- Ontario follows buyer beware, so a seller generally need not disclose defects you could find by reasonable inspection and inquiry, though some exceptions apply.
- Your deposit goes into a brokerage trust account and is released on a failed deal only under a signed release or direction from all parties or a court direction.
- Land transfer tax is payable when the transfer is registered, which happens on closing.
Buying a first property in Ontario involves several laws, a land registration system and a series of legal steps. It can feel like a lot at once, especially if you are new to owning property.
This overview walks through the main rules in the order you are likely to meet them: making an offer, paying a deposit, doing your checks, closing and registering, and what happens if the seller will not close.
Making an offer: conditions and competing bids
A conditional offer does not bind the seller and the buyer until every condition has been fulfilled or waived, which is why a seller can keep marketing the property in the meantime. An escape clause is a term in a first, conditional Agreement of Purchase and Sale requiring the seller to notify the first buyer if the seller accepts another offer, after which the first buyer has a short window to waive or fulfil conditions or the deal ends. The length of that window is whatever the Agreement says.
If the first buyer meets the conditions, the seller must sell to that buyer on the original terms. The second agreement should be conditional on the first falling through, because otherwise the seller risks being bound to sell the same home to two buyers.
In a competing-offer situation, the seller's agent must tell every buyer who has submitted a written offer how many competing offers there are, but may not share what they contain unless the seller directs it. Even then, personal or identifying information cannot be shared.
Your deposit and the trust account
Every brokerage must keep a trust account in Ontario, deposit money it holds in trust for others into it, keep that money separate from its own, and pay it out only according to the terms of the trust. This is required by the Trust in Real Estate Services Act, 2002. A deposit the brokerage is to hold under the Agreement must be put into that account within five business days of receipt.
RECO's consumer deposit insurance covers deposits in a brokerage trust account against events such as theft, fraud, insolvency or misappropriation, up to $200,000 per claim and $4 million for all claims from a single event, at no cost to consumers. It does not apply where a deal has failed and you and the seller simply cannot agree on who gets the deposit. In that case the brokerage should release the deposit only under a release or direction signed by all parties, or a court direction.
Checking the property: buyer beware
Ontario follows buyer beware. A seller generally need not disclose patent defects, which a buyer can find through reasonable inspection and inquiry, but must disclose latent defects that make the property unfit for habitation, dangerous or potentially dangerous. A seller who conceals a patent defect can lose the protection of buyer beware.
A seller property information statement is not a required form, and it is based on the seller's own knowledge and experience. If the seller has prepared one, the seller's agent must tell every interested buyer it exists and give a copy to any buyer who asks.
Closing, registration and tax
Ontario's electronic land registration system is called e-reg. In it, only a lawyer may sign for completeness of a document that requires compliance with law statements, which most transfers of title contain. Generally a transfer must be signed for completeness by two different lawyers, one for the transferor and one for the transferee. Some transfers, such as those within a family or between related parties, may be completed by one lawyer acting for both sides.
Land registered under the Land Titles Act has its own rule on adverse possession, and it has an exception for land first registered with possessory title only, where a person in possession at that first registration can still have a claim against the first owner. No right adverse to the registered owner can be acquired by length of possession or prescription in Land Titles land. Ask your lawyer which system applies to your property.
| Tax or cost | Key rule |
|---|---|
| Land transfer tax | Payable when the transfer is registered on closing, generally based on the price plus any mortgage or debt assumed |
| First-time homebuyer refund | Up to $4,000 for eligible buyers, claimed at registration or later |
| Non-Resident Speculation Tax (residential property) | 25 per cent for foreign nationals, foreign corporations and taxable trustees buying residential property anywhere in Ontario, on top of land transfer tax |
Toronto also has a separate municipal land transfer tax, and refund rules differ for each tax, so confirm the details with your lawyer.
If the seller will not close, and what to do next
A buyer suing a seller who refuses to close can use a certificate of pending litigation, because starting a lawsuit that puts an interest in land in question is not notice to outsiders until the certificate is issued and registered on title. The court may discharge the certificate in several cases, including where the claim is only for money or can be adequately protected by other security. Separately, a court that can order specific performance of the sale may award damages in addition to specific performance, or instead of it.
- Get your financing in principle before you make an offer
- Have a lawyer review the Agreement of Purchase and Sale, especially any conditions, before you sign
- Ask for any seller property information statement
- Arrange a home inspection and ask questions about anything that concerns you
- Budget for land transfer tax and closing costs
- Keep records of your deposit and all signed documents
Frequently asked questions
Is there a legal deadline for an escape clause?
No statute sets one. An escape clause is a term in the first, conditional Agreement of Purchase and Sale, and it gives the first buyer only a short window to waive or fulfil their conditions after the seller gives notice of another offer. Read it closely before you sign.
Is my deposit protected?
RECO's consumer deposit insurance covers deposits held in a brokerage trust account against events such as theft, fraud or insolvency. It does not apply where a failed deal leaves you and the seller disagreeing about who gets the deposit.
Do I need a lawyer to close?
Most transfers of title contain compliance statements that only a lawyer may sign for completeness in e-reg. Generally two different lawyers are involved, though some transfers, such as within a family, may use one lawyer for both sides.
When do I pay land transfer tax?
It is payable when the transfer is registered, which happens on closing. Eligible first-time homebuyers may claim a refund of up to $4,000 at registration or later.
Sources
- RECO – conditional offer on buyer selling existing home — reco.on.ca
- RECO – Dealing with competing offers — reco.on.ca
- Trust in Real Estate Services Act, 2002 (e-Laws) — Ontario e-Laws
- RECO – Failed Agreements of Purchase and Sale — reco.on.ca
- RECO – Consumer deposit insurance — reco.on.ca
- RECO – Property information statements — reco.on.ca
- RECO Bulletin 7.4 – Facts a seller has a legal obligation to disclose — reco.on.ca
- Law Society of Ontario – Two-lawyer requirement for transfers of title — lso.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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