May 22, 2025
Buying or selling a property in Ontario is an exciting, yet complex process that involves multiple legal steps. Whether you’re a first-time homebuyer or a seasoned investor, understanding the legal requirements is crucial to ensure a smooth transaction. This article will guide you through the essential legal steps involved in buying or selling property in Ontario.
- Offer and Agreement of Purchase and Sale
The transaction begins when a buyer makes an offer to purchase the property. This offer is outlined in a document known as the Agreement of Purchase and Sale (APS). The APS includes important details such as:
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- The offer price
- The deposit amount (often 5% of the sale price)
- Conditions (e.g., financing, home inspections)
- Closing date
Once the seller accepts the offer, both parties are legally bound to the terms outlined in the APS, provided any conditions are met.
For Buyers:
Ensure that your agreement includes conditions like:
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- Financing Condition: This gives you time to secure mortgage financing.
- Home Inspection Condition: This allows you to hire a professional to inspect the property and identify any potential issues.
Although not as common as we would like, some agreements include a Lawyer Review Condition: This allows your lawyer to review the agreement before finalizing it.
For Sellers:
Ensure the terms of the offer are clear, including the closing date and any items (appliances, fixtures, etc.) that should stay with the property.
- Hiring a Real Estate Lawyer
One of the first and most important steps when buying or selling property in Ontario is hiring a real estate lawyer. While real estate agents can help with the marketing, listing, and negotiations, a lawyer’s role is to protect your legal interests during the transaction. Lawyers review contracts, ensure compliance with laws, and handle the transfer of property ownership.
In Ontario, it is standard practice for both buyers and sellers to hire their own lawyers.
- Conducting Due Diligence
For buyers, due diligence is a critical step. Before you complete the purchase, your lawyer will conduct thorough checks to ensure that the property is free of any legal issues. This includes:
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- Title Search: To confirm the seller’s legal right to sell the property and verify that there are no claims or disputes on the property title.
- Property Tax Status: Ensuring there are no outstanding property taxes or municipal charges.
- Zoning and Land Use: Checking if the property can be used for the intended purpose (residential, commercial, etc.) under local zoning laws.
- Encumbrances: Verifying if the property is subject to any mortgages, liens, or easements that could affect the transfer of ownership.
Title insurance, common in Ontario transactions, simplifies the due diligence process, and provides added protection, but does not fully replace due diligence.
For sellers, you should ensure that all legal documents related to the property, including any outstanding debts or liens, are settled or disclosed before the sale proceeds.
- Finalizing the Terms
Once due diligence is completed, negotiations may occur between the buyer and seller (or their lawyers) to finalize the terms of the sale. This could include adjusting the purchase price based on the results of a home inspection, agreeing on repairs, or modifying conditions.
Any agreed-upon changes to the Agreement of Purchase and Sale will be documented as amendments and must be signed by both parties.
- Finalizing Financing
As a buyer, securing financing for the property is crucial. Once the purchase offer is accepted, the buyer must finalize the mortgage application and confirm approval. Mortgage lenders will require a copy of the signed APS before finalizing the loan.
Your lawyer will also review the terms of the mortgage to ensure everything is in order before closing the transaction. This includes confirming that the loan is for the correct amount and understanding any interest rates or repayment terms.
- Preparing for Closing Day
The closing date is when ownership of the property officially transfers from the seller to the buyer. Both parties’ lawyers will work together to ensure that all paperwork is completed. This includes:
- Title Transfer: The buyer’s lawyer will arrange for the title of the property to be transferred and registered in the buyer’s name.
- Final Adjustments: Any outstanding costs or adjustments, such as property taxes or utilities, will be prorated between the buyer and seller.
- Payment of Funds: The buyer’s lawyer will send the final purchase price, minus the deposit, to the seller’s lawyer in exchange for the property keys.
- Closing Costs
Both buyers and sellers in Ontario should be prepared for various closing costs. For buyers, these may include:
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- Land Transfer Tax: A tax imposed on the transfer of property. The amount depends on the purchase price of the property and whether it is a first-time home purchase (first-time buyers are eligible for rebates).
- Legal Fees: For the lawyer’s work in facilitating the sale.
- Home Inspection Fees: If applicable, the cost of conducting a home inspection.
- Appraisal Fees: To confirm the value of the property for mortgage purposes.
- Title Insurance: Optional but highly recommended to protect against title issues. In Ontario practice, almost all transactions rely upon title insurance.
Sellers should be prepared for costs such as:
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- Real Estate Agent Fees: Typically paid by the seller ( often 5% of the selling price, split between the buyer and seller agents).
- Mortgage Discharge Fees: If there is an existing mortgage on the property, the seller will need to pay off the remaining balance, and there may be discharge fees associated with it.
- Legal Fees: To finalize the sale and ensure all conditions are met.
- Closing the Deal
On the closing day, once all conditions are satisfied, the buyer’s lawyer will transfer the purchase price to the seller. After the transaction is complete, the seller’s lawyer will release the keys, and the buyer will take possession of the property.
How Weilers LLP Can Help You
Buying or selling property in Ontario involves several important legal steps. By hiring a Weilers LLP real estate lawyer to conduct thorough due diligence, and make sure that you understand the various financial and legal obligations, you can protect yourself and ensure a successful transaction. Whether you’re purchasing your first home or selling an investment property, careful planning and attention to detail will help ensure a smooth and legally compliant experience.
If you’re unsure about any aspect of the process, consult with a Weilers LLP real estate lawyer to navigate the legal complexities of real estate transactions in Ontario.