Contact us for a free consultation 905-897-8611
Contact us for a free consultation 905-897-8611
Although it is usually the responsibility of the real estate agent to prepare a purchase offer, once the offer is signed, it is a binding contract, and if there are any concerns or questions unanswered, the real estate lawyer can be used to review, explain, and fine tune the offer to the buyer’s satisfaction. A lawyer will often draft the offer, or assist the agent in resolving complex issues. New condominium offers have a ten day review period, but other new home and resale offers do not.
ONCE THE OFFER BECOMES AN AGREEMENT:
A signed purchase offer is a binding contract, and once any conditions, such as arranging a mortgage, or a construction inspection report, are satisfied, the parties are required to honour its terms. It is the job of the lawyer to investigate the title and clear any liens or claims from the land, and to provide a title certification – his guarantee that the buyer owns the property, free of any legal claims or debts other than the ones the buyer has agreed to take on, or to obtain title insurance to cover any insured risks.
The government keeps a title history of every property, recording each owner and every mortgage or lien and most easements or agreements. . In each offer, a requisition date is listed, setting a deadline, by which time any title problems must be located and notice delivered to the vendor’s lawyer. The title search is then updated on the date of closing to ensure no new claims have arisen. The Land Titles Office has set fees for each service, which are paid by your lawyer on your behalf.
Most municipal utilities, such as hydro, water and gas suppliers require you to contact them several weeks prior to the closing date to arrange for new accounts and to have any rental contracts for water heaters or furnaces signed, and to arrange for any deposits required. The vendor will undertake to pay any accounts to the closing date, and the purchaser pays from there onward. The property taxes are adjusted so that each party pays the proper amount.
Some utilities, such as telephone and television cable, are personal to the vendor and purchaser, and the buyer is expected to arrange for a telephone number, if required, and cable service.
Your lawyer can purchase a title insurance policy as an alternative to a solicitor’s opinion that protects purchasers from someone claiming an interest in their property and protects against non-compliance with the requirements of applicable municipal and regulatory authorities. Title insurance eliminates the need for a recent survey and allows your lawyer to waive a number of clearances, levies and searches and reduce the cost of your closing. Coverage is no fault, whether or not there was an error, for any covered risk, and continues as long as you own the property.
Title insurance also protects against loss in case of a title fraud, where false identification or documents are used to register an unauthorized mortgage or deed against your property.
A copy of the survey of the property is sent to the local Building and Zoning Department with a request for full information about the zoning by-laws to make sure that the home meets the municipal requirements for distances to each lot line and the street line, the type of construction, home size, frontage and depth. If an occupancy permit or completion certificate is available, a copy is requested. Any outstanding work orders or deficiency notices on the record for the property are ordered, and reviewed. If there is no survey available for the home, your lawyer will try to locate one, or discuss the problems and consequences of proceeding without a survey. Usually, these matters are covered by the title insurance policy.
Often if the home is less than 5 to 10 years old, there are subdivision agreements with the City and Region or Municipality requiring payment for the construction of services by the developer of the project, and a compliance letter is requested to ensure that everything is paid for or properly bonded, so that any existing or future grading and servicing problems will not be an expense for the purchaser. The local authority has a separate charge for each compliance letter or service, and these are paid by your lawyer and shown as a disbursement to the purchaser.
If title insurance is obtained these searches are usually not performed.
A search of Executions, or Writs of Seizure and Sale, is conducted to ensure that there are no Judgments outstanding against the vendor or any prior owners of the property that could affect the title to the property. If anyone is successfully sued, and does not pay the debt, the Creditor can register an Execution in each Municipality, which binds the title to anything owned by the Debtor, including any land in the Municipality. If the Judgement is left unpaid, the land can be sold to retire the debt, and, once registered, the debt can be enforced against any subsequent owner of the land through forced sale. Executions are searched against the vendor and purchaser at the time of closing. The current charge for each name is $11.00, which is paid on the purchaser’s behalf by his lawyer as a disbursement.
Before you sign the Purchase Agreement, you should have determined the amount of financing you can qualify for. Once you have agreed to a purchase price and terms, you can determine the actual amount of financing required and discuss the exact terms with your financial institution to ensure that the mortgage meets your needs and lifestyle. There are a number of expenses that you should be aware of for the closing day, and you should consult your lawyer before finalizing the mortgage to determine what you will require. The mortgage company or bank is required by law to provide you with a Mortgage Commitment Letter setting out the terms of the mortgage, and you may want to review this with your lawyer before you sign.
Your financial institution will provide your lawyer with a copy of the Mortgage Commitment Letter, and quite often will allow your lawyer to act on their behalf in order to reduce the costs and avoid having to order duplicate sets of searches and clearances. Ensure that your lender is made aware of the name and address of your lawyer at the earliest opportunity. The financial institution will send a package of material to your lawyer with instructions and a list of requirements. Your lawyer will complete all of the needed documents and arrange for the mortgage funds to be available to purchase the home. Your lawyer must ensure that all of the conditions and terms set out in the Commitment Letter are fulfilled and must certify to the mortgage company that they have a good and valid mortgage on the property.
It is important that you arrange fire and liability insurance on your home. Proof of the insurance is required by your mortgage company before they will advance funds. You should arrange proper insurance with an Insurance Broker of your choice, in an amount of at least either the mortgage amount or the replacement value of the home. A letter confirming the insurance, called a binder letter, must be delivered to your lawyer before the closing date and it must show the name and address of the mortgage company as the payee in the event of any loss.
It is important that you arrange fire and liability insurance on your home. Proof of the insurance is required by your mortgage company before they will advance funds. You should arrange proper insurance with an Insurance Broker of your choice, in an amount of at least either the mortgage amount or the replacement value of the home. A letter confirming the insurance, called a binder letter, must be delivered to your lawyer before the closing date and it must show the name and address of the mortgage company as the payee in the event of any loss.
The different levels of government have allowed home buying assistance plans to allow home buyers to save on taxes, and these plans should be taken advantage of if possible.
First time and other qualified home-buyers can also use money accumulated in their Registered Retirement Savings Plans (R.R.S.P.’s), of up to $35,000 each, to purchase a home. This money must be redeposited to the R.R.S.P. over the next 15 years or there are tax penalties. There are a number of forms which you must obtain from the company that holds your R.R.S.P. and deliver them to your lawyer to be completed.
If the money is withdrawn after March 1, the repayment begins the second calendar year after the withdrawal. a payment made in the first 60 days of a year are treated as made the prior year. To qualify, money must be contributed to the R.R.S.P. at least 90 days before the withdrawal.
If you are buying a home from a builder, you should complete a thorough inspection of the home prior to the closing and fill out a form called a Certificate of Completion and Possession under the Ontario New Home Warranty Plan (affectionately dubbed ONHWP (onwip) and formerly known as HUDAC, but now called TARION). As your purchase agreement probably states the builder is only obliged to repair those items listed, your inspection and report should be as complete and detailed as you are able. A representative of the builder should accompany and assist you in the inspection. If the builder doesn’t repair the deficiencies within a reasonable time, you have the right to complain to TARION which will ensure that the repairs are done. Often, your mortgage company will demand a copy of the Certificate, so that you should get at least one copy and deliver this to your lawyer before the closing date.
You have to decide how you wish to “take title”, or the name shown on the deed. You can use your full name, or leave out any middle names. A married woman can use her maiden or married name as she chooses. The names on title will be checked to ensure there are no judgments against the purchaser, and the more names the more specific the identification, but each name can be a separate computer match for execution problems, and initials in a name will match just too many debtor names. The key is to be consistent in using the same name for all purposes.
Title can be taken in a number of ways. Most couples use both names in “joint tenancy”. Each owns an equal interest, and if anyone dies, the survivor owns the title. But if one of the owners operates a business, or could run into debt, and doesn’t want creditors trying to seize their interest in the home to repay business debts, it might be wise to put title in the name of the other spouse, provided that the mortgage company is agreeable. In some cases, the purchasers may wish to have a specific percentage interest in the home, or want to deal with their interest in the property separately from the co-owner, such as by a will. In this case, they would take title as “tenants in common”.
You should meet with your lawyer to review the Purchase Agreement and get a good estimate of the actual costs to buy the home. If any problems arise your lawyer will keep you informed, and if you become aware of any problems or changes to the agreement or mortgage terms, you should keep your lawyer up to date. A few days prior to closing, you will be required to attend at your lawyer’s office to review and sign all of the documents for the closing. Your lawyer should have informed you of the amount of money needed to buy the home, and you must deliver a certified cheque for the closing funds. You should have time to ask any questions and have them answered to your satisfaction.
All you should have to worry about is moving in. Your lawyer will arrange to have all of the mortgage and other closing funds available and arrange with the vendor’s lawyer to exchange certified closing cheques for a deed to the land showing you as owner. The title will be searched again to ensure no changes have occurred, and a final execution search conducted. The deed, mortgage, and any other required documents will be registered with the electronic registration offices (e-reg) and the keys to the home turned over.
If you are purchasing a new home, the keys are normally released at the builder’s site office. For a resale home, the keys are normally delivered to your lawyer’s office for you to pick up, unless some other arrangements are made.
It can take quite a bit of time for all of the proper arrangements to be completed, so that keys are usually not available until late in the afternoon. This is especially so if you have chosen a closing date on the last Friday of a month.
AFTER THE CLOSING
When you move into the new home you should check to see that all of the chattels or items listed in the Agreement of Purchase and Sale have been left in the property and are in working order. If anything is missing, damaged, or changed, you should contact your lawyer immediately, hopefully before the vendor’s lawyer has released all of the purchase funds.
Shortly after the closing your lawyer will prepare a reporting letter to you reviewing your title and explaining all aspects of the purchase to you. The letter will include copies of all of the closing documents, including the lawyer’s itemized account, the closing adjustments, and trust funds statement. You will receive a copy of the deed, mortgage and survey, if available, and other relevant papers. The report should answer any remaining questions and should be kept in a safe place for reference and may be needed for any future refinancing or sale.
The Ontario Government charges a Land Transfer Tax each time the ownership of land passes. The tax is based on the purchase price and is payable by the Purchaser on closing. The Tax is 0.5% for the first $55,000, then 1% up to $250,000, 1.5% up to $400,000, and 2% above that.
The Tax can be calculated as follows:
Under $250,000: Purchase Price X 1% less $ 275.00
Over $250,000: Purchase Price X 1.5% less $1,525.00
Over $400,000: Purchase Price X 2% less $3,525.00
For Example:
Purchase Price of $150,000
X 1% = $1,500, less $275, LTT = $1,225.00
Purchase Price of $450,000
X 2% = $9,000, less $3,525, LTT = $5,475.00
The City of Toronto has its own additional transfer tax.
There is a program to rebate up to $4,000 of the Transfer Tax for first time home-buyers purchasing new homes and a further rebate if in Toronto.
Harmonized Services Tax is payable on new homes and homes which have been used for non-residential purposes or substantially renovated. The H.S.T. on a new home is 13% of the purchase price, less a 36% new home rebate to a maximum of $24,000 provided that the buyer resides in the home. Usually the builder pays the H.S.T. as part of the purchase price, but this must be inserted in the offer. No Land Transfer Tax is payable on H.S.T., so that the net purchase price is calculated by deducting the H.S.T. and adding the rebate before calculating the Transfer Tax. If the buyer is not intending to reside in the new home, as in a rental purchase, the buyer must pay the H.S.T. and can then apply directly to the government for a rebate.
In a normal resale purchase, no H.S.T. is payable.
LARRY PLENER LAW
755 QUEENSWAY E., SUITE 110, MISSISSAUGA, ON L4Y 4C5
Copyright © 2023 LARRY PLENER LAW - All Rights Reserved.