The Role of a Lawyer in a Typical Residential Real Estate Transaction

What does a lawyer do in a typical purchase or sale of a residential home? Below is a chart with some definitions to follow that describes the main steps that a lawyer will take when assisting a client with the purchase or sale of their home.

 

Purchase	Sale
Review of the Agreement of Purchase and Sale and Status Certificate where applicable and note any deadlines to insure the deal proceeds as scheduled;	Review the Agreement of Purchase and Sale and note any deadlines to insure the deal proceeds as scheduled;
Arrange for and review the title search	Obtain and review parcel register
Request other required searches – tax arrears, common expenses, zoning, work orders, etc	Obtain property tax information from client or from City
Obtain information regarding satisfaction of conditions/deliverables (i.e. invoices to show repair work completed, clean water test obtained, septic permit)	Receive, review and respond to requisitions, which might include following up with clients about things the clients are supposed to look after before closing
Prepare and send requisition letter and closing documents required from Sellers and Sellers counsel on or before the requisition date	Provide an undertaking to the buyers and their lawyer to pay out existing encumbrances (as provided for and agreed to in the typical Agreement of Purchase and Sale);
Request and obtain title insurance or provide an opinion on title	Obtain mortgage pay out statement if there is a mortgage
Prepare transfer for review and completion by seller’s counsel	Review draft transfer and complete missing information
Prepare draft Charge as instructed by Lender for review and execution by client	Attend with the clients for review and execution of closing documents and obtain keys from clients to be held in escrow;
Attend with client for review and execution of closing documents and obtain remaining closing funds from client	Prepare and deliver Statement of Adjustments to the lawyer for the buyers;
Enter escrow closing arrangement with the lawyer for the sellers;	Enter escrow closing arrangement with the lawyer for the buyers;
Receive mortgage funds and rest of closing funds in trust	Deliver closing package to the lawyer for the buyers, including keys;
Review Statement of Adjustments and prepare certified cheques for sellers as directed by counsel and in keeping with the Agreement of Purchase and Sale	Receive closing funds in escrow and in trust (to be released only according to the terms of the escrow arrangement);
Receive keys and deliver to client once released, release closing funds	Review and release transfer
Register Transfer and Charge once released from escrow	Attend at bank to prepare certified cheques from Trust Account to pay out existing Charge and any other liens or encumbrances required to be discharged on closing;
Report to buyer clients	Attend to payment of existing Charge so as to discharge the existing Charge (or mortgage) as well as of any other liens or encumbrances required to be paid;
Report to Lender	Prepare payment for and deliver payment of real estate commissions owed;
Advise municipality of change in ownership	Pay out closing proceeds as directed by the clients;
Follow-up with counsel for sellers to ensure that discharge of previous charge has been registered	Report to client;
	Attend to or ensure discharge of existing mortgage is registered
	Advise municipality of change in ownership

 

What are the typical fees, disbursements and other payments?

Purchase Transaction:

Legal Fees, HST, Title Search, Property Tax Certificate, Photocopies, Registration Fees, Land Transfer Tax, Title Insurance, Zoning and work order searches (where applicable), mortgage insurance such as CMHC.

Sale Transaction:

Legal Fees, HST, Subsearch of Title, Property Tax Certificate, Photocopies, Registration Fees, Administration fee by mortgagee to discharge existing mortgage, courier charges, Real Estate Commission

 

Terms used in a typical real estate transaction

Below are some terms and a basic description of what they mean. The definitions are not full and complete, but, they will help a buyer or seller understand the terms.

Conditions: Items needed to be satisfied before an offer to purchase becomes a firm deal, for example, the arrangement of financing satisfactory to the purchaser.

Conflict of Interest (Ethics): A lawyer can sometimes continue to act even if a conflict of interest exists or presents itself. A lawyer may represent both the Lender and the Borrower in a typical house purchase transaction. However, a lawyer can not act for both the Vendor and the Purchaser in a typical arms length Purchase of a house.

Encumbrance: Something that attaches to land that diminishes the value of it, such as a mortgage, a construction lien, a writ of execution or even a right of way.

Escrow Closing: A way to allow lawyers to receive documents and funds in a type of trust arrangement before the final closing happens.

Fees: The money a lawyer charges for the work.

Key (for Electronic Registry System): An electronic data file with passwords.

Land Transfer Tax: A tax that is paid by the buyer when a property is purchased.

Mortgagee: The person who lends the money, also called the Lender. Often the morgagee is a bank, but, an individual or a company that is not a bank can also lend money.

Mortgagor: The person who borrows money, also called the chargor.

Planning Act: A piece of legislation that is used to help control the manner in which land is subdivided.

Registration: People used to meet in person at a registry office and exchange documents, keys, and money. Now documents are typed and exchanged through an escrow arrangement with each lawyer at their own separate offices. Once everyone has what they need, the documents get registered electronically (with the exception of the few properties that remain in the old paper registry).

Retainer: An agreement with your lawyer regarding the services that he or she will provide, and the amount of money you will pay as a deposit toward fees and disbursements.

Tender: Presentation of items required to close the deal.

Title Insurance: A type of insurance that protects property owners against things like unpaid property taxes or unknown defects on the title.

Title Search: A search to retrieve documents on a piece of real property in order to determine whether there are any outstanding encumbrances and what the nature of the encumbrance is if there are any, whether the person who claims to be selling the property is the registered owner, and whether or how the purchaser will be able to gain access to the property.

Statement of Adjustments: A documents that shows how much money the purchaser has to pay including credits for pre-paid property taxes.

The article posted here is for general information. We hope you find it useful. For advice specific to your circumstances you should consult a lawyer. We would be pleased to speak with you if you have questions about our services or need the assistance of a lawyer.