Real Estate Lawyer Ottawa advice. Below is a list of things you need to know before buying real estate in Ontario.
1) Timing on Move-in Day
Before keys can be given to you for your new real estate, the buyer’s lawyer must ensure the following:
- All of the lender’s conditions are satisfied in order to receive the necessary funding;
- Cheques must be certified;
- Closing documents are exchanged; and
- Registration of title documents is completed.
After all of these things have happened, it will often be about 2-5pm on closing day. THEREFORE, it is important that you schedule your movers to arrive at your new home during late afternoon to avoid incurring additional moving costs, particularly if you are paying your movers on an hourly basis. Also, if you are moving into a condo and require the use of an elevator, you should book your elevator sooner rather than later to ensure that you can access the facilities during your move in period.
2) No Holdback of Purchase Price
In most standard form purchase agreements, it is not usual to have any holdback of the purchase monies on closing day. Therefore, you may want to consider inserting a provision for a % holdback of the balance due on closing in case the property is damaged prior to the closing day. In that case, you will want to keep the hold back for x number of days after they have moved out to confirm the condition of the home and chattels. If any of the appliances or other personal property is particularly valuable, ensure that you take the model numbers and take photos of them in case they get damaged or switched out after move out.
3) Fire and Contents Insurance
Purchase of homes that are not condo units MUST have a Fire Insurance Binder before closing. In order to avoid delay, ensure that your insurance agent emails or faxes your insurance binder to your lawyer. The insurance must also be for the GUARANTEED REPLACEMENT VALUE of your home.
If the residence is a condo, it is still necessary to arrange insurance for public liability and the contents of the unit even though the condominium corporation will have insurance for the building. Make sure that you are protected against your condo corporation’s insurance deductibles to avoid unforeseen costs associated with loss or damage to the property that you would otherwise expect to recover through insurance coverage. In some cases, your mortgage lender or builder will require condominium unit insurance for both the contents and liability before occupancy of the unit.
4) Adjustments on Closing
A few days before closing, you will be asked to provide a certified check or bank draft to allow your lawyer to close the deal. The amount requested will reflect certain adjustments to the purchase price. On a resale home, typical price adjustments will be made to provide for any benefits that the seller has provided to the buyer after the closing date. Examples of usual adjustments include prepaid realty taxes or prepaid condominium fees. For new home purchases, adjustments tend to be greater than for resale homes because of necessary adjustments for hydro and water meter installation costs, Ontario New Home Warranty Enrolment Fee and other items not normally adjusted on purchase of resale homes.
5) Mortgage Financing
IF YOU NEED TO OBTAIN MORTGAGE INSURANCE in situations where your down payment is less than 20% of the purchase price, the mortgage lender will usually deduct costs associated with the mortgage advance. Please double check with your lender to confirm the amount of the associated deductions and ensure that you have sufficient funds to make up the difference on closing. Typical deductions include an 8% provincial sales tax on the mortgage insurance premium, property tax holdback, appraisal fees, interest adjustments, etc. Also, if you will be using a Power of Attorney to close the transaction, written pre-approval must be obtained from your lender.
It is the buyer’s obligation to meet the special requirements of the mortgage, such as proof of cash down payments, income, debt obligations, etc. As soon as pre-approval has been obtained, advise your mortgage lender to forward the mortgage instructions to your lawyer as soon as possible to avoid delays.
6) Loans from Family and Friends
If you will be taking loans from your relatives or friends on an informal basis, you should put these arrangements down in writing to avoid future problems or misunderstandings. You might also want to protect your relative’s or friend’s interest by registering a security on title against the new property you will be purchasing. Remember to advise the lender to obtain independent legal advice.
7) Where One Party is Providing the Closing Funds
If one partner is providing substantial funding for a purchase, even if that partner will not become a registered owner, it is highly recommended that you have a partnership agreement drafted and that each partner separately obtain independent legal advice.
8) Form of Ownership
If more than one person will become a registered owner, it is important that you decide how each owner will take ownership of the property. In Ontario, there are two options:
As tenants in common, which means that upon death of one of the owners, that owner’s interest passes to his/her heirs in accordance with his/her Will, or if there is no Will, in accordance with the Succession Law Reform Act.
As joint tenants, where upon the death of one of the owners, the property passes to the other owner, regardless of the provisions of the deceased’s Will, subject to:
- the interest of the spouse of the deceased joint tenant, if any, pursuant to the Succession Law Reform Act;
- section 26 of the Family Law Act which provides that if a spouse dies owning an interest in a matrimonial home as a joint tenant with a third person and not with the other spouse, the joint tenancy will be deemed to have been severed immediately before the time of death.
- In one name only: This may provide some protection against creditors of the other party.
When you are purchasing a home as a couple, you will most likely want to take ownership as joint tenants.
If more than one person is taking ownership of a property and they are not spouses, it is recommended that you enter into a special written agreement setting out shares of ownership and respective obligations relating to the property such as maintenance costs and distribution of net profits from the property. It is also advisable that each partner obtain independent legal advice.
9) Title Insurance
Title insurance protects you, the homeowner, against losses associated with title fraud, survey and title issues/ defects, as well as challenges against your ownership (title to the property). Title insurance not only provided coverage for problems that may occur in the future (e.g. title fraud), but also, provides coverage for problems that already occurred in the past, prior to your home purchase. It is a one-time premium and you are protected for as long as you own your property. A title insurance policy will usually cover title risks associated with the below listed items:
- solicitor error, omission or fraud
- unpaid property taxes or local improvement charges by a prior owner
- defects that would have been revealed by an up-to-date survey
- survey errors or illegibility of survey
- encroachments (before or after closing)
- contravention of municipal zoning by-laws
- unmarketability of title
- defects in the title
- invalidity or unenforceability of the mortgage on title
- easements (other than usual easements for utilities, etc.)
- contravention of subdivision, development and other agreements
- priority of certain construction liens
- priority of unregistered easements and rights of way
- fraud or forgery (prior to and after closing)
10) Condominium Rules
Be careful when you purchase condominium units because there are often rules and by-laws that restrict the use and activities allowed in the condo. It is advisable that that first speak with the property management office to get a list of restrictions and by-laws that have been passed.
You will often find rules relating to the following items:
- carpeting may be required on certain types of floors to reduce sound transmission; or no hardwood floors (unless management consent is obtained in writing);
- barbecues are not allowed on balconies;
- satellite dishes are prohibited (only cable television is allowed);
- parking for recreational or commercial vehicles is not allowed;
- commercial or business activities (such as a home office) is not permitted;
- restrictions on the type or number of pets allowed;
- certain colors for window coverings may be prohibited;
- noise restrictions for musical instruments;
- restrictions on short term rentals and other tenancy requirements if you intend to rent the unit.
If condo rules are not complied with, the Condominium Corporation has the right to obtain a court order to enforce compliance in addition to an award of legal costs against you. Remember that if you are purchasing a unit for rental purposes, insert a clause in the lease agreement requiring the tenant to comply with all rules and by-laws of the Condominium Corporation.
11) Changes to the Common Area and the Condo Unit
According to the Condominium Act of Ontario, changes or alterations to exclusive use common areas is prohibited, unless consent of the Board of Directors and the majority of the unit owners is obtained. So if you find that changes have been made to the common areas of your condo unit, like the installation of a central air conditioning unit, a garden shed or fence, construction of a deck, or enclosure of a balcony, inquire at your condo’s management office to ensure that such changes were made with the necessary consent. If you notice that the seller has made internal changes to the unit or common area changes, ask the management office if such changes were approved. If you intend to make changes to your unit after the purchase, confirm with the management office that it will be permitted.
DISCLAIMER: Our website contains general legal information only and is not a substitute for legal advice from a lawyer. This information is provided to you without any representations or warranties, express or implied concerning the accuracy or completeness of the information.