INTRODUCTION
This client information brochure for purchase transactions has been prepared to provide information with respect to several of the issues that you may encounter in a typical home purchase. If you have any questions, or require additional information, please do not hesitate to call.
BEFORE YOU SIGN
When you make an offer to purchase a house through a real estate agent, the agent will normally fill out and have you sign a “Standard” Real Estate Board “Offer to Purchase” form or a builder’s standard form of agreement. Your offer becomes a binding contract the moment it is accepted by the Vendor. Because it becomes binding on both you and the vendor, you should review it with your real estate lawyer before you sign so that you are aware of the effect of the provisions in the Agreement.
Items that we will discuss will include the ways of financing the purchase; the extras to be included; the money you will have to pay for such things as search costs, land transfer tax, registration fees, survey, costs of mortgages, searches other than Registry Office searches and the cost of title insurance and certain practical matters such as choice of closing date, inspection before closing, conditions to be included in the Agreement of Purchase and Sale, standard adjustments for either resale homes or for new homes and obligations which you would like performed by the Vendor.
ONCE THE AGREEMENT IS MADE
We will begin a thorough and complete series of investigations to check that you are really getting everything that is included in your agreement. All of the following things are checked:- Title – this must be searched at the Registry Office to see if the Vendor owns the property and whether there are encumbrances, easements, subdivision agreements or restrictions which affect the property;
- Realty taxes;
- Hydro and other utility accounts;
- Particular requirements such as any warranties concerning the swimming pool, insulation, etc.;
- Zoning by-laws;
- Status of previous corporate owners(if applicable);
- Status of mortgages being assumed or discharged;
- Compliance with agreements and restrictions;
- And Documents prepared by the Vendor’s lawyer.
CONDITIONS IN THE AGREEMENT OF PURCHASE AND SALE
It is assumed that you and your real estate agent will be taking care of the conditions in the Agreement, so that if the condition is in your favour you will satisfy yourself that it is met and through your agent will notify the Vendor that the condition is satisfied, or conversely, that the condition has not been satisfied and the Agreement is at an end.
If the condition is in the Vendor’s favour, you will have the Vendor advise you either through your agent or through this office whether or not the condition has been satisfied and accordingly whether or not the Agreement becomes unconditional or terminated. Unless we are advised to the contrary, we will assume that all conditions have been met.
Please seek our advice before amending the Agreement of Purchase and Sale and provide us with copies of any amendments.
FINANCING
If you plan to finance part of the purchase by giving a mortgage, please arrange all the necessary details as soon as possible with your Mortgage Company and have the mortgage instructions forwarded to us at least 3-4 weeks prior to closing.
It is usual for one lawyer to act on behalf of both the Purchaser and the mortgage company. However, if we are acting on your behalf with respect to the purchase, and on behalf of the mortgage company with respect to the mortgage, there is a possibility that a conflict of interest may arise between yourself and the mortgage company. No information given by you to us can be treated as confidential as against the mortgage company.
If a conflict does arise, we cannot and will not continue to act on your behalf with respect to the transaction, or for the mortgage company. In such a situation, both parties must obtain an independent lawyer to act on their behalf. At our pre-closing meeting, we will request that you sign an Acknowledgement of Conflict authorizing us to act on your behalf with respect to the transaction notwithstanding the potential conflict of interest. This is a standard procedure in real estate transactions.
HOME INSURANCE
Please contact your insurance agent and give particulars of your purchase, together with the name and address of the mortgagee. You should insure the full value of the buildings on the property and you must insure the full amount of mortgages being placed on the property, so you should obtain coverage for the higher of the two amounts.
Please advise of the name, address and phone number of your insurance agent or broker as soon as possible so that we may confirm insurance coverage. Ask your insurance agent/broker to fax us the confirmation of insurance as soon as possible before the closing since this is a mandatory requirement of most lenders before advancing funds to us on your mortgage.
TITLE INSTRUCTIONS
If you have not already done so, please advice as to how you wish to take title to the property. Your deed to the property must include the full name and date of birth of all those who are to be shown on title.
If it is your intention that there are to be two owners to the property, please advise whether you wish the owners to hold as “joint tenants” or as “tenants in common”. Where title is held as joint tenants and one of the owners dies, the other owner automatically becomes the sole owner of the property. This is the manner of holding title most commonly used by spouses. However, where title is held as “tenants in common” and one of the owners die, the deceased owner’s interest passes to his beneficiary under his will or, if there is no will, to his heirs in accordance with the law.
SURVEY
While the title search reveals the chain of title leading to the current registered owner of the property, the survey depicts the extent of the title as it relates to the actual physical features of the parcel of land in question and its boundaries.
A survey is a diagram of the property signed by an Ontario Land Surveyor showing the boundaries of the property and the location of buildings, fences, etc. on the property, as of the date of the survey. It is a “snapshot in time”. We check the boundaries against the description on title and can advise you of any encroaching buildings, fences, etc. on your property and whether or not parts of your buildings, etc. encroach on neighbouring land. The survey is also checked to confirm that the house is located entirely within the lot lines and that the building complies with all local zoning by-laws. We also send a copy of the survey to the relevant Building Department, which may or may not provide information as to whether the property complies with the zoning by-laws. As you can see, if there is no survey of the property or if the survey is not up-to-date, we will not be able to check the items described above and our title opinion will be qualified by that fact. An up-to-date building location survey is required by institutional lenders, although this requirement may be waived if you purchase title insurance for the transaction.
ZONING/BY-LAWS/WORK ORDERS
The construction, use and occupancy of buildings including your new home is governed by municipal by-laws which usually limit the size and location of the buildings on the property and the types of uses that the structure can be put to (for example, single family dwelling, multiple dwelling units, commercial uses, etc.). Work orders or violations of applicable property standards by-laws generally arise where the property or the buildings located on the property are found to be below certain by-law standards. For example, the municipality could identify certain repairs that must be completed within a specified time period or financial penalties will be imposed. Sometimes if the infractions are very serious, continued use of the building(s) could be prohibited.
In acting for you on this transaction, and unless you instruct us to obtain title insurance with respect to this transaction, we intend to write a letter to the municipality to inquire about zoning matters, including the following:
- Whether the buildings as located on the survey which was provided to me complies with the provisions of the applicable building and zoning by-laws which were in effect at the time of construction;
- What uses were permitted under the by-laws which were in effect at the time of construction and whether these uses are permitted today;
- Were all occupancy requirements complied with as of the date that the premises were first occupied;
- Does the current use of the property comply with the official plan and the applicable zoning by-law;
- Are they aware of any applications to re-zone the property from the current zoning designation;
- Are there any outstanding orders or notices of violation that may result in work orders against the property.
Municipalities will respond to these inquiries for a fee with varying degrees of completeness and speed. The information that the municipality provides is not guaranteed and is often not complete. Also, without an up-to-date plan of survey which is legible, it is impossible to provide you with information concerning compliance with certain zoning by-laws concerning the proper location and construction of the building(s). Please note that we will report to you the information provided by the municipality in response to our letter inquiry only.
UTILITIES
We will obtain confirmation from the appropriate gas and hydro companies (if available) that these utilities have been paid up to date and that there are no outstanding arrears. We will also request that the meters be read as of the date of closing, and the final bill forwarded to the Vendor. The standard forms of Agreement of Purchase and Sale do not provide for a holdback to be made on closing to cover the final utility bills
You are responsible for making your own arrangements for hook ups and credit with the utility companies. You should also contact Bell Canada and the cable company to make arrangements for these services, if desired.
ADJUSTMENTS
The Statement of Adjustments is prepared by the Vendor’s lawyer and is sent to us a few days before closing. It shows the actual balance owing to the Vendor at closing in accordance with the Agreement of Purchase and Sale and how the Vendor would like to have the balance paid. Items adjusted may include the following: property taxes; water when it is billed for a set period of time and not metered; rents; and mortgage payments, if the mortgage is being assumed.
Adjustments ensure that the Vendor is compensated for amounts he or she has paid that are attributable to your period of ownership of the property and that you are compensated for amounts you will have to pay that are attributable to the vendor’s period of ownership. If you are buying a new home from a builder, there will be additional adjustments for such things as the Ontario New Home Warranty Program, boulevard tree planting, educational and development lot levies, the cost of installation of water and hydro meters and subdivision service damage deposits.
POSSESSION PRIOR TO CLOSING
It is unlikely that you will be allowed to take possession of the property or make any changes to the property before closing, and in fact, we recommend that you do not. If you do and damage occurs before you become the owner and for some reason the closing does not take place the Vendor would have to incur the cost of evicting you from the premises or eliminating the changes made to the property.
JUST BEFORE CLOSING
Shortly before closing we will meet to review the transaction and for you to sign the necessary documentation, including the mortgage documentation and Land Transfer Tax Affidavit, that is required for closing. When the meeting is arranged, we will advise of the funds required to close the transaction so that you may arrange to have the funds available at that time to complete the deal. Please note that these funds are to be payable to the solicitor’strust account, and must be made by way of certified cheque or bank draft in order to satisfy the requirements of the Law Society of Upper Canada.
Documents prepared by the Vendor’s lawyer, including the Statement of Adjustments, will be sent to and reviewed by us. If these documents are satisfactory, and if the Vendor’s lawyer has answered all of our requirements and questions, a final time on the closing date to complete the purchase is arranged.
CLOSING
The date that the transaction is completed is called the closing date. Transactions are completed in the registry office for the jurisdiction in which the property is located. You will not have to attend at the closing.
On the day of closing, and at the time your purchase is completed and closed, we will:
- Update the search of title;
- Check all the documents received from the Vendor’s lawyer;
- Check all the documents offered in support of adjustments made on the Statement of Adjustments, such as municipal taxes, insurance, fuel oil, etc.;
- Ensure that the house is vacant subject to any special arrangements;
- Deliver the cheques to the Vendor’s lawyer and, if included in the Agreement of Purchase and Sale, give the mortgage back to the Vendor;
- Get the keys and all necessary papers for completion of the contract, such as promises and instructions from the Vendor’s lawyer;
- In the case of homes covered by the Ontario New Home Warranty Plan, we will confirm that the builder has forwarded the Certificate of Completion of Possession completed by the buyer before closing;
- We will also make sure any money needed to discharge mortgages on the property which are not being assumed by you are paid;
- If everything is correct, we will then register your deed, pay the applicable Land Transfer Tax and the registration fees for the Deed and Mortgage.
MOVING
Vacant possession is given on closing unless the Agreement states otherwise. Keys are usually not available at our office until LATE AFTERNOON the day of closing.
AFTER THE CLOSING
After your purchase is completed and the deal is closed, we will confirm to you that the purchase has been completed and that the keys to your house are available. Soon after closing, we will also:
- Alert you to any tax payments or mortgage payments which will come due in the near future;
- Discuss with you any special parts of the transaction;
- Confirm the change of ownership to the Tax Department and any person whose mortgages you have assumed, and, where applicable, the Condominium Corporation;
- Arrange to get and have registered the discharges of the mortgages which were paid from the funds due on closing:
- Confirm the completion of any promises you or we have given on closing;
- And make sure, as far as possible, that the Vendor’s promises are completed.
Our written report to you will follow shortly thereafter.
AFTER YOU MOVE IN
You may discover that lighting fixtures, carpets or other items that the offer states were to remain on the property have been removed in error or otherwise by the Vendor.
You may also discover a month or two after closing that final utility bills based on a meter reading the day of closing or bills that the Vendor promised to pay in the Statement of Adjustments have not been paid or you may discover on closing that the fuel tank has not been filled.
Your first step is to inform our office of the same. We will thereafter write to the vendor’s solicitor to enforce the Vendor’s promise made on closing in the Statement of Adjustments and Undertaking to Readjust.
ONTARIO NEW HOME WARRANTY PROGRAM
Under the Ontario New Home Warranty Plan, builders of new homes must register with the Association. The buyer is responsible for paying the enrolment fee under the Plan. This would be included in the Statement of Adjustments provided to us at the time of the closing.
LAND TRANSFER TAX
Land Transfer Tax must be paid to The Minister of Finance on closing before the deed will be accepted for registration.
Land Transfer Tax is calculated as follows:
If the purchase price is less than $55,000.00
– Multiply the purchase price by .005
If the purchase price is between $55,000.00 and $250,000.00
– Multiply the purchase price by .01 and subtract $275.00
If the purchase price is between $250,000.00 and $400,000.00
– Multiply the purchase price by .015 and subtract $1,525.00
If the purchase price is over $400,000.00
– Multiply the purchase price by .02 and subtract $3,525.00
We will prepare a written statement, called a Land Transfer Tax Affidavit, which contains a statement as to the amount of consideration paid for the land and for any chattels that are included in the transaction. You will be asked to confirm the Land Transfer Tax Affidavit by taking an oath and by signing it. The amount of Land Transfer Tax is calculated based on this statement and retail sales tax is payable on the chattels. Please advise as to the amount to be assigned to the chattels.
P.S. For properties located in Toronto, there is an additional land transfer tax applicable on purchases apart from the Ontario Land Transfer Tax. It is called the Municipal Land Transfer Tax.
FIRST TIME HOME BUYERS
Land transfer tax applies to all conveyances of land in Ontario. First-time homebuyers are eligible for a rebate of all or part of the tax payable.
Amount of Rebate
The amount of the rebate claimed will offset the land transfer tax payable. The maximum amount of rebate is $2,000 for the Ontario Land Transfer Tax.
Examples:
| Cost of Home | Tax Payable | Tax Refund | Net Tax Payable |
| $100,000 | $725 | $725 | $0 |
| $200,000 | $1,725 | $1,725 | $0 |
| $300,000 | $2,975 | $2,000 | $975 |
Similarly, for the Municipal Land Transfer Tax for properties located in Toronto, the maximum amount of tax rebate available to first time home buyers is $3,725.
LIMITATION ON REBATE
The rebate will be reduced if one or more of the purchasers are not a first-time home purchaser. The rebate will be proportionate to the interest acquired by the individuals who qualify for the rebate.
For example, where a parent who is not a first-time purchaser and a child who is a first-time purchaser, purchase a home with equal 50/50 interests, the child may claim 50% of the land transfer tax rebate. The child’s claim cannot exceed 50% of the maximum allowable rebate (i.e. 50% of $2,000).
A qualifying purchaser may also claim a rebate in proportion to his or her spouse’s interest if that purchaser’s spouse has owned a home before becoming the purchaser’s spouse, but not while being that purchaser’s spouse.
IMPORTANT REAL ESTATE INFORMATION FOR BUYERS, SELLERS AND AGENTS.
Why do you need a Real Estate Lawyer when you buy or sell your home?
Most people are aware of the need for a Real Estate Lawyer when buying or selling a home but are not sure what the lawyer does in the transaction. We hope to clarify this and help you make an informed decision when choosing a lawyer.
