Stage of a Real Estate Transaction


The Agreement of Purchase and Sale

A typical residential real estate transaction begins with an offer by the purchaser to buy a particular property. This is usually by way of an Agreement of Purchase and Sale (“APS”), a form approved by the Ontario Real Estate Association, which is presented to the owner of a property who listed it for sale, or the vendor. Once the terms have been agreed upon, both parties sign the APS and the contract is sealed.

Even though it is generally a good idea to have a lawyer review the APS before it is signed, it usually does not happen. Instead, the real estate agents finalize it and send it to the lawyers of the respective parties. The property is not yet “sold”. There is simply a contract to sell it on a certain date. While it does not happen often, sometimes these contracts are voided or otherwise abandoned prior to the actual sale date for various reasons.

Title Search

The lawyers’ first steps will be to inspect property title. In practice this means pulling the search from an established conveyancing system. When a purchaser buys a house, they are buying a parcel of land on which a structure has been erected. It is up to the lawyer to determine that the structure is located entirely within the boundaries of where it is supposed to be and there are no defects on title which might affect the purchasers’ rights to the land. However, with the rise of title insurance and the land registry system, this has gradually become somewhat less common.

More common are title encumbrances which the vendor will have to pay out or otherwise discharge from title prior to the sale taking place. Many properties have bank or private mortgages registered against them. Since these cannot be easily paid out prior to the sale taking place, parties usually agree that vendor’s lawyer will undertake to pay off and discharge the mortgage from title using the proceeds of the sale. This is also true of less common title encumbrances such as notice of liens, cautions or writs registered against a title holder.

The Mortgage

The purchaser often arranges a mortgage of their own with which to purchase the property. They will need to visit either a broker or a bank of their choice to see if they qualify. It is generally a good idea to speak with a broker before committing to a property purchase. Finding out that you can not arrange a mortgage, after you have already entered into the Agreement of Purchase and Sale, could result in losing your deposit. However, most transactions do not have that problem. Once a mortgage is arranged, the lawyer is “instructed” by the lender of the mortgage of what the terms are. If the lender is an institutional bank, the Law Society of Ontario allows a single lawyer to act for both parties, i.e. the purchase and the lender. If the mortgage is being arranged through a private lender, they will have their own lawyer. Even though mortgage can be rushed, this is not really an ideal way of conducting the transaction. It is recommended that the lawyer is instructed at least a week prior to the transaction so that everything can proceed smoothly on closing.

Title Insurance

While title insurance is not mandatory on real estate transactions, it has become almost ubiquitous because of the protection it provides. Some of the defects that title insurance protects against are an encroachment onto the land by a neighbor’s fence, or a fraudulent mortgage being placed on title after closing. Many lender’s particularly private ones, actually insist on title insurance being bought by the purchaser as a condition of the mortgage. However, it is almost always the lawyer who arranges these policies on behalf of the client. While there are several companies to choose from, most lawyers stick to a single provider as they are generally similar.

Preparing for Closing Day

Prior to the closing the lawyer will sit down with their client to sign the necessary paperwork for the transaction to close. As a practical matter, the parties will simultaneously sign both the property closing and the mortgage paperwork in a single sitting. New rules allow this part to be done using electronic signatures, which has greatly expended the geographical area over which lawyers can now practice. However, both sides need to agree to such an arrangement. The closing itself takes place as soon as the purchaser’s lawyer deposits the purchase funds into the vendor’s lawyer’s trust account. The vendor’s lawyer then signs an electronic confirmation that the purchaser’s lawyer can register the property in their clients name with the relevant Land Registry Office.

There was a time when a purchaser would have to attend their lawyer’s office to retrieve the keys to their new property. However, in practice, this has been replaced by the lockbox system. The vendor’s real estate agent will place the keys in a lockbox on the property. The vendor’s lawyer will then advise the purchaser’s lawyer of what the lockbox code is, so that the purchaser can retrieve the keys on site.

If you are thinking about purchasing or selling a residential unit, contact Empel Law Professional Corporation today, at 416-500-1937, today to arrange for your legal representation on the transaction.

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Arkadiusz J. Empel urodził się w Katowicah. Jako dziecko emigrował do Kanady, razem z rodziną, lecz wrócił jako student aby ukończyć Pracę Magisterską w Krakowie. Przez swoją pracę z polonią w okolicy Toronto utrzymał władność w swojim języku ojczystym. Jeżeli Państwo życzy się skonsultować prosto z adwokatem Polski, proszę przedzwonić na numer 416-500-1937.