In Ontario, the “title condition” in a real estate transaction refers to the buyer’s right to ensure that the property’s title is clear, marketable, and free from defects before the deal becomes firm.
A valid, unencumbered title is essential for the lawful transfer of ownership, for securing mortgage financing, and for avoiding legal disputes after closing.
This article explains what the title condition means, why it matters in Ontario real estate, how a title search works, common title issues, and the role of lawyers and title insurance in protecting your interests.
Key Takeaways
- A clear title ensures that the property can be legally transferred without unexpected claims, liens, or ownership disputes.
- A title search conducted by the buyer’s lawyer is essential for identifying defects or encumbrances before closing.
- Title insurance provides financial protection against certain covered title defects and fraud.
- Involving a real estate lawyer early is critical to ensure compliance with Ontario law and to protect your investment.
Understanding the Title Condition
In real estate, title is the legal proof of ownership. The title condition in an Agreement of Purchase and Sale (APS) allows the buyer’s lawyer to review the property’s title within a specified time before closing to ensure it:
- Accurately reflects the seller’s ownership.
- Is free from unacceptable encumbrances (e.g., liens, mortgages, judgments).
- Does not have restrictions that would prevent the buyer’s intended use.
If the title search reveals problems, the APS typically requires the seller to correct them before closing. If they cannot be corrected, the buyer may be able to terminate the agreement and recover the deposit, depending on the terms of the APS.
What a Title Search Involves in Ontario
In Ontario, title searches are conducted by the buyer’s lawyer using the Electronic Land Registration System (ELRS) under the Land Titles Act or Registry Act.
A standard title search will:
- Confirm the legal description of the property.
- Verify the seller’s registered ownership.
- Identify encumbrances such as:
- Mortgages or charges.
- Construction liens.
- Easements and rights-of-way.
- Restrictive covenants.
- Outstanding property taxes or utilities that create liens.
- Check for notices of pending litigation, executions, or writs of seizure and sale.
Under most Ontario APS forms (e.g., OREA Form 100), the title search deadline is 10 days before the closing date, unless otherwise agreed.
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Common Title Issues in Ontario
Title defects can vary in severity. Some common issues include:
- Unpaid property taxes or utilities that create liens.
- Outstanding mortgages or charges not discharged.
- Construction liens registered by unpaid contractors.
- Restrictive covenants limiting the use of the property.
- Easements granting third-party access to the land.
- Boundary disputes due to conflicting surveys.
- Unregistered rights or interests (e.g., certain leases, prescriptive easements).
- Title fraud through identity theft or forged transfers.
Many of these issues must be resolved before closing to ensure the buyer receives good and marketable title.
Role of Title Insurance in Ontario
Title insurance is an optional but widely used product in Ontario real estate transactions. It:
- Protects buyers and lenders against financial losses from certain covered title defects, even if they are not discoverable in a title search.
- Covers risks such as title fraud, survey errors, undisclosed liens, and certain zoning violations.
- Remains in effect for as long as the insured owns the property.
Title insurance is not a substitute for a title search—Ontario lawyers still conduct full searches to meet their professional obligations.
Importance of a Real Estate Lawyer
In Ontario, only a lawyer licensed by the Law Society of Ontario can complete the closing of a real estate transaction.
When handling the title condition, your lawyer will:
- Conduct and review the title search.
- Identify and advise on any defects or encumbrances.
- Ensure the APS provisions comply with Ontario law.
- Request discharges of mortgages or liens from the seller’s lawyer.
- Obtain title insurance if requested.
If defects cannot be remedied, your lawyer will advise you on exercising your rights under the APS, which may include terminating the deal.
Addressing Title Defects Before Closing
If a title defect is found:
- Seller’s obligation – The APS usually requires the seller to correct issues at their own expense before closing.
- Negotiation – Parties may agree on a price reduction or other accommodation if the issue cannot be fully resolved.
- Termination rights – If defects cannot be cured and the APS allows, the buyer may terminate and receive their deposit back.
Acting early is critical—Ontario APS timelines are strict, and missing a notice deadline can mean losing the right to object to a defect.
Title Condition in the Agreement of Purchase and Sale
Ontario APS clauses relating to title typically:
- Give the buyer’s lawyer the right to search title until a specified “requisition date.”
- Require the seller to convey good title, subject only to permitted encumbrances.
- Set out remedies if defects are found and not corrected.
The requisition date is a key deadline—buyers must deliver written notice of objections by this date, or they are deemed to accept the title “as is” (subject to certain exceptions like fraud).
Impact of Title Condition on Closing
Without a clear title:
- Lenders may refuse to fund the mortgage.
- The closing date may be delayed.
- The buyer may lose the ability to use the property as intended.
Ensuring title is clear well before closing helps avoid last-minute disputes, financing problems, and failed transactions.
Summary
In Ontario, the title condition is a vital protection for buyers. It ensures that:
- Ownership is valid and transferable.
- There are no undisclosed encumbrances or defects.
- The buyer’s intended use is not restricted.
A thorough title search by an Ontario real estate lawyer, supported by title insurance, is the best way to safeguard your investment. Meeting all APS deadlines and acting on issues promptly ensures the deal closes smoothly and in compliance with Ontario law.
Frequently Asked Questions
What is a title search, and why is it important in Ontario?
It’s a review of land registry records to confirm legal ownership and identify any liens, encumbrances, or restrictions. It’s essential for ensuring a good and marketable title.
What are common title defects in Ontario?
Unpaid taxes, mortgages not discharged, construction liens, restrictive covenants, easements, boundary disputes, and title fraud.
How does title insurance help?
It covers certain risks not always discoverable in a search, such as fraud, survey errors, and some zoning issues, for as long as you own the property.
What happens if a defect is found before closing?
The seller may be required to fix it. If it can’t be fixed, the buyer might be able to negotiate or terminate under the APS terms.
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.
