Buying Real Estate
Your real estate transaction is likely the largest single financial transaction that you will carry out in your lifetime. It is our goal to ensure that the closing of this transaction is carried out in a manner in which you will be able to enjoy this exciting process. This guide outlines the procedures that we will be following. We will keep you up‑to‑date on our progress from time to time. We will do everything to complete this process while shielding you from its stresses so that you can concentrate on the many other things associated with this transaction.
Since most people buy real estate only a few times in their lives, they are not aware of the details of the process. We have prepared this paper in an attempt to make our clients aware of just what their lawyer is doing. In fact, each real estate transaction is unique in some way and therefore each will differ from the other.
Usually, by the time we meet, you will already have entered into a binding contract for the purchase of land. The contract, the Agreement of Purchase and Sale, will determine your rights and obligations throughout the entire process. The majority of the Real Estate Agents seem to be quite competent at negotiating and drafting these agreements, and you will, I hope, have been advised and are aware of the terms of the contract.
Some of the services we will be performing are: dealing with the Registry or Land Titles Office, the Building Department, the Sheriff's Department, the Tax Department and the monetary calculations.
Registry Or Land Titles Office
We will be investigating the record, or abstract, of the title to your land, and the documents noted upon the record during the last 40 years. A thorough examination is essential since we will have to certify to you that you have a good and marketable title and we are not liable for defects in that title. If Title Insurance is purchased, we'll not be certifying title as the policy will provide you with the protections afforded by the insurer. Some of the defects we find may seem trivial to you but, nonetheless, we will advise you of the defect and will only proceed with the purchase upon your instruction and with our certificate of title being subject to that defect. Should any problem arise we will go over with you its nature and effect in detail. If we are dealing with a part lot it may be necessary to conduct an abutting land search. If this is necessary, we will advise you in advance as this will entail extra costs since lands other than yours are being searched.
If the title (and all of the other items) are satisfied, we will advise the lawyer for the seller of how you wish to take the title to the land and will examine his draft of the deed to you. Please note the we cannot directly contact the seller of the land. We must deal through his or her lawyer. When the purchaser closes, we will register the deed to you, and hand over the purchase monies to the lawyer for the seller.
Most people are not aware that only the land is registered in the Registry Office - not the structures located on the land. Only the land is recorded and conveyed when properties change hands. Whatever is attached, and is within the boundaries of the land, is automatically conveyed when the land changes hands.
A survey completed by an Ontario Land Surveyor is an accurate drawing showing the boundaries of the property with all structures located thereon. It is useful to determine if there are any encroachments by or on the subject property and whether the structures are legally situated in accordance with local by laws. If you desire a survey, one can be ordered if there is enough lead time. They are expensive (currently running about $1,200.00 and up) and instead most people order a less expensive Title Insurance Policy to protect against some of the type of defects that a survey can reveal. Title Insurance policies cost a few hundred dollars and make it unnecessary to spend money on searches from the city that would otherwise have to be done to insure compliance, such as compliance with zoning and by -laws. There are advantages and disadvantages which apply to each of these procedures.
It is advisable to obtain a survey before closing the transaction as any defects noted by the survey will have to be corrected by the seller at his or her own expense before the deal closes. Title Insurance only provides recovery for the items covered in the policy AFTER a defect is discovered; and since that usually occurs sometime after closing, the seller will likely no longer be in the picture and your only recovery will be from the title insurance policy.
All financial institutions accept Title Insurance in lieu of a survey. The reason for that is the financial institution is only concerned with recovery of the money it loaned you and title insurance provides a guarantee to the bank that it will not lose its money even if there is a defect.
Building & Zoning Departments
We will check with the Town or Township, Building Department for outstanding work orders, local improvement levies and, if the survey is available, will submit a survey for a check of compliance with bylaws regulating placement of buildings upon lots. If no survey showing location of the buildings upon the lot is available, my certification of title will be subject to any defects such a survey might reveal. If title Insurance is purchased this search is not necessary as the policy covers this matter.
Judgments of a Court against a person (defendant) may be filed with the Sheriff of a County, District or Region and therefore bind, or create a lien against, lands owned by the defendant within that County, District or Region. There are thousands of such Judgments filed, and it is very likely that, unless the name is unusual, there will be at least one against a person with a name similar to that of the seller of the land. We will ensure that the seller's lawyer provides satisfactory proof that his client is not the person named as a defendant. If you are mortgaging the land we will also search for your name with the Sheriff as this is a requirement of the mortgage lender.
We will obtain a Certificate from the Town or Township Tax Department setting out the real property taxes currently assessed against the land and the payments due or paid against the land and the payments due or paid against that assessment. If Title Insurance is obtained, this search is not required. However as a practical matter we prefer to order this Certificate because even if there is a liability which would be paid by the Title Insurance company, your time and aggravation associated with making that recovery makes it worthwhile to know about and deal with the defect before closing.
If you have questions about any part of a real property transaction you are considering, it is important to seek the advice of a licensed professional with local experience in that specific area of the law. Our reputation for being top tier property lawyers is well deserved, and we work tirelessly to advance your interests, mitigate risks and help you reach your objective.
We will notify the local Assessment Department, after closing, that you are the new owners of the land and that the tax rolls should be amended to show you as such.
The monetary calculations begin with the Statement of Adjustments (prepared by the seller's lawyer) which sets the amount of money due to the seller upon closing. To this amount is added our fee and the disbursements made. If you are placing a mortgage, separate calculations will be necessary to arrive at the actual amount required based on what the lender will be advancing.
Statement Of Adjustments
The purchase price is adjusted on a form called a Statement of Adjustments. The seller is credited with the sale price of the property. You are credited with the amount of your deposit or down payment. The taxes are adjusted by dividing the yearly total by 365 and multiplying the daily amount by the number of days during the year you, or the seller, will be or have been, in the house. This calculation tells us how much of the yearly total each party is responsible for and adjustments are made to take account of that responsibility.
If the home is oil heated you will be required to pay for a full tank of oil (the seller will have it filled). This is the only way to ensure compensation to the seller for that amount of oil already in the tank since a partially full tank cannot be accurately measured in gallons or litres and, of course, the seller cannot drain the oil which he would otherwise have to pass on to you without compensation. Water bills, etc., may be adjusted in the same way as taxes. There are also many other adjustments which may be made. When all adjustments are made a balance due on closing will be arrived at. You have to sign up for hydro and gas services before closing as the seller will notify these utilities that he will not be responsible for services provided to the property after closing. If there are service contracts for hot water tanks or furnaces etc you have to sign up for those as well to maintain continuity of service.
To the balance due on closing we will add our fee and the amount of disbursements (money spent) we incurred in processing the purchase.
The most significant disbursement is Land Transfer Tax. This is a tax imposed by the Provincial Government and payable at the time of the registration of the Deed. If the purchase price is over $55,000.00 and up to $250,000.00, you can calculate the tax by multiplying the purchase price by .010 and then subtracting $275.00 from the result. For a purchase price between $250,000.00 and $400,000.00 multiply by .015 and subtract $1,525.00 from the result. Over $400,000.00 the formula becomes more complicated.
Other common disbursements include fees paid to the Registry or Land Titles Office for examination of abstracts and documents, for photocopies and for registration of the Deed, fees paid to the Building Department, the Sheriff's Department, the Tax Department, Reliance Home Comfort , the local Flood Plain Conservation authority, and other agencies depending upon the circumstances.
Amounts Required From You
If you are paying cash for the land the balance due on closing, taken from the Statement of Adjustments, plus our fee and the disbursements, will be the amount of money that we require to close the purchase.
If you are placing a mortgage on the property we will deduct the amount of money actually advanced by the mortgagee from the above total to arrive at the balance actually required from you. we will seldom know the amount that will actually be delivered by the mortgagee until just a few days before closing, and so we cannot give you an exact amount until that time.
Please remember that the monies we require from you must be delivered in the form of a CERTIFIED CHEQUE or BANK DRAFT. Since the monies go through a trust account and not through our own bank account, we must be absolutely and totally certain the account is never over drawn. An uncertified cheque cannot, under any circumstances, be accepted. The passing of monies through the trust account is for your protection. We will advise you on how to make out the certified cheque or Bank draft.
At some time on the day set for closing, when both the seller and you are ready (after delivery of the mortgage money, etc.), We will make arrangements with the lawyer for the seller to close this transaction through the Registry or Land Titles Office and, after examining his documents and satisfying ourselves as to their form, updating the title search and rechecking with the Sheriff, we will proceed to register the Deed and hand over the balance due on closing.
In the strict legal sense, you are entitled to vacant possession of the property when the Deed is delivered to us. You will almost never be allowed possession before this moment (most closings do not occur until afternoon) since, should something go wrong, it is inconvenient for the seller to have to evict you. In real life, as opposed to strict legalities, if you have set a popular date for the closing (such as the end of the summer months), the seller may be closing his purchase on the same date and the two of you may wind up passing each other at the doorstep. If possession turns into a truly serious problem we can advise you of the available options, however, we do not move furniture as a rule.
Sometime after closing, when all documents are assembled, we will be forwarding to you a report with a statement of where all of the monies went and your copies of all pertinent documents. Our report will contain our certification of title in the form of a statement of opinion as to the marketability of your title unless you have purchased Title Insurance which replaces our opinion on title.
It is our hope that this generalized, and someone over simplified, explanation of some of the typical procedures in a real estate purchase will enable you do feel more comfortable with the process. Please remember that every transaction will differ in some way from every other transaction. The nature of the seller, the buyer, the land and the content of the Agreement of Purchase and Sale will determine the conduct of your own purchase.
Our quoted fee herein covers all the matters outlined in this "Procedural Guide". These are the complete standard matters to close a regular transaction and it is unlikely that there will be any problems or deviations. However, if a problem is encountered that falls outside the usual services and if it will require a fee adjustment, you will be contacted and asked for instruction before we proceed. In every instance we will use our discretion to accomplish the job in the most efficient and cost‑ effective manner to keep the legal costs to an absolute minimum.