
On the day of closing, the keys and transfer documents for the property are given to the solicitor for the purchaser in exchange for the funds required. Usually, the vendor can acquire the balance of the funds due to him the next business day after the sale.
We request that the vendors notify the various utility companies of the date of the sale.
The act of assuring the purchaser of good title may be accomplished by your lawyer in one of two ways:
- By providing a qualified Letter of Opinion on whether the purchaser has good and marketable title to the property being purchased; or
- Applying on the purchaser's behalf for a title insurance policy, which replaces the lawyer's Letter of Opinion.
Assuring the purchaser of good title, insures the purchaser that he or she really owns the property, that it is correctly described in official documents and properly registered and that no one else has a claim or a lien against the property.
The purchaser's lawyer will:
- Proceed with various searches (each with an associated cost) of municipal records relating to zoning, subdivision agreement compliance, municipal taxes, work orders, and status of utility accounts, in an effort to ensure that no claims or a liens against the property pertaining to same exist; or
- Proceed to collect the necessary information to enable the lawyer to apply on the purchaser's behalf for a title insurance, or TitlePLUS insurance policy, with coverage that will provide protection for claims against, or problems with the property that may in fact exist.
Upon review of title and related matters, the purchaser's lawyer writes to the vendor's solicitor with a list of requirements to effect a clear transfer of title. The vendor's lawyer must satisfy these requirements as described above prior to the transfer of the property.
The purchaser's lawyer must also prepare all the documentation required for the transaction. This includes the deed, mortgage and several declarations which must be signed by the vendor in order to protect the purchaser from any charges or liability which may attach to the property. This documentation is forwarded to the lawyer acting for the vendor for signing.
If there is to be a mortgage placed on the property, the purchaser's lawyer must obtain instructions from the financial institution and prepare all mortgage documentation. He must also insure that the funds are advanced on the day of the purchase.
On the day of closing, the purchaser's lawyer acquires the keys and transfer documents from the solicitor for the vendor and provides the funds required to close the deal.
The proceeds for the purchase are usually arranged by the purchaser's solicitor such that any existing mortgages or charges against the property are paid directly so that there is no question that these charges have been satisfied. The requisite documents are then registered with the Registry Office and the purchase is complete.
The exchange of documents, funds and keys takes place at the Land Registry Office in the jurisdiction in which the land is located. The Deed and/or Mortgage is registered immediately thereafter and the keys are released to the purchaser's solicitor once registration is complete.
It is imperative that any financing required to purchase the property be arranged at the earliest possible opportunity. It is in the rarest of occasions that financing can be implemented in less than 3 weeks.
It is wise to assume that the keys will not be
available before 5:00 p.m. on the day of closing.
available before 5:00 p.m. on the day of closing.
Often real estate transactions are in a chain. One person sells a property in order to buy another one and that vendor in turn is using the proceeds to buy a third property. If any problems develop on any of these transactions in the chain, your closing may be somewhat delayed. It is rare however that the closing itself is delayed to another day.