Real Estate

The purpose of this brochure is to discuss some of the practical aspects of buying, selling and mortgaging real property, and the role of a lawyer in these transactions.

Sale of Property

In the majority of cases property is listed for sale with a professional real estate agent. There are various types of listing agreements, including the following:

1. Exclusive Listings;
2. Multiple Listing; and
3. General Listings.

Your Realtor will be able to explain the nature of each type of listing and give you advice as to the one best suited to your needs. In some instances you may choose to market your property without the services of a Realtor. In such circumstances it is often recommended that prior to entering into an Offer to Purchase you consult with your lawyer to ensure that the terms of the Offer are suitable and acceptable, and that the Offer to Purchase is properly completed.

Offer to Purchase

The agreement for the purchase and sale of property is generally constituted by an offer from the prospective purchaser to the seller which should be accompanied by a deposit. The Offer to Purchase must contain the following essential elements:

1. Description of the property;
2. The parties to the offer;
3. Price;
4. Amount of deposit;
5. Possession date;
6. Adjustment date;
7. The manner of payment of the purchase price (example: cash, mortgage, assumption of mortgage);
8. Chattels included in the purchase; and
9. Any special terms and conditions.

Where residential property is concerned a professional Realtor will often prepare the Offer to Purchase, but there are certain instances where either or both of the seller and purchaser may want to review the offer with their lawyer before it is signed. This is particularly so where the transaction is complex. It is also important to note that the standard form Offer to Purchase is designed to deal with residential property and may not be appropriate in all circumstances, particularly the sale of commercial property, businesses or farms.

Mortgaging

Many real estate transactions will include mortgage financing as a means of payment of part of the purchase price. In simple terms, a mortgage is a loan secured by a registered charge against the land.  Often there is an existing mortgage registered against the property which may be assumable by a purchaser. If the terms of the mortgage are acceptable to the purchaser, the Offer to Purchase may provide that such mortgage is to be assumed.  In other instances it will be necessary that the purchaser make application for a new mortgage. If the purchaser does require financing the offer is generally made subject to a condition that the purchaser obtain approval for a new mortgage.

When placing a new mortgage there are various expenses that may be involved, some of which are as follows:

1. Appraisal fees;
2. Administration and processing fees;
3. Mortgage insurance fees;
4. Tax holdbacks; and
5. Real Property Report.

Once the mortgage application is approved the lender will send mortgage instructions to the lawyer to prepare the mortgage.  One final type of mortgage worthy of mention is a seller take-back mortgage. This simply means that the seller will loan part of the purchase price to the purchaser and hold a mortgage as security for the loan.

Role of the Lawyer

In some cases the lawyer will become involved before the formation of the contract. Such involvement may include drafting or reviewing of the Offer to Purchase. If in doubt it is prudent to speak to your lawyer before signing the Offer to Purchase. Following acceptance of the offer and approval of the mortgage, where applicable, the lawyer will take all steps necessary or advisable to see that the transaction is performed and concluded in accordance with the terms. As a general rule each of the seller and purchaser will be represented by a different lawyer, however, there may be some instances where one lawyer acts for both parties provided that each of the parties agrees.

Conveyancing practices have grown increasingly complex over the past years, however, the essential elements remain the same. The Seller's lawyer is responsible for preparation of all necessary conveyances required to pass title to the purchaser. He will search the title to the property and check the standing of all encumbrances registered against the title together with the real property taxes. A Statement of Adjustments will be prepared which will reflect any necessary adjustments called for under the Offer to Purchase. The most common adjustments are in respect to taxes, mortgages, rents, and G.S.T. He will also arrange for the discharge of any encumbrances which must be removed from the title. Thereafter the lawyer will meet with the seller to review the transaction and to have all necessary documents signed. The documents are then forwarded to the Purchaser's lawyer.

The Purchaser's lawyer will undertake the necessary searches to ensure that his clients receive good title to the property subject only to the encumbrances which were accepted by them. He will also make sure that the Statement of Adjustments has been calculated properly, and where necessary, will require the seller to discharge unwanted encumbrances.  If new mortgaging is involved the Purchaser's lawyer will see to the preparation of the mortgage documents.  The Purchaser's lawyer will be responsible for registration of the documents at the Land Titles Office and thereafter paying the purchase price to the Seller's lawyer.  The actual granting of possession to the purchaser is coordinated through the lawyers and the Realtor, if applicable. It is always desirable that possession coincide with the transfer of title and payment of the purchase price, but that is not always possible.  Upon completion of the transaction the lawyer will provide you with a complete report in respect to the transaction including an accounting for all monies and copies of all pertinent documents.

Legal Fees

Each of the Purchaser and the seller are responsible for the payment of their own respective legal fees. If the Purchaser is placing a new mortgage he will also be responsible for payment of legal fees in respect to preparation of such mortgage. While the mortgage lender reserves the right to appoint its own lawyer to prepare the mortgage, it will generally, upon request, allow the Purchaser's solicitor to do so. This will usually result in savings to the client.

The client is also responsible for payment of disbursements incurred by the lawyer on behalf of the client. These include the actual out of pocket expenses of the lawyer for such things as title searches, tax searches and registration charges.

You should discuss the matter of legal fees when first consulting with your lawyer. He will be able to review the various aspects of the transaction and provide you with a close estimate of the legal fees, G.S.T. and disbursements which you may expect to incur.