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Frequently Asked Questions - Real Estate

Purchase Transactions:

1. When should I contact a lawyer?

It is always best when contemplating buying or selling your home to have an Agreement of Purchase and Sale reviewed by your lawyer BEFORE executing the Agreement. Once the Agreement is signed you have a binding contract and it is often very difficult, if not impossible, for a lawyer to change the terms of the agreement.

2. What is the lawyer's role in a purchase transaction?

The lawyer's role consists of obtaining the necessary title and legal searches to ensure you receive clear title to your property, free from encumbrances. The lawyer also communicates with the mortgage company to obtain, prepare and register your mortgage documentation. The lawyer will explain the different ways to take title to your property (joint tenancy or tenants in common), explain what title insurance is and why you may wish to obtain coverage. The lawyer will ensure you understand fully all of the documentation you will be executing to complete your purchase transaction. The lawyer is also required for the exchange of closing documentation, funds and keys as well as for the registration of your title documentation. The lawyer will provide written reports to the mortgage company and the client upon completion of the transaction.

3. What does joint tenants and tenants in common mean?

When you take title to a property you must provide your full names and dates of birth as well as the manner in which you wish to take title to the property. You may take title in two ways: as joint tenants or as tenants in common. The main difference is that joint tenants have the right of survivorship while tenants in common do not. If a property is taken in more than one name, as joint tenants, and one of the registered owners dies, the property will revert to the remaining named joint tenant by right of survivorship. If the property is held as tenants in common, upon the death of a registered owner, that owner's share in the property reverts to the deceased owner's estate, which will share ownership with the remaining registered owner as a tenant in common.

4. Why should I title insure my property?

Title insurance protects your ownership interest (i.e.: title) of your property from losses incurred as a result of unknown title defects or other covered matters that exist at the time of your purchase, but are unknown to you at that time. Title insurance will cover both you, the property owner, and any mortgagees. The premium for title insurance is only paid once and is valid for the duration of your ownership of the subject property. The cost of the premium is often offset by the savings from reduced searches performed by the lawyer and the insurance coverage is more expansive than just a lawyer's opinion.

5. Are lawyers required to obtain title insurance?

No, lawyers are not required to obtain title insurance: however, The Law Society of Ontario, which governs lawyers, requires that ALL lawyers when acting for purchasers inform their clients about title insurance and its advantages, conditions and limitations.

6. Do you recommend that purchasers obtain title insurance?

Yes. Unfortunately, no lawyer can completely assure a purchaser that there is absolutely no chance of an error in government records, or that there are no undisclosed claims, or that what appears to be the signature of the prior owner or consenting spouse is a true signature or that there has been no fraud or forgery involved with the subject property. Title insurance can satisfy these gaps in the traditional lawyer’s opinion on title. The coverage for fraud and forgery covers both the period prior to closing and after. With title insurance, the lawyer is not required to complete the many searches that are normally required for a lawyer’s opinion on title. As a result the fee for the title insurance is offset by avoiding completing these searches, which each have an associated fee, and quick closings are not delayed by having to wait for responses to these search enquiries. At Elliott & Elliott your purchase transaction includes arrangements for issuance to you of a Stewart Title Guaranty Company title insurance policy which will provide you with title protection. Our role is to provide purchasers with all required legal services and advice during the course of your transaction. Should you prefer another form of title protection, please inform our office in writing at least seven business days prior to closing.

7. Do I require fire insurance?

Residential purchases cannot be completed without proof of fire insurance if you are obtaining a mortgage. It is mandatory that your fire insurance agent provide your lawyer with a fire insurance binder prior to closing. This binder should include the details of any mortgagees and show GUARANTEED REPLACEMENT COST.

For condominium purchasers, the condominium corporation arranges insurance for the entire condominium complex. It is still necessary for the individual unit owner to obtain insurance for their contents and for public liability. Fire insurance coverage should always be placed before closing, becoming effective on the day of closing.

8. What other actions am I required to take to prepare for closing?

Arrangements should be made, prior to closing, for all utility meters on the property to be read for final billing purposes, effective on the day of closing. Purchasers should contact each applicable utility company with respect to confirming the request for final meter readings and to provide the required information to set up new accounts.

9. How do I calculate Land Transfer Tax?

Ontario Land Transfer Tax is payable at the time of registration of your transfer and is based on the consideration paid for your property. Ontario Land Transfer Tax is calculated as follows (a Land Transfer Tax calculator has been included in this website under "Practice Areas - Real Estate", for your use):

Value of Consideration Percentage
$55,000.00 or less - 0.5% of the purchase price
Over $55,000.0 - 1% of the purchase price, less $275.00
Over $250,000.0 - 1.5% of the purchase price, less $1,525.00
Over $400,000.0 - 2.0% of the purchase price, less $3,525.00

If the subject property being purchased is in the City of Toronto, there is an additional Land Transfer Tax payable to the City of Toronto.

10. What is Tarion New Home Warranty coverage?

Every new home in Ontario is protected by a mandatory warranty that is provided by the builder and guaranteed by Tarion Warranty Corporation. This warranty coverage is outlined in the Ontario New Home Warranties Act. The coverage under the Act includes deposit protection, protection against defects in work and materials, protection against unauthorized substitutions and protection against delayed closings or delayed occupancies without proper notice. For condominiums, warranty coverage also includes common/shared areas of the building. The aggregate maximum warranty coverage for new homes and condominium units is $300,000.00. The maximum coverage for condominium common elements is $50,000 times the number of units, to a maximum of $2.5 million. For complete details on Tarion Warranty Coverage please see the Tarion website at www.tarion.com.

11. How does HST affect my residential purchase?

On July 1, 2010, Ontario introduced a federally administered Harmonized Sales Tax (HST) that applies to most purchases and transactions. The HST applies to newly constructed homes, but in most cases does not apply to resale homes. Buyers of new homes will receive a rebate of up to $24,000 regardless of the price of the new home. This rebate ensures that buyers of homes priced up to $400,000 (about three-quarters of new homes built in Ontario), on average, pay no more - or possibly even less - tax than under the old PST syste.

12. What do I need to be aware of if the property to be purchased is on well and septic?

Well - Any Agreement of Purchase and Sale should be made conditional upon the vendor providing a current water potability certificate confirming the water is fit for human consumption and there is no significant evidence of bacterial contamination. The vendor should also provide a warranty that the well is capable of providing adequate water supply to meet the household needs and that the pump and all related equipment serving the property are in proper operating condition.

Septic - Any Agreement of Purchase and Sale should be conditional upon you determining, at your own expense, that at the time of installation: (1) all sewage systems serving the property are wholly within the setback requirements of the said property and had received all required Certificates of Installation and Approval pursuant to the Environmental Protection Act; (2) all sewage systems serving the property had been constructed in accordance with the said Certificates of Installation and Approval; (3) all sewage systems serving the property had received all required use permits under the said Act or any other legislation; and further, that on inspection, the septic bed is in good working order.

Also the vendor should provide you with any and all documentation regarding the septic system and confirmation that the system has been and currently is in good working order. You may also want to request that the vendor have the septic system pumped out, prior to closing, and provide written confirmation that it has been completed on closing.

13. On the day of closing what time will I receive my keys?

Most real estate transactions are not completed until late in the day, often as late as 4 or 5 p.m, and although we strive to complete your transaction as quickly as possible, our ability to complete your transaction is dependent upon when we receive closing funds from the mortgagee, when we receive closing documents from the other solicitor and if your transaction is part of a "chain" of closings. Accordingly, it may be prudent to book your moving company for later in the afternoon and be pleasantly surprised if the keys are available earlier.

First Home Buyers:

1. When should I contact a lawyer?

It is always best when contemplating buying or selling your home to have any Agreement of Purchase and Sale reviewed by your lawyer BEFORE executing the Agreement. Once the Agreement is signed you have a binding contract and it is often very difficult if not impossible for a lawyer to change the terms of the agreement.

2. As a first time home buyer am I eligible for a refund of Land Transfer Tax?

First time home buyers may be eligible for a refund of all or part of the Land Transfer Tax payable on their purchase. This refund applies to all homes, whether newly constructed or resale. The maximum amount of the refund is $2,000.00. The refund can be claimed at time of registration or directly from the Ministry of Revenue. Any applications to the Ministry for the refund must be made within 18 months of the date of registration of your transfer. To claim a refund you must be at least 18 years of age, must occupy the home you purchased as your principal residence within 9 months of the date of transfer and you cannot have owned a home, or an interest in a home, at anytime, anywhere in the world. Also, your spouse cannot have owned a home, or an interest in a home, at anytime, anywhere in the world while being our spouse.

3. What is the RRSP Home Buyer Plan?

In order to use RRSP funds for the purchase of a home, whether a brand new home or a resale home, you must be a first time home buyer or you or your spouse or common law spouse must not have owned a home that you occupied in the last five years. Prior to withdrawing any funds from your RRSP, you must have a fully executed Agreement of Purchase and Sale. Other requirements under this Plan include the following: You must be a resident of Canada during the period starting with the date of withdrawal of RRSP funds through to the closing date of your house purchase. You must use the home as your principal residence in Canada within one year of completing your purchase. Your RRSP funds must have been on deposit for at least 90 days before they can be used under the Plan and at the time of your withdrawal of your funds you must not owe any money to your RRSP for a prior borrowing from RRSP funds to buy a home. Your RRSP funds must be withdrawn within 30 days from the date of completion of your house purchase and if you make multiple withdrawals, all of the withdrawals must be made in the same calendar year or in January of the following year. RRSP funds can be used as your downpayment, for land transfer tax, legal fees and disbursements, improvements to your home, and even for the purchase of furniture and appliances for your home. The maximum amount of RRSP funds allowed, per purchaser, is $25,000.00 The funds must be paid back after your initial grace period over a period of 15 years by depositing 1/15th of the amount withdrawn annually to your RRSP. The grace period consists of the year in which the withdrawal was made plus one more full calendar year. If you wish to make payments in additional to the required 1/15th amount you may do so without penalty. If a payment is missed in any given year, you can no longer pay that amount back and it will be included in your taxable income for that year.

Sale:

1. When should I contact a lawyer?

It is always best when contemplating buying or selling your home to have any Agreement of Purchase and Sale reviewed by your lawyer BEFORE executing the Agreement. Once the Agreement is signed you have a binding contract and it is often very difficult, if not impossible, for a lawyer to change the terms of the agreement.

2. What is the lawyer's role in a sale transaction?

The lawyer’s role consists of reviewing agreement of purchase and sale, responding to title requisitions, preparation of closing documentation, including Statement of Adjustments and Transfer, reviewing documentation provided by the purchaser’s lawyer to ensure the vendor’s rights are protected and that the documentation reflects the terms in the Agreement of Purchase and Sale. The vendor’s lawyer will also obtain mortgage statements, as required. The lawyer will exchange closing documentation with the purchaser’s lawyer, obtain funds and payout outstanding encumbrances, real estate commission, etc., from sale proceeds and provide net proceeds to clients. The lawyer is also responsible for providing the clients with a final reporting letter including a Statement of Account and Trust Ledger Statement.

3. What will the lawyer require to complete my transaction?

Typically, a lawyer will ask for the following items:

  • Signed copy of the Agreement of Purchase and Sale, and all amendments
  • Copy of your Transfer to the property
  • Copy of a recent mortgage statement, for all mortgages registered on title
  • Survey of the property
  • Confirmation of how the property is heated
  • Most recent property tax bill
  • If the property that you are selling is a condominium, we will require the name and address of the Condominium Corporation
  • Your new address

4. My home is heated by oil, what is required for closing?

If your home is heated by oil, it is your responsibility to have the tank filled on closing. An adjustment will be made so that the Purchasers will reimburse you for a full tank of oil, including HST. If the purchasers advise that they are converting to gas and do not require the tank to be filled, this should be included in the Agreement of Purchase and Sale or confirmed through the lawyers.

5. What other actions am I required to take to prepare for closing?

Arrangements should be made, prior to closing, for all utility meters on the property to be read for final billing purposes, effective on the day of closing. If you are purchasing another property you should contact each applicable utility company with respect to confirming the request for final meter readings and to provide the required information to set up new accounts for your new property. If you rent or have a purchase plan set up for any heating or cooling equipment, you should provide your lawyer with the details so that a proper adjustment or repayment can be made.

Relocation Services:

1. Does your firm provide relocation services?

Yes, our firm provides services under the Integrated Relocation Program (IRP, formerly known as IRPP) and will gladly assist you in navigating the requirements for this program and provide you with guidance regarding costs covered under this program.

2. When should I contact a lawyer

It is always best when contemplating buying or selling your home to have any Agreement of Purchase and Sale reviewed by your lawyer BEFORE executing the Agreement. Once the Agreement is signed you have a binding contract and it is often very difficult if not impossible for a lawyer to change the terms of the agreement.