Frequently Asked Questions (Purchase Transaction)
Q. What is my first step?
A. Once you have an Agreement of Purchase and Sale in place, you should arrange for your agent to email us a legible copy of it and then you should send us your contact particulars. An easy way to send us your contact information is to complete and submit the Client Information Form. We can then begin working on your file right away.
Q. I know I need a real estate lawyer, but what exactly does the lawyer do in a purchase transaction?
A. We are often asked a variation of this question. There is a perception that real estate lawyers simply search title and some clients have indicated that they could do this themselves. The mechanical steps that real estate lawyers take are not magic – anyone can do it if they go through the learning curve. It is similar to hiring a car mechanic to check a used car you might be buying. The mechanic checks many things on the car and, at the end of that process, issues a Certificate of Mechanical Fitness that you require to transfer ownership. Real estate lawyers do the same thing. While we do not physically inspect your new home, we review title which requires us to do a number of searches. At the end of that process, we issue you an opinion certifying that, subject to some minor qualifications, you are the lawful owner of your home. Can you do these searches yourself? Of course. Just as you could check over a used car yourself, you could check title and other related matters. However, what you cannot do is certify your title.
Q. Why is certifying title so important?
A. Certifying title is the reason why you need a real estate lawyer. We carry errors and omissions insurance. If we make a mistake certifying title that cannot be fixed and it costs you money, our liability insurer protects against those mistakes. If you searched title yourself and made a mistake, there would be no insurance. But, there is a better reason. Most people require a mortgage when they purchase a house. All of the banks agree to use your real estate lawyer for the preparation and registration of the mortgage. Generally, real estate lawyers are not supposed to represent two clients in the same transaction (in this case, you and the bank) because of a conflict of interest, but this is one exception. The banks require a real estate lawyer’s opinion that you are the lawful owner of your home. The banks also require a real estate lawyer’s opinion that its mortgage is a good and valid first charge against the property. The banks have historically dictated what searches are required to be conducted by lawyers prior to giving our opinion so that they can lend you the funds you need to purchase your home. Banks allow us to use title insurance now (which is discussed in greater detail below) and if you chose to take advantage of title insurance, we also are required to give the title insurer an opinion. In the final analysis, we end up giving four opinions – one to you, two to the bank and one to the title insurer.
Q. Can you confirm the scope of your retainer?
A. In addition to our fees and H.S.T., there will be disbursements which include the cost of doing the searches and processing your transaction. In consideration of the fees, we will perform the necessary searches and perform the necessary due diligence required to certify to you and your bank that you have good and marketable title to your home. Our opinion will be subject to a number of items namely;
|A.||certain covenants, restrictions and unregistered easements, running with the land;|
|B.||any right of expropriation conferred by a federal or provincial statute;|
|C.||all municipal taxes and local improvement rates;|
|D.||the Registry Act, or Land Titles Act, as applicable, and amendments thereto;|
|E.||any defects which an up-to-date survey may reveal;|
|F.||any matter revealed by an environmental audit;|
|G.||any matter revealed by a building, structural, fire or health inspector;|
|H.||any errors in regards to arrears information provided to us from any utility or tax authority; and|
|I.||any item, matter or thing covered in a title insurance policy.|
Unless you indicate otherwise in writing, we will assume that you have agreed to the scope of our retainer. Please note that our legal fees only cover the cost of a normal conveyance and any additional work we undertake at your request and on your behalf, such as reviewing the Agreement of Purchase and Sale, additional mortgages, or transactions which cause us to spend an inordinate amount of time and effort, will result in additional fees.
Q. What are disbursements and how much are they?
A. In a typical real estate purchase, disbursements currently amount to approximately $550.00 – $650.00 which include the costs of performing the due diligence. For example, title searches can cost anywhere from $100.00 – $150.00. We also pay for things such as couriers to pick up mortgage instructions or funds. We pay these expenses up front and then recover them from you on final closing. When we advise you on how much money you are required to bring with you when you attend at our offices, we will ask you for $650.00 as an estimate of these disbursements. Any portion of this estimate remaining will be paid to you by cheque when we send you our reporting letter. The amount of disbursements has increased significantly over the last several years and much of the reason is due to the increase in search rates charged by the Provincial and Municipal Governments. If you instruct us to obtain Title Insurance for you as an alternative to performing some of our regular searches, we confirm you will not be charged anything extra as it will be included in the above-quoted disbursement costs. Title insurance premiums are based on the purchase price of the property and depending on the purchase price, we may be required to collect a greater disbursement amount than quoted above.
Q. When do I arrange my mortgage?
A. Once the final closing date has been set, you should arrange your mortgage as soon as possible and advise us which financial institution you will be using and your contact person together with his/her telephone number. If you are arranging your mortgage through a mortgage broker, please provide us with this person’s name and contact numbers. PLEASE ENSURE THAT YOUR MORTGAGE REPRESENTATIVE PROCESSES THE MORTGAGE USING THE FIRM NAME OF GARDINER MILLER ARNOLD LLP AS OPPOSED TO JUST GERALD MILLER.
After your mortgage is approved, your financial institution typically forwards your information to a mortgage processing centre. The mortgage processing centre then forwards instructions to us as to how to complete the mortgage documentation. It is these instructions which we need at least one week prior to closing. Please confirm with your bank or mortgage broker that they will provide us with these instructions within this time frame. If we do not receive these instructions at least one week prior to closing it could result in increased fees and disbursements.
Q. When will I need to see you to sign the closing documents?
A. We generally arrange appointments for the day prior to closing. However, it could be several days before closing or the day of closing depending on a number of factors which are beyond our control. Real estate closings are unpredictable and can be very complicated, which is why you must try to make yourself available to us and keep your time as flexible as possible prior to closing to attend at our offices. While we understand that this may be potentially disruptive to your work schedule, please note that you will likely have to attend our offices during work hours.
Q. Will I get the keys when I come to your office?
A. No. There is often a misconception by purchasers as to how keys are exchanged between the parties. You do not receive your keys when you attend at our offices. The standard procedure is for the vendor’s real estate lawyer to exchange the keys with the purchaser’s real estate lawyer on the day of closing in return for the funds required to purchase the property. This procedure is often referred to as “the closing”.
NEW HOME: Because you are buying from a developer, often the builder will arrange to have keys released on site on the date of closing once the builder’s lawyer has received the necessary closing documents and funds. That may occur at any given time in the day depending on when documents are exchanged amongst the lawyers and the Deed is registered, which can be as late as 5:00 p.m. on the day of closing. Keys can be picked up at the site at that time. As the closing may not happen until later on in the day, we therefore do not recommend that you schedule moves or contractors for the day of closing.
NEW CONDO: If you are buying a condominium unit from a builder, you will receive keys on interim closing. Often the builder will arrange to have keys released on site on that date once the builder’s lawyer has received the necessary executed interim occupancy documents and funds. That exchange may not happen until later on in the day and we therefore do not recommend that you schedule moves or contractors for the day of closing.
RESALE HOME/CONDO: The closing may occur at any given time in the day depending on when documents are exchanged amongst the lawyers and the Deed is registered, which can be as late as 5:00 p.m. on the day of closing, at which time keys can be picked up from our office. If there is a need to obtain keys quickly, you should make the appropriate arrangements with your real estate agents. If you choose to make arrangements with your real estate agent to obtain keys, please let us know at least one week prior to closing so that we are not expecting keys on closing. For your information, the real estate agents cannot release keys to the purchaser until confirmation is received from the vendor’s real estate lawyer that the transaction has been completed. Because there is no guaranty as to when you will receive the keys, we do not recommend that you schedule moves or contractors for the day of closing.
Q. What is Land Transfer Tax and are other taxes payable on this transaction?
A. Land Transfer Tax is payable by everyone who buys a home. It was historically put in place to fund the costs of operating the Land Registry Offices around the Province. The amount of tax is based on the purchase price. The present tax is 0.5% of the first $55,000.00, 1.0% on the amount over $55,000.00 but under $250,000.00, 1.5% on the amount over $250,000.00 but under $400,000.00 and 2% over $400,000.00.
The new Municipal Land Transfer Tax applies to those single family residential homes located in the GTA only. The amount of tax is based on the purchase price. The present tax is 0.5% of the first $55,000.00, 1.0% on the amount over $55,000.00 but under $400,000.00, and 2.0% over $400,000.00. For all other property other than a single family residential home, the tax is 0.5% of the first $55,000.00, 1.0% on the amount over $55,000.00 but under $400,000.00, 1.5% on the amount over $400,000.00 but under $40,000,000.00, and 1% over $40,000,000.00.
NEW HOME/CONDO: In addition to the above, please note that new legislation has been passed to include various other factors to be taken into account in determining the value of the consideration on which the land transfer tax amount is based. These include, but are not limited to, the value of extras and upgrades (i.e. upgraded flooring, cupboards, doors, windows, counters, etc., finished basements, fireplaces, tree planting, sodding and grading, driveway paving, etc.), the cost of installation (i.e. gas, hydro, water meters, etc.), and assumed liabilities and miscellaneous costs incurred by the builder (i.e. development charges, Tarion fee, Law Society transaction levy surcharge, to name a few). Therefore, until we are in receipt of the statement of adjustments from the developer’s solicitor, we cannot calculate the land transfer tax amount ahead of time.
Q. How do I know if I qualify for the Land Transfer Tax Rebates?
A. To be eligible for both the Municipal and Provincial Land Transfer Tax rebates, you must be at least 18 years of age and you must occupy the home as your personal residence no later than 9 months after the closing date. Please note that if you or your spouse has previously owned a home or had any ownership interest in a home anywhere in the world at any time while married to each other, you are not eligible for the rebate. If your Agreement of Purchase and Sale was entered into on or before December 31, 2007, you are eligible for a full rebate of the Municipal Land Transfer Tax. If your Agreement of Purchase and Sale was entered into before December 14, 2007, a Provincial Land Transfer Tax rebate can be granted only if the home is a “newly constructed home”.
Q. What are adjustments and how much will they be?
A. Additional amounts will be payable by you relating to adjustments as specified on the Statement of Adjustments which the vendor will likely forward to us several days prior to closing.
NEW HOME/CONDO: Typical adjustments include realty taxes, Tarion enrolment fee, etc. You should carefully check your Agreement to ascertain anticipated adjustments as adjustments can be much greater when you buy from a builder.
RESALE HOME/CONDO: Typical adjustments include realty taxes, common expenses if applicable, rent if you are assuming a tenant, prepaid water if water is charged in bulk and oil if your home is heated by oil. Please note that if your home is heated by oil then the only way the vendor knows how much oil is in the tank is to fill it. An oil adjustment can be as much as $500.00. Similarly, if the vendor has prepaid realty taxes then there could be an adjustment by as much as one third of the year’s taxes.
Q. How will I know how much money I need to bring with me when I meet with you?
A. Once we receive the Statement of Adjustments from the vendor’s real estate lawyer, we will prepare a Funds Flow that will set out the adjusted balance due on closing, Land Transfer Tax and registration fees, our legal fees and disbursements. We add these figures together and then subtract the amount that we expect to receive from your bank. The difference is what you will be required to bring in. BECAUSE WE HAVE NO CONTROL AS TO WHEN THE VENDOR’S REAL ESTATE LAWYER WILL PROVIDE THE STATEMENT OF ADJUSTMENTS TO US, WE OFTEN CANNOT PROVIDE YOU WITH THAT FIGURE UNTIL A FEW DAYS BEFORE CLOSING. A good rule of thumb when purchasing from a developer is to budget for 3.0% TO 4.0% of the purchase price to cover closing costs (i.e. land transfer tax, legal fees and disbursements and adjustments), plus the balance of your downpayment. This will give you an approximate idea of how much you will need to bring in. Another matter you should consider in calculating your closing amount is that often the bank does not advance the entire amount of the mortgage. It is not unusual for the bank to deduct an interest adjustment if your mortgage payments are going to be made on the first day of the month. Or, if your mortgage is being insured by Canada Mortgage and Housing Corporation, the PST on the CMHC premium is deducted from the mortgage advance. If you are having your mortgage insured, you should check with your bank to find out exactly what amounts will be deducted from your mortgage advance.
Q. Should I bring a bank draft or certified cheque?
A. We require you to bring a bank draft made payable to Gardiner Miller Arnold LLP in Trust. In addition, when you attend at your bank to purchase the bank draft, please obtain the business card of either the person who prepared the bank draft, or the person who will be able to verify its authenticity at the branch. In addition, please keep and bring with you the receipt for the bank draft purchased as that will assist us in verifying its authenticity.
Q. How should ownership in the property be taken?
A. The two most popular methods in which individuals take title to real estate in Ontario are as “Tenants in Common” or as “Joint Tenants”. Most often, married couples prefer to own property as joint tenants because, on the death of one or the other spouse, the deceased spouse’s interest passes directly to the surviving joint tenant. In comparison, property owned by unrelated persons as investment property is generally held as Tenants in Common because, upon death, the deceased’s interest passes to his or her estate.
Q. Do I need an up to date survey?
A. NEW/RESALE HOME: Having an accurate survey is recommended. If the vendor has not agreed to supply a plan of survey, we recommend that an up-to-date survey of the property be made by an Ontario Land Surveyor. Such a survey is a necessary prerequisite to our full opinion on title and is also generally required by institutional lenders (banks or trust companies) before an advance on a mortgage loan will be made. If you choose not to get an up-to-date survey, our opinion on title will be qualified accordingly. The alternative to an up-to-date survey is to select the Title Insurance option which may give you the protection lost by our qualified legal opinion without the extra cost of a new survey. Please be sure to carefully review the survey provided in this transaction and advise us immediately if you notice any irregularities, inconsistencies or omissions once it is compared to the property in its present form.
Q. How are property taxes handled?
A. NEW HOME/CONDO: At the outset, the City will have assessed the land value only and it is likely that the tax adjustment by the developer will be based on land taxes only. Alternatively, the developer may estimate your individual lot’s property’s taxes and adjust based on that figure. At some point after final closing, perhaps two to three years, the City will assess each lot separately and issue each owner a supplementary tax bill or omit tax bill, as it is sometimes called, dating from the date of your ownership. It is very important that you understand who is responsible for the realty taxes and from what date you are expected to pay the property taxes. You should read your agreement carefully with respect to this issue. It is your responsibility to contact the developer once you receive these supplementary or omit tax bills to be reimbursed for its proportionate share of the taxes prior to your ownership of the property. We would be happy to undertake this on your behalf if you wish but we will have to charge you fees based on our hourly rate at that time.
Q.Should I be concerned about environmental matters?
A. Yes you should concern yourself with environmental issues. First and foremost, you should ensure that there is no urea-formaldehyde foam insulation in your house. Your agreement will probably contain a warranty in this regard. We wish to advise you that our legal opinion will be subject to those items which an environmental audit might disclose. Environmental audits are not standard in residential transactions; however, we recommend that if you have concerns in this regard, you should obtain such an audit prior to closing. In the absence of your instructions to the contrary, we will assume that you have deemed an environmental audit unnecessary and have instructed us accordingly.
Q. Do I arrange for insurance on the property?
A. NEW/RESALE HOME: Yes. It will be necessary for you to contact your insurance broker to arrange full replacement cost insurance on the property being purchased, to be effective from the date of closing, and showing loss payable to all mortgagees (bank or trust company). You will therefore need to give your broker your financial institution’s name and address. Please make these arrangements early and, once you have made them, we will require a copy of the insurance policy from your broker prior to closing. Please advise your broker of our firm’s name and fax number and instruct him/her to forward confirmation to us prior to closing.
NEW/RESALE CONDO: The Condominium Corporation building, all of the units and the common elements are covered by a blanket insurance policy. However, you will also need insurance for your personal property and improvements made to your unit. Therefore, you should contact your insurance agent and/or broker as each insurer has special insurance for condominiums. The Standard Unit By-law will determine what your insurance will cover and what the Corporation’s insurance will cover.
Q. Do I have to contact the utility companies?
A. NEW/RESALE HOME: Yes, it is good idea to contact the utility companies to ensure that the accounts are set up in your name as of the date of closing. If you are buying from a builder, you should do that closer to the closing date as the closing date is likely to change from time to time. It is also a good idea to contact cable and Bell to ensure that services will be up and running when you move in.
NEW/RESALE CONDO: Yes, if there are utility services that are separately metered and not covered in the monthly maintenance fees. It is also a good idea to contact cable and Bell so that services will be up and running when you move in.
We also suggest that a few weeks after closing, you call the City to confirm that the tax account is in your name.
Q. Do I need to know about title insurance?
A. We are obligated to advise you that title insurance is now available to you. There are a number of title insurance companies offering title insurance in Ontario including the Lawyers Professional Indemnity Company (“LPIC”). LPIC operates TitlePlus and is owned by the Law Society of Upper Canada, the body that governs lawyers. There are also private insurance companies offering title insurance such as Stewart Title and First Canadian. Title insurance provides protection on title matters which might affect the marketability of your property. Often adding title insurance can reduce the number of searches traditionally performed without affecting the integrity of your title. This often results in lower costs to you together with the benefit of title insurance. While title insurance companies can retain lawyers to perform work on their behalf, we are not permitted to accept a referral fee. We confirm that, in the absence of your instructions to the contrary, your instructions are to proceed with obtaining title insurance in the event we feel you will benefit from title insurance or the financial institution giving you a mortgage requires it. Furthermore, you authorize us to perform work on behalf of the title insurer and acknowledge that we may receive compensation for that work. If you are purchasing a home and assuming that we proceed with title insurance with Stewart Title Guaranty Company as your title insurer, we will be receiving a fee of $100.00 from Stewart Title Guaranty Company for providing our opinion to them.