Real Estate Law

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If I buy real estate, what does my lawyer do?

The purchaser’s lawyer protects you throughout the transaction, and makes sure that you obtain “good title” to your new property. Your lawyer searches title, prepares and registers your documents, and co-ordinates the closing. Usually, the purchaser’s lawyer also represents the interests of your mortgage lender in preparing and registering the mortgage documents for the mortgage you have arranged. You and the lender will each receive a final report from your lawyer.

If I sell real estate, what does my lawyer do?

The Seller’s lawyer makes sure that your sale is completed on the closing date and on the terms that you agreed to.   This work includes calculating the adjusted purchase price (“adjustments” are explained below), arranging for the payout and discharge of any mortgages, preparing closing documents, and releasing your transfer for electronic registration.

What is an Agreement of Purchase and Sale?

The Agreement is the most important document in the entire process. It may be prepared by a realtor or by a lawyer. In order to protect you, the Agreement should be conditional upon a satisfactory property inspection and upon mortgage financing (yes, even if you have a pre-approved mortgage – the lender still needs to check the house). Every rural purchase should also be conditional upon proof of potable water and a legal septic system. As soon as you have a firm Agreement of Purchase and Sale (that is, both parties have signed it and initialled all the changes) and all the conditions have been satisfied, you or your Realtor must get all of the legal “papers” into the lawyer’s hands so that the lawyer can begin preparing documents, as well as starting time-sensitive searches such as the title search.

How do I know if a lawyer is doing a good job?

Interview the prospective lawyer on the phone or even in the lawyer’s office – but make it clear that you do not expect to pay a professional fee for this preliminary meeting. At this stage, many buyers make the mistake of asking only about professional fees, as if they are getting quotes for a standard consumer product such as an appliance, and the cheapest price is all that matters. Keep in mind that legal fees are relatively low in relation to the cost of your new property, and that the fees do not vary much from one law firm to another. You want a law firm that will give you good service. Why would you accept poor service to save $200.00 on a purchase of $550,000.00? Use the initial interview to assess the law firm for basic courtesy and professionalism, as well as to probe for information: “If I retain your firm, what exactly are the next steps?”, “What is the lawyer’s speciality?”, “Will I meet the lawyer personally or virtually? When?”, “Will you keep me informed as the transaction progresses?”, “May I phone you from time to time for progress reports or advice?”, “When will you tell me the final closing costs?”, “When do you require me to bring in the funds?/ Sign the papers?”, “How soon after closing will I get my reporting letter?”

What will it cost?

Your lawyer should quote a fee for professional services for all aspects of the transaction. Expect this figure to be firm, but subject to increase for unexpected complications.    These might include extra time spent by the lawyer or staff dealing with delays caused by other parties in your transaction, post-closing problems for which you require legal representation, or obtaining a Court Order.

What are disbursements?

Disbursements are the various expenses over and above the lawyer’s fees which are charged to you during a real estate transaction.

In a purchase, “disbursements” include the Title Insurance premium, the cost of a title search, government charges to register documents, Land Transfer Tax, HST, software transaction charges, courier charges, and the like.  Usually, your lawyer will have you bring in one certified cheque or bank draft on the day before closing to include the lawyer’s fees and disbursements and the adjusted balance due to the vendor on closing (“Adjusted?” – see Adjustments below). Those funds will be placed in the lawyer’s trust account along with the mortgage advance and will be used to close the deal. Insist that your lawyer provide you an exact figure well before the closing date.

In a sale, there are fewer legal “disbursements”:  HST, courier and other administrative costs, the costs to register a discharge of mortgage.  A sale involves other cost that you need to consider such as the real estate commission and the cost to discharge your mortgage (which may include an early payment penalty).

What are adjustments?

The final payment to the Vendor is “subject to the usual adjustments.” Here are some examples of “adjustments”:
  • your vendor has paid municipal taxes for the entire calendar year, and your purchase closes July 1 – you therefore owe the vendor on closing a reimbursement of one-half the year’s taxes; 
  • your house is oil-heated; your vendor will fill the tank just before closing, and add the cost of a full tank of fuel; 
  • or, consider the following which is not strictly an “adjustment”, but is an additional closing cost that may be an unpleasant surprise: you have selected a high-ratio mortgage with mortgage insurance to protect the lender; the lender deducts the insurance premium from the mortgage, reducing the available money for closing. 

What insurance do I need?

“Insurance” will arise in many forms on your purchase.

Your lawyer will ask you to arrange Property Insurance, which covers things such as protecting the house against fire and other perils You will be required to provide proof before the closing date. Simply ask your Insurance Broker for a “Binder Letter” or “Insurance confirmation” to prove that your insurance is on place as of the closing date and that the policy will show the interest of you as owner and your mortgage lender as first mortgagee. For this you will need to provide the exact name and address of the mortgage lender.

If you have a high ratio mortgage, your lender will be protected against default by Mortgage Insurance, for which you will pay a significant premium normally deducted from the mortgage.

Mortgage Life Insurance has obvious benefits – it may be a great relief to you or your dependants if your mortgage is repaid following your death or the death of a co-mortgagor – BUT, compare premium rates charged by your own insurance broker for ordinary term insurance before you decide whether to take the mortgage lender’s group insurance plan.

Finally, your lawyer will arrange Title Insurance, to protect you in the unlikely event that your property has a legal problem that was not disclosed by a normal title search.

What is title insurance?

Title Insurance is not a substitute for a title search, which your lawyer must perform in any event. The purpose of Title Insurance is to give you insurance protection for title defects that your lawyer might have missed, and for any other defect that would not normally be revealed by a title search, such as a survey problem, or a technical violation of a zoning by-law. You pay a one-time premium on closing. In most cases the cost of the Title Insurance premium is more than offset by the expense of searches that your lawyer will not have to perform because the potential problems are insured.

What is a survey? Do I need one? Who pays for it?

In a real estate purchase, the only “survey” that counts is one signed and sealed by an Ontario Land Surveyor, and that shows the boundaries of your property, along with the location of the buildings, fences, and other physical features. If you have retained the surveyor and paid his professional fee, then you have a claim against the surveyor for any inaccuracy. An engineer’s sketch is not a survey, nor is a copy of the plan of subdivision.

Usually, the vendor’s only obligation is to give the purchaser a copy of any document in the vendor’s possession, updated by the vendor’s written declaration. For most new construction, and for fairly new resale houses, and for most properties created by severance of an existing building – there is likely some kind of survey document available that may give you helpful information if not complete legal protection. You will have to make an informed decision whether you want the additional expense of a new survey.

You may hear that a survey is unnecessary because of Title Insurance. This is partly true – if you have Title Insurance, your mortgage lender will not insist on a survey. But bear in mind that you have a higher personal and legal interest in the property than does your lender. It may benefit you to know exactly where the foundation and fences are in relation to the lot lines – before you buy the house, and not after trouble arises.

When do I get the keys?

In Ottawa, the deed and mortgage are actually created and registered in electronic rather than paper form. That means that the “closing” will take place in your lawyer’s office, and not the Land Registry Office. The money and the keys are exchanged between the vendor’s and purchaser’s lawyers by courier, under an “escrow” agreement. Your lawyer can give you the keys only after the electronic registrations are complete, and the money is in the hands of the vendor’s lawyer – usually by mid afternoon of the closing date. The keys could be provided at the lawyer office or via a Lockbox code with a lockbox is placed on the property by the realtors.

I have a non-residential purchase, can I retain your services?

Our firm is also happy to offer services with:

  • Commercial purchase and sale transaction
  • Asset purchase and sale for a business
  • Franchise purchases, representing Franchisees 
  • Land severances and Committee of Adjustment condition management
  • Survivorship Applications
  • Private Mortgage representation
  • Refinance of Mortgage including debt consolidation transactions

Our firm proudly continues the practice of Robin D. MacKay and Associates.