What Real Estate Lawyers Do in an Ontario Purchase or Sale

If you are buying or selling a home for the first time, the legal side can feel like a black box. You sign an agreement, and weeks later the keys change hands. A lot of work happens in between, much of it handled by lawyers on each side.

This article walks through the usual steps in order. Every deal is different, so treat it as a general map and ask your own lawyer how your transaction will run.

Step 1: Reviewing the agreement

Ideally you speak to a lawyer before you sign, or before the agreement becomes firm. The lawyer reads the conditions, closing date, what is included in the sale and any special terms. For a buyer with a financing or home-sale condition, that review matters because a conditional offer does not bind the seller and first buyer until every condition has been fulfilled or waived.

Deposits come up early. A deposit received by the brokerage that is to hold it under the agreement must be put into that brokerage's real estate trust account within five business days of receipt. If a deal fails, the brokerage should release the deposit only under a release or direction signed by all parties, or under a court direction.

Step 2: Title search and legal checks

For a buyer, the lawyer searches title to confirm who the registered owner is and what is registered against the property, such as mortgages or liens. For a seller, the lawyer identifies what must be paid out and discharged on closing, such as an existing mortgage.

Other debts can also show up against a property. For example, a municipal treasurer may register a tax arrears certificate if part of the tax arrears is still owing on January 1 in the second year after the year the taxes became owing. Problems found on title are raised with the other side so they can be fixed before closing.

Step 3: Funds, trust accounts and taxes

Your lawyer will explain how much you need to bring to closing, including land transfer tax and legal costs, and will prepare a statement showing the adjustments between buyer and seller. Land transfer tax is generally based on the purchase price plus any mortgage or debt assumed.

Some buyers pay less or more tax. Eligible first-time homebuyers can get a refund of up to $4,000 for registrations on or after January 1, 2017, which may be claimed at registration or later from the Ministry of Finance. Foreign nationals, foreign corporations and taxable trustees buying residential property in Ontario pay the Non-Resident Speculation Tax at 25 per cent, in addition to land transfer tax.

Lawyers hold closing money in trust. If trust funds held for a real estate closing are lost, the Law Society's Compensation Fund typically pays, but it is a last resort and you must first try to recover the loss from the lawyer or paralegal and from other sources.

Step 4: Registration and closing day

In Ontario's electronic land registration system, only a lawyer may sign for completeness of a document that requires compliance with law statements, and most transfers of title contain them. Non-lawyers may sign these documents for release only.

On closing day, the lawyers exchange documents and funds as agreed and register the transfer. Land transfer tax is payable when the transfer is registered, which happens on closing. Once registration is complete, the buyer's lawyer reports to the buyer and the seller's lawyer pays out the amounts owing from the sale proceeds.

What to do next

• Contact a lawyer before you make or accept an offer, or before conditions are waived.
• Ask what documents and identification they need from you.
• Confirm how much money you need to bring and when it must arrive.
• Ask whether you qualify for any land transfer tax refund.
• Tell your lawyer about anything unusual, such as a rental contract, a family transfer or a co-owner.

Frequently asked questions