Written by Benjamin Berry, Co-Founder & CLO at Doormat
A real estate lawyer or notary is an important part of any real estate transaction in Canada. While the exact involvement of the real estate lawyers varies from province to province, they are the parties that are ultimately responsible for facilitating the transfer of property ownership. This article will focus more on the requirements in Ontario, but much of this information will be applicable in other provinces as well.
Please note that you should not consider this blog as legal advice. If you are in need of a real estate lawyer, you should formally engage one and solicit their advice for your own unique needs. At Doormat, we provide a seamless closing experience that is supported by our own in-house application to keep you organized and informed.
What is a Real Estate Lawyer?
Real estate lawyers are an essential part of the equation in a home purchase, sale, refinance, or title transfer in Ontario. In fact, a lawyer is required to legally close a purchase or sale. Lawyers ensure that all legal aspects of a real estate transaction are handled properly and that their clients are protected throughout the process.
What Real Estate Lawyers in Canada do for Buyers
For homebuyers, real-estate lawyers provide essential support by ensuring their best interests are protected during the home purchasing process. This involves confirming that the transaction is equitable, verifying that the property being bought aligns with expectations, and coordinating services such as title insurance.
Review purchase agreements and Real Estate contracts
Real estate lawyers review and draft legal documents related to the sale, purchase, or transfer of real estate. This includes the review of purchase agreements, title, and mortgages. Lawyers carefully review these things to determine whether there are issues the Realtor wouldn’t have been aware of before a client signed their purchase agreement. If lawyers identify any issues, they fix them before the transaction is finalized.
Perform title search
Real estate lawyers perform title searches to ensure that the property is free from any liens or legal encumbrances. This allows them to assess the legal ownership of the property and ensure that title can be transferred, free and clear, to the purchaser. As any issues found on title could impact a purchaser’s ability to use the property how they want to, making it an incredibly important part of a lawyers job to identify and resolve them.
Arrange for title insurance
While lawyers perform title searches, they also arrange for title insurance. This insurance policy protects property owners and their lenders against losses related to the property’s title or ownership.
Title insurance is not always required, but I highly recommend it for anyone purchasing a property. It is a small price to pay for the security that you are protected from any title issues that may arise, as well as certain off-title issues. Those issues could end up being incredibly costly, which is when title insurance will come in very handy. It also gives you the peace of mind that you are covered in the event that something were to come up in the future.
Facilitate closing and help finalize a real estate transaction
There are a number of things that need to happen for a closing to be completed. Much of this work requires coordination with the other parties involved in the transaction, such as real estate agents, mortgage brokers, and other lawyers. Real estate lawyers are responsible for facilitating everything that needs to be done in order for the real estate transactions to close. This includes the transfer of funds between buyers and sellers, distribution of funds to professionals involved in the transaction, and resolution of any title issues surfaced.
What Real Estate Lawyers in Canada do for Sellers
For those selling a home, a real estate lawyer ensures a seamless transaction by addressing or alleviating potential legal concerns that may arise and preventing costly delays or additional expenses.
Draft and review Real Estate contracts
A real estate lawyer helps sellers with the legal documents related to their transaction. This can include the drafting or review of the Agreement of Purchase and Sale, and preparation of any other documents that outline or solidify the terms of the sale. Legal documents can often be difficult to interpret, so lawyers play a key role in translating them for you and ensuring that all parties involved are fulfilling their obligations.
Negotiate Real Estate deals
Real estate lawyers also negotiate with the other parties in the transaction on the seller’s behalf. This includes working with the purchaser’s lawyer to ensure that the seller’s interests are taken care of from beginning to end.
Resolve any outstanding legal issues
A real estate lawyer will work to solve any issues that arise throughout the closing process, including resolving any title issues that are identified. Your lawyer will work to ensure a smooth transition of ownership to the purchaser under the terms of your Agreement of Purchase and Sale.
Is a Real Estate Lawyer required to close on a property in Canada?
In most provinces, a real estate lawyer is a required element of the property closing process. For example, in Ontario, both the buyer and seller must have a lawyer represent their interests for a property transaction to close. In some provinces, such as BC, you may be able to use a notary instead of a lawyer, but you are still required to retain the services of a professional to facilitate the closing.
When do I need a Real Estate Lawyer?
A real estate lawyer is needed when purchasing or selling your home in order to finalize the property transfer with your province’s land registry office.
Buying a real estate property
You will need to engage a real estate lawyer once you have agreed to purchase a property. Usually this is once you have signed the Agreement of Purchase and Sale (APS). The sooner you can engage a lawyer after signing this document, the better, as that gives them the time needed to coordinate the closing and fix any issues that arise along the way.
While the engagement of a real estate lawyer doesn’t normally happen until after the APS is signed, there are some instances where you may need one before that. A good example is when you’re buying a condo: having a lawyer review the condo status certificate is essential to ensure that everything is in good standing.
Selling a real estate property
Similar to when you buy a property, the most common time to engage a real estate lawyer when selling a property is when the Agreement of Purchase and Sale (APS) is signed. This is when the work to start facilitating the ownership transfer begins. If you are aware of any title issues before signing an APS, it would be a good idea to engage a real estate lawyer ahead of time to proactively resolve those issues.
How much does a Real Estate Lawyer cost?
At Doormat, our fee is $979 plus HST and disbursements. Disbursements are the costs that lawyers incur in order to close the property transaction. These can include expenses such as title search fees, registration costs, and Law Society transaction levy surcharges.
Real estate lawyers can have difficulty estimating your exact disbursements at the beginning of a transaction, but they will usually fall in the range of $200 to $500, not including title insurance or land transfer tax. Some lawyers will also charge for ‘administration’ fees such as postage, paper, and fax, but we don’t include those costs in our disbursements. We only include the charges that are required to close on your property.
The cost of a real estate lawyer can vary widely from company to company and location to location. It can often be difficult for a client to get a clear answer on what the price actually is as the lawyer manages a number of payments on the client’s behalf. These payments include, but are not limited to, land transfer tax, agent and broker fees, and title search costs. The lawyer’s fee is usually the most important cost to pay attention to when comparing lawyers, as most of the other costs are outside the control of the lawyer and will be the same from place to place.
For a full list of what costs to expect in your closing, check out Doormat’s blog here.
In addition to commissions paid to agents and brokers, a few closing costs that you should keep in mind are title insurance, land transfer tax, and home insurance.
Obtaining Title Insurance
If you are funding your purchase with a mortgage, you will likely need to obtain title insurance, which provides coverage for a number of issues that may affect your and your lender’s interest in the property. The title insurance premium is a one-time fee, paid upfront when you purchase the property, and provides coverage for as long as you own the property. The amount paid for the premium is generally based on the purchase price of the property, but normally does not exceed $1,000 for the average-priced Ontario home. If your property has title issues, or if you use a private lender, the premium may be increased.
Your real estate lawyer will arrange title insurance on your behalf, but the premium will be a part of your closing costs. The title insurer, in some instances, will also pay your lawyer for helping them arrange the policy for you. The premium is quoted by the title insurer, not your lawyer, so the total cost will be relatively similar across all lawyers.
For everything you need to know about title insurance, check out our blog.
Determining Land Transfer Tax
In Ontario, land transfer tax is paid by the buyer when residential property is transferred from one owner to another. This tax is calculated based on the value being paid or provided by the buyer for the property, and the amount due will depend on various factors such as the location of the property, and whether the circumstances of the transfer fall under any tax exemptions.
To calculate land transfer tax in Ontario, you will need to first determine the “consideration” being provided by the purchaser. The consideration is usually equal to the purchase price of the property, although it can also be based on the property’s value as determined by an independent appraiser, and can include other values such as the amount of the outstanding mortgage if the buyer has agreed to assume one from the seller.
Note that some municipalities, such as Toronto, charge an additional land transfer tax.
If your real estate transactions take place in Toronto, it’s important that you do your research on your municipality and speak with Toronto real estate lawyers to understand these costs as they can be quite expensive.
Similar to title insurance, your lawyer will arrange the payment of land transfer tax, but you are responsible for providing the tax amount to your lawyer. It will be included in your overall closing costs.
Obtaining Home Insurance
Home Insurance (also referred to as Fire, Flood, and General Liability Insurance) covers accidents or damaging events that affect the property’s structural integrity or cosmetic value, as well as your liability for issues that befall visitors to your property.
You will have to arrange insurance that names your lender as a loss payee before your lender will provide the funds you need to close the transaction. This type of insurance has ongoing premiums that may increase if you make claims. The cost is generally based on an inspection of the property and the appraised value of the home.
Check out our blog for everything you need to know about home insurance.
What to consider when selecting a Real Estate Lawyer in Canada
While a real estate agent and mortgage broker are the more familiar professionals involved in a real estate transaction, a real estate lawyer plays an incredibly important role. They are the ones that take your Agreement of Purchase and Sale all the way through to the transfer of ownership. With that in mind, you will want to select your real estate lawyer with care.
You should talk to a few different lawyers before making your selection. Ask them about what to expect from their service, when you will engage with them, and how they price their services. While we all want to keep our costs down, be wary of extremely low prices. It is not uncommon for people to be quoted a particular price, only to have it increased significantly by the time closing day comes around. Some lawyers will build in additional costs to their quote that may not be clear to you from the start, and may try to hide additional costs as disbursements. Be sure to get clarity from your lawyer about the different costs involved in your transaction before committing to them.
In addition to getting clarity on pricing, you want to be clear about how you will be supported throughout the closing process. It’s a common complaint that people feel left in the dark about what’s happening leading up to their closing day. This brings a lot of unnecessary stress to what should be an incredibly exciting life event. It’s highly likely that your property will close without issue, so you can save yourself a lot of anxiety by selecting a lawyer that communicates well throughout the entire closing process.
Last, but certainly not least, you want to select a lawyer or firm that has deep experience with property closings. There are a number of lawyers that will do property closings as part of their practice, but not exclusively, and perhaps not often. Ask your real estate lawyer how many transactions they have closed and how much of their time and attention is typically allocated to real estate law.
How to prepare for your consultation with the Real Estate Lawyer
Your real estate lawyer should be clear about what information they will need from you to facilitate your property closing, so don’t worry about having everything in order prior to engaging a lawyer. The most important part is engaging a lawyer in the first place. The specific requirements will depend on whether you are a purchaser or seller, if you have a mortgage, and what province and municipality your property is located in.
At Doormat, you are set up with a personalized dashboard that clearly indicates everything that you need to do in order to move your property closing along. Your dashboard serves as one central location where you can find all your important documents, share information that your lawyer needs, and track your transaction’s progress.
What sellers need to provide
There are a number of things your lawyer will need to know in order to properly close your sale. If you have any mortgages on the property, you will need to share those details so that your lawyer can arrange their discharge or transfer. You will also need to share the details of any rental appliances you have on the property.
Some rental appliance companies will register interest on title to the property, and these registrations will need to either be paid out or transferred to the purchaser. It will also be helpful for your lawyer to know if you are aware of any outstanding title issues or liens on your property, though your lawyer will complete their own due diligence on these matters as well.
What purchasers need to provide
As the purchaser, you will need to provide your mortgage information, property insurance information (often referred to as an insurance binder), and the source of funds you are using to pay for the property. Again, the requirements will depend on your own unique situation, so ensure you get clarity from your lawyer.
For example, if you are purchasing your property with personal sources of funds (ie. no mortgage) you won’t need to provide mortgage information, though your lawyer will need to ask about the source of your funds for anti-money-laundering purposes.
Property closings with Doormat
At Doormat, we’re bringing property closings into the 21st century without sacrificing the legal expertise that you need. You get access to your own personalized dashboard that everything related to your transaction flows through. From your dashboard, you’ll be able to track your transaction, download and upload documents, and complete the tasks required of you to move your property closing along.
We provide clear and transparent pricing and we steer clear of legal jargon so that you can actually understand what we’re saying. Our services are completely virtual (meaning no lawyer office visits) but you still get access to our amazing support team via phone, text, email, or chat from 8am to 8pm, Monday to Friday. We’re here to make your property closing experience a great one. Get a quote from us today!
About the Author
Benjamin Berry is a solicitor with 5+ years of experience leading real estate legal teams in Ontario. Having closed over 1,000 real estate transactions, his first-hand experience with traditional closing methods inspired him to build something better. Doormat leverages technology and a client-centric approach to deliver a seamless closing experience that keeps clients informed every step of the way.
