Buying a house or condo is an exciting, but complicated, process that requires the help of an experienced lawyer. Hiring a lawyer is a requirement in the final stages of home buying, after a deal has been made. But hiring a lawyer early on in the process makes the whole thing easier and prepares you for any unforeseen circumstances. A lawyer will ensure that you have completed all the required paperwork, made all the required payments, and that everything is in order for your new purchase. That being said, because buying a home is one of the biggest and most important purchases you may make in your lifetime, it’s a good idea to have a sense of what payments you will have to make, and what fees you will have to pay, on top of your down payment and mortgage so you aren’t caught off guard with a hefty bill you didn’t prepare for.
Below we will outline some of the different fees or payments that are required. We will then offer a simple step-by-step look at how a typical closing works in Ontario, concerning all legal fees and considerations.
Lawyer Fees
As is the case anytime you hire a lawyer (unless they are taking your case “pro bono”), you will have to pay lawyer fees on top of the money you’re spending on your new home. Lawyer fees are the payment you make for the time spent on your case by the lawyer or others at the law firm and are calculated by the hour. This includes the time lawyers spend reviewing and analyzing the offer; creating and completing documents; working with the other party’s lawyer or other parties involved; and any time they spend with you as their client – answering questions, collecting information, and communicating with you throughout the process. The amount a lawyer charges will depend on a number of factors, like the amount of experience the lawyer has or their location.
September 2017 changes to the Rules of Professional Conduct (the rules that govern all lawyers in Ontario) require lawyers to include all relevant information when they “advertise a price for residential real estate services,” but it is good practice to ask about any other legal fees to protect yourself against hidden or unexpected fees.
Disbursements
When you receive your bill from the lawyer, there will likely be a line for “unpaid professional disbursements”. But what does that mean? A disbursement is money paid by the lawyer to a third-party on your behalfDisbursements are necessary out of pocket expenses that are paid out to complete your file by your lawyer on your behalf and these costs have to be paid back to your lawyer on the completion of your file.
Examples of things that might fall under “professional disbursements” when you are buying a home include: any relevant government taxes (i.e., the Land Transfer Tax); title search and registration of title (ownership and new ownership); registration of mortgage; execution certificates; title insurance; and banking fees; and office and travel expenses related to your file.
How Does a Closing Work?
Now that you have a sense of the types of fees that are part of the home buying process, here is a step-by-step look at the closing process and the fees and considerations involved:
- Offer to Purchase: This is the contract between you and the seller. Before signing an Offer to Purchase, you will want your lawyer to review it to make sure that everything is in order. Your lawyer will hold onto this and any other documents and money needed for the transaction until the process is complete. This is to protect you from misdealing or dishonesty throughout the process.
- Waiver of Conditions: Your Agreement of Purchase and Sale may have certain conditions that need to be waived prior to becoming firm. These conditions could be for you to secure mortgage financing, review of the status certificate, for a home inspection, etc. The key thing here is that these conditions have a certain time limit for which if they are not waived, the Agreement becomes null and void. It is crucial to ensure that these waivers are done and that your lawyer receives a copy of the same for their file.
- Title Search: Your lawyer will conduct a title search – a search for all records and documents that apply to the property, including the ownership. A title search will reveal if there are any legal issues with the property or ownership, and if there are none then you are able to proceed. This search will be done closer to the title search date as determined by your Agreement of Purchase and Sale.
- Documents: Talk to your lawyer about what documents are required for the sale. These will include your approved mortgage application and insurance documents, amongst others, and you will need to provide these to your lawyer to prepare the closing documents.
- Payments: Your lawyer can tell you what fees you’ll be required to pay, such as the Land Transfer Tax (based on purchase price), the Execution Certificates , and Title Insurance . You will make these payments in-trust to the lawyer.
- Closing Documents: Your lawyer will prepare closing documents, including the transfer of land, mortgage documents, tax forms, and a statement of adjustment using the information you have provided them. A few days before closing you will meet with your lawyer to sign the documents and make any outstanding payments.
- Finalizing the Sale: Once you have signed all the necessary documents and made all the required payments, your lawyer will register the transfer and mortgage documents , and deliver this to the seller’s lawyer, when the process will be complete.
There are many important parts to closing a real estate transaction, and a lawyer will help you navigate the process, keep everything in order, protect you in case of misdealing, and ensure that the whole thing runs as smoothly and easily as possible for you. It is important to communicate with your lawyer at from the very beginning of your real estate transaction and to keep them informed of any issues or concerns you may have so the same can be addressed well advance of the closing date.
