Real Estate Law in Ontario: Frequently Asked Questions

Real estate transactions can be complex and may raise many questions, even for experienced individuals. This article compiles the most frequently asked questions to provide clarity and understanding. However, for queries not covered in this article or for specific advice on real estate transactions, consulting with experienced real estate lawyers for personalized guidance is highly recommended.

What Does A Real Estate Lawyer Do?

Real Estate Lawyers handle the Conveyancing of the Property, which includes handling the paperwork that transfers the property title to your name, dealing with your mortgage financing, and paying the seller the purchase price. Real estate lawyers review the legal documents and issues related to a transaction, including the legal review of the Agreement of Purchase or Agreement of Sale.

When to Contact a Real Estate Lawyer?

Buyers and sellers will want to contact a real estate lawyer as soon as an Offer to Purchase is signed. Conveyance of a property can be complex and time-consuming – real estate lawyers have the experience to ensure the process is smooth and headache-free. Your Lawyer can explain the terms in plain language, the steps you will need to take, and help you guide throughout the process.

What Costs Are Associated with Real Estate Transactions?

These expenses can also vary across Canadian cities and provinces. Preparing for these costs is essential when purchasing property, as they represent an additional financial burden in addition to your moving expenses. Closing costs typically range from 1.5% to 4% of the purchase price of your new home, which you will need to pay when your house closes.

The term “closing costs” usually refers to expenses such as Land Transfer Tax, closing lawyer fees, and other expenses (in addition to your down payment) paid when purchasing a property.

How Much Does it Cost to Hire a Real Estate Lawyer?

The cost of hiring a real estate lawyer varies depending on the nature of the work, the real estate transaction type, the transaction’s complexity, and the lawyer’s experience. Some lawyers charge on an hourly basis, while others charge a flat fee.

Do the Buyer and Seller Need Separate Lawyers?

In a real estate transaction in Ontario, it is generally recommended that the buyer and seller should have their own lawyers. This is done to ensure that each party’s legal interests and rights are separately represented and protected. Having separate lawyers can avoid potential conflicts of interest, and both parties can receive impartial legal advice tailored to their specific circumstances. The Rules of Professional Conduct of the Law Society of Ontario generally prohibit lawyers from representing both a buyer and a seller in a residential property purchase due to potential conflicts of interest. However, there may be some exceptions.

What is the Land Transfer Tax in Ontario?

In Ontario, the provincial government levies a tax on the purchase of land or an interest in land called “Land Transfer Tax” at the time of closing, payable by the purchaser. If the property you purchase is located within the City of Toronto, purchasers will also be required to pay an additional municipal land transfer tax on top of the LTT. The tax amount is based on the value of the property being transferred and is calculated using a sliding scale, meaning that the rate increases as the property value goes up. If you are a first-time homebuyer, you may be eligible for a refund of all or part of the tax, but there are specific provisions. It’s best to consult the official Ontario government website or a real estate professional to get the most accurate and current rates and any potential exemptions or rebates.

What is an Agreement of Purchase and Sale?

An agreement of purchase and sale is a legally binding written document used in real estate transactions between the buyer and the seller. Essentially, it is the offer letter that the buyer presents to the seller when buying a home. The process begins when the buyer drafts an original offer to purchase and submits it to the seller. If the seller accepts the offer, the agreement can be terminated only through mutual agreement or if the agreement’s terms and conditions permit it. In Ontario, the Ontario Real Estate Association (OREA) Agreement of Purchase and Sale document is the most commonly used agreement of purchase and sale.

What is the Difference Between a Chattel and a Fixture?

When buying, selling, and financing real estate, you might have heard of “chattel” and “fixture”. These terms describe different types of personal property and have some significant legal differences.

A chattel is a movable personal property not permanently affixed to the land. The most common examples of chattels are furniture, appliances such as dishwashers, dryers etc., and personal items. In Ontario, chattels are typically not included in real estate purchases unless specifically agreed by the parties. When a buyer purchases the property, they buy the land or building with fixtures attached to it unless otherwise specified.

However, a fixture is a personal property attached or affixed to the land or building in such a way that it becomes part of the subject real estate property, and its removal might damage the land or building. One way of determining whether a personal property is a fixture or a chattel is to observe its degree of attachment to the land or building. If the item is attached in a way that it is an integral part of the property, it might be considered a fixture.

What is Joint Tenancy?

In this type of ownership, joint tenancy is a form of co-ownership in which owners have equal rights to the property. In Ontario, joint tenancy includes the right of survivorship, which means that if one owner dies, the surviving owner automatically owns the property without probate. This might be a significant advantage since it can save time and money on legal fees.

Joint tenancy is common among married or common-law partners since it can be beneficial. If one partner dies, joint tenancy allows for a smooth transfer of ownership, and the surviving spouse/partner would automatically become the sole owner of the property.

However, joint tenancy can also have some drawbacks. Each owner has an equal say in decisions regarding the property, which can lead to disagreements or conflicts. In addition, if one owner decides to get involved in a certain transaction, such as a sale, the other owner(s) must agree to the sale.

What is Tenants in Common?

Tenants in common is another form of co-ownership in which multiple owners hold a specific percentage of the property, which can be unequal and can be dealt with separately. In contrast to joint tenancy, tenants in common do not have the right of survivorship. If one owner dies, their share of the property does not automatically pass to the other owner(s); instead, it passes to their estate and is distributed according to their will or provincial laws.

One of the pros of this type of ownership is that it allows for flexibility. Owners can determine and hold different percentages of the subject property, reflecting their financial contributions or other factors. Additionally, tenants in common can sell their share of the property without the consent of the other owner(s).

On the other hand, tenants in common can also have some drawbacks. Finding a buyer willing to share the title with the remaining owners can be challenging if one owner decides to sell their share. Additionally, if one owner dies without a will, their share of the property will be distributed according to provincial intestacy laws, which may not align with their wishes.

What are Rent-to-Own Agreements?

Rent-to-own agreements are also known as lease-to-own or lease-purchase agreements. This agreement allows tenants to lease a property with the option to buy it at a predetermined price at the end of the agreed-upon term. Typically, rent-to-own agreements have two components: a lease agreement and an option to purchase the property.

What are the Potential Consequences of Backing Out from Real Estate Transactions?

Agreement of Purchase and Sale (APS) is a legally binding contract. Once both parties – typically the buyer and the seller – sign this agreement, they must follow through with the terms. Backing out of the deal without following the terms of the APS can have significant consequences. Some of these consequences may include:

Loss of Deposit: One of the immediate repercussions for buyers who renege on an APS is the forfeiture of their deposit. This deposit is a good-faith gesture showcasing the buyer’s serious intent to purchase. The seller typically retains the deposit if the buyer backs out without a valid reason stipulated in the contract (such as a failed financing clause).

Lawsuits for Damages: If the seller can’t secure another buyer for the same price or if the subsequent sale price is lower, they can sue the initial buyer for the difference. Other incurred costs, such as storage fees, temporary housing, or additional legal fees, can also be subjects of the lawsuit.

Additional Costs: Legal proceedings can bring other costs to light, such as storage fees, interim housing expenses, seller’s legal fees, mortgage carrying costs and any other losses the seller suffered.

What is a Home Inspection?

A home inspection is important when buying or selling a home in Ontario. Home inspections comprehensively evaluate a property’s condition, ensuring buyers make informed decisions and sellers meet their disclosure obligations.

What is Title Insurance?

Title insurance is indemnity insurance that offers protection against losses that may arise from title defects in real estate transactions. This insurance covers issues such as errors in public records, unknown liens, encroachments, and fraud that may not be discovered during a standard title search. Unlike traditional insurance policies covering future events, title insurance in Ontario covers past occurrences that could negatively impact ownership rights.

What is a Title Search?

A title search examines public records to determine the legal ownership of a property and identify any liens, mortgages, or other encumbrances on the property.

What Does “Disbursements” Mean?

Disbursements refer to the various expenses incurred during a real estate transaction. These expenses can include land transfer taxes, title searches, title insurance, appraisal fees, tax certificates, software and office charges, and any other costs associated with the transfer of ownership from one party to another.

Contact Real Estate Lawyer at Insight Law Professional Corporation

If you need more information on real estate transactions, contact us today to learn how a real estate lawyer can help.

The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.