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Buying or Selling a House in Ontario: Why you need a Lawyer?

Posted on 08 Sep'14 Tags: , , , , , , in Case Study, General, Litigation and Dispute Resolution, Real Estate

Whether you are buying a home for first time or selling your current one to buy that bungalow you have been yearning for years, your home is one of the single most important purchases of your life and while you are on cloud nine, you must ensure that your dream home does not turn into a nightmare.

What is the Lawyer’s role?

You may think, what does the lawyer really do in a purchase or sale of a property? In a nutshell, a real estate lawyer`s presence by your side, at every step of purchase and/or sale of a house will ensure your dream becomes a reality and not a nightmare. A brief outline of what a lawyer does do to safeguard its client’s interest in a purchase of a house is discussed below:

  1. Get the Agreement of Purchase and Sale (APS) reviewed by your Lawyer: The APS is the starting point of the transaction and is a binding contract between the parties. Typically, parties sign the agreements between themselves or though their real estate agents. Real Estate Lawyers usually receive copies of signed and firmed agreement, after all conditions have either been waived or fulfilled. The contract is now binding but it does not necessarily mean that it contains equal or balanced terms for the parties. Seeing a lawyer before you sign the APS or including a condition for lawyer’s approval, will ensure your interest remains protected. Standard OREA forms are used as agreements which are usually quite comprehensive and are further customized to include deal specific conditions. However, if your real estate lawyer reviews the APS, they can advise on escape clauses and certain other conditions to be included or further modified keeping in mind your requirements and best interests.

For instance, a condition can be added that if the home inspection reveals defects, the Vendor must either rectify on or before closing or the buyer is to be provided a credit to the purchase price. How much credit should be provided? Is the credit sufficient to cover the costs which the purchaser will incur to rectify the defects? Or if the buyer wishes to build a deck or a pool in the future, is there provision to do so under zoning requirements or there may be an easement which prevents a pool or deck from being built and is revealed only at the time of title investigation. In such circumstances, your lawyer can ask you to include a condition in the APS that under such circumstances the buyer shall have the option to rescind the contract and walk away from it with their deposit refunded to them while the standard APS will force the buyer to complete the purchase even though the APS does not offer the buyer what they expected to buy. A real estate lawyer can ensure that the buyer is not stuck with a poorly drafted agreement.

  1. Due Diligence: Caveat Emptor, which literally translated means ‘buyer beware’. In other words, transactions involving the resale of a home are “as is” transactions and the buyer must investigate the title on their own. Investigating title is the single most important task which your Real Estate lawyer conducts in a purchase to ensure that you, the buyer, is receiving a good and marketable title. This investigation involves conducting numerous title and off-title searches including reviewing the title page from the land registry, zoning and environmental searches, searches for work orders or utilities, writ searches on the seller’s name to ensure that there are no judgements against the seller’s name, etc… These searches helps your lawyer determine if there are any title related problems. If any are found your Lawyer will work to correct the same and if the same cannot be rectified, your lawyer will advise you of the risks involved.
  1. Walk you through the Transaction: Your lawyer is your friend, philosopher and guide, as they say and will walk you through the complete purchase transaction which will help you avoid potential unpleasant surprises on closing and help you prepare for your closing. If you are buying a new home from the builder your lawyer may suggest that you cap your closing costs at a certain amount so you can budget for them on closing. Similarly, your lawyer will also advise you the amount of land transfer tax which you will be paying in Ontario, which tax is usually calculated on a sliding scale and varies based on the purchase price of the property. In addition, your lawyer will advise you in advance of all other closing costs including the legal fee, the disbursements and the taxes. Your lawyer will advise on the benefits of arranging title insurance. Comprehensive title searches cost money to the client and your lawyer can tell you how arranging title insurance can save you money on the costs of certain searches that may not be needed if title insurance is in place. The requirement of an up-to-date survey, zoning or work orders search can sometimes be avoided if you arrange title insurance. Furthermore, arranging title insurance will ensure protection from title fraud or any other title related issues that may dilute or in any other way compromise your title to the home you are buying.
  1. Legal Tenure: If you buy your house jointly with someone, how should the title be registered and whose names should go on title. For instance, if you are buying your house with your spouse, it is common to have both your names go on title as “joint tenants”. This means that if one of you dies, the other automatically becomes the sole owner of the property. Similarly, if you want your share be specified in title then your lawyer will register the legal tenure to be “tenants in common” where shares are specified and are dealt as part of your estate should you die.
  1. Title and Mortgage Documents: In addition to all above key responsibilities, if you are arranging a mortgage your lawyer will prepare your title documents, review mortgage instructions from your lender, prepare mortgage documents and will prepare and register the transfer deed and your mortgage on title on closing. Your lawyer will receive your closing funds in their trust account and the closing will be completed by your lawyer after closing deliveries are exchanged between the seller and buyers lawyer and registration is completed.

Consequently, hiring the right lawyer, even before you sign the contract may save you time, risk and most importantly, money. Therefore, you aren’t necessarily doing yourself any favours by retaining the cheapest lawyer out there. Always ask the right questions to your lawyer to ensure they will be committed to representing you in a competent manner with your best interests in mind.



Disclaimer: The above article is not a legal opinion as every case is different and is only for general awareness. Please contact us for specific questions and legal advise.