Buying Your Home

     This article contains the text of a pamphlet that we give to clients who have purchased a home and have hired us to complete the transaction. We encourage our clients to speak to us before they sign an agreement of purchase and sale as there are many important things to consider. The focus of this article is not on the process of signing the agreement, rather it deals with matters related to the completion of the transaction.

Introduction

Congratulations on the purchase of your new home!

Buying a home is a major decision and we would like to thank you for referring the legal work to us. You can be sure that it will be carried out with high standards of professionalism. Our services are designed to ensure you that your transaction will be processed and managed in the most practical and efficient manner possible.

We know it is important to keep you informed and to answer your questions. This article provides answers to a number of questions that we are commonly asked. If you have others, please contact us and one of our lawyers or experienced staff will be glad to help you.

How Can the Agreement of Purchase and Sale be Amended?

It is a good idea to consult us before signing any document which could be an amendment to the Agreement. Amendments can be achieved by written agreement (usually prepared by the Real Estate Agent) or by an exchange of letters by the lawyers.

What is the Meaning of Joint Tenancy?

If two people own property as "joint tenants" then, upon the death of one of them, the other automatically becomes the sole owner of the property. Occasionally it is desirable for two people to hold the property as "tenants in common" with the result that upon the death of one of them, the interest of the deceased becomes the property of the estate to be dealt with according to a Will or the laws of succession in Ontario.

How Are the Mortgage Arrangements Finalized?

It is your responsibility to apply for any new mortgage and to ensure that the lender sends the legal instructions to us. If you have any questions relating to the mortgage application or require further information concerning the transaction, then we will be glad to assist you. Please keep us informed on the finalization of your mortgage arrangements. Once we have the legal instructions, we will make all necessary contacts with the lender and arrange to obtain the mortgage proceeds.

Is a Survey Necessary?

A survey is a detailed plan which shows the boundaries of a property, the location of any buildings, and any other unusual features. If you are buying a newly constructed home, a survey will generally be available. The seller of an existing home must supply a survey only if one exists or if the Agreement specifically requires that a survey be provided. The age of a survey is important. New hedges, fences, and additions might create significant boundary problems, which may not be shown on outdated surveys. We cannot be responsible for any problems which would have been uncovered if an up-to-date survey had been made. The cost of a survey for a residence is about $600.00.

If you are placing a new mortgage on the property, a survey is generally required. Most lending institutions will be satisfied with a survey which is less than ten years old provided there are no material changes to the structures, such as an obvious extension, or to the size of the property. If you know of any changes of that nature, let us know right away.

Most lending institutions will now accept title insurance instead of a XXX. While that would result in a net savings, many clients would rather eliminate all uncertainty as to whether or not a problem exists, rather than have insurance against such a problem.

What are "Disbursements" and How Much Will They Be?

A disbursement is any expense related to your transaction which we pay on your behalf. You reimburse us at the time of closing for these costs which are charged without any markup.

Here are some examples of disbursements which we usually incur:

• Registration costs of deeds and mortgages
• Payments to a third party conveyancer to search title and complete the exchange of closing documentation.
• Checking for arrears of hydro bills and, water accounts, and realty taxes
• Disbursements at the registry office to obtain copies of books and documents
• Searches with the Sheriff to make sure there are no outstanding legal orders which affect your interest in the property

We will happily discuss and detail both fees and disbursements and help you plan a budget for these legal expenses.

Should you Purchase Title Insurance?

     It's possible to buy a policy of insurance that will reimburse your actual financial losses if an insured risk related to your property ownership should occur. For example, if there should be an outstanding violation of a subdivision agreement which results in monetary loss or extra expense to remedy a problem then the insurer will either pay you or fix the problem directly. It follows that the purchaser of title insurance would normally incur the cost to determine the status of a subdivision agreement. By and large it is often possible to save more disbursements than the cost of the policy.

     As mentioned above, title insurance can also offer coverage to a mortgage lender. Lenders often accept title insurance in place of searches related to subdivision agreements, utility searches, up to date surveys, searches of outstanding judgments and title searches.

     While it is comforting to have insurance against unlikely , unknown risks, many clients prefer to do the searches and incur the extra cost in order to have greater certainty.

     A full discussion of title insurance is beyond the scope of this article. Please contact us if you wish to obtain further information.

What Taxes Must be Paid as Part of Your Purchase?

Every house purchaser must pay a tax to the Ontario government which is called "Land Transfer Tax". This is a "one-time" tax that is levied every time a home is purchased. For most homes over $55,000.00 in value, the tax is one percent (1%) of the purchase price less $275.00. For example, if your home costs $125,000.00 the calculation would be:

($125,000.00 ÷ 100) - $275.00 = $975.00

For homes over $250,000.00, the rate of tax is higher.

This tax is paid at the time of registration of your deed. It should not be confused with municipal realty taxes which are payable every year.

What About G.S.T.?

If you are buying a new home or one that has been substantially renovated for the purpose of resale then G.S.T. is usually payable. However, most agreements for such a home provide that G.S.T. is included in the price. We will review your agreement for any special provisions related to G.S.T. The purchase of a resale home without substantial recent renovations is not subject to G.S.T.

What Should You do About Utilities Which Service the Property?

In advance of the closing date, you must contact the offices of any utilities servicing the property to arrange for the service to be continued. These include Hydro, Gas, Fuel Oil, Water and Sewers, Bell Telephone, and Cable TV. We try to make sure that all utility bills of the seller are paid in full. Obviously, this cannot be guaranteed for the bills generated by the taking of final readings on the closing date. We do obtain the written promise of the seller that all final bills will be paid.

How Much Insurance Do You Need?

Insurance on the property you are buying should be arranged well in advance of the completion date with your Insurance Agent. The proper name and address of every mortgage lender must be shown on the policy. We will need written proof that you have arranged this insurance prior to closing. Most lenders require that the property be insured for its full insurable value. Most clients also consider buying a policy of life insurance to pay off a mortgage upon the death of an owner.

What is Interim Financing?

If your purchase is to be funded by the proceeds of the sale of a property and that sale will not be completed on the day of closing of your purchase, then interim financing may be required to enable the purchase of the new property to be completed. This can also be necessary when the property you are selling is not located in the same geographical area as the property you are buying. If you think you are in either of these situations, please consult us to assist in making the necessary arrangements.

What Are "Subdivision Agreements"?

A subdivision agreement is a contract between the original developer of a subdivision and a local municipality. It provides for such things as street location, road construction, sewer service, drainage, fencing, etc. These agreements are registered on the title to your property and, unfortunately, many of them are never discharged and remain on the title several years after the subdivision has been completed. If the home is new, it is our policy that the status of any subdivision agreements must always be determined. If the dwelling has been constructed for more than five years, our policy is that we do not determine the status unless specifically requested to do so by our clients. Even for older homes, problems relating to grading and drainage are occasionally disclosed by information on file at the local municipality. If you are suspicious that such problems exist, it would be a good idea to determine the status of any subdivision agreements and possibly have a surveyor view the property.

When Do You Bring In the Balance of Your Downpayment?

The exact amount of money required to complete the transaction is not known until a few days prior to closing. The amount depends on the adjustments to the purchase price for items such as property taxes, mortgage interest and fuel oil and the amount of an advance to us by a new mortgage lender. The advance could be reduced by the amount of any mortgage insurance fee, a holdback for interest to the end of the current month or a holdback related to municipal taxes. Often, the amount of the mortgage is not known until the day prior to closing. We try to get all the relevant figures as soon as possible and advise you of a single amount which will include additional costs. We arrange to have any mortgage money advanced directly to us.

If you are also selling a home, we will also need to finalize the details of that transaction before we can give you a final figure.

When you come in to sign the necessary documents, a day or two prior to closing, the funds should be provided by way of a single certified cheque payable to "Kitchen, Kitchen, Simeson & McFarlane, in Trust".

Do You Have the Right to Inspect the Property Prior to Closing?

You do not have the right unless it is specifically written into the Agreement of Purchase and Sale. This basic answer may be modified where the seller is required to carry out specific repairs or other work prior to closing.

In the case of a new home you can expect to find a specific reference in the Agreement and it is usually quite restrictive. However, this makes it all the more important to conduct a thorough pre-delivery inspection.

What is an ONHWP Warranty?

The Ontario New Home Warranties Plan Act makes certain standards of workmanship and materials a part of every Agreement to buy a newly constructed home. This is referred to as the ONHWP Warranty.

The Act also sets up an insurance plan to reimburse buyers if their home does not come up to these standards. The basic warranty lasts for a period of one year, but for certain major defects the warranty extends for several years. Every new home built in Ontario must be enrolled under this plan. Any unexpired warranty can be assumed by subsequent buyers of a home.

The warranty is activated by an inspection of the premises by the purchasers and the builder prior to closing. At that time, all outstanding deficiencies should be noted.

When Do You Get Your Keys?

Most Agreements of Purchase and Sale provide that vacant possession is to be given "upon completion". In other words, when the deal is closed. This time can vary, and the actual "possession" time is unpredictable. On the day of your closing there are many details which must be satisfactorily settled before the closing is complete and possession can be taken. We don't recommend that you be packed and ready to move in at 9:00 a.m.! Take your time, and be patient.

We try to close all our transactions as early in the day as we can, but the simple fact is that you cannot force a seller to complete a sale early in the day. Usually we receive the keys when the purchase price and necessary documents have been exchanged at the Registry Office. The time of this "closing" depends on many factors including the availability of both conveyancers, mortgage funds and the successful completion of any prior sale of your current property. The keys must then be returned to our office. It is rare that they are available by noon on the day of closing. A more realistic time is between 2:30 p.m. and 4:30 p.m., but on days when there are many closings, even this is optimistic. You can reduce the wait by offering to pick up the keys directly from the registry office.

It is a help to us if you make all your arrangements for signing documents and providing funds in advance of the day of closing. We have every intention of concluding your purchase as soon as we possibly can so you can move into your new home. For newly constructed homes, keys are often made available at the subdivision site office once the closing takes place.

What if the House is Damaged When You Move In?

If the damage to the property is more than reasonable wear and tear and occurred after you last saw the house, then you can successfully claim to be reimbursed by the seller for the repairs. The repair of damage which occurred prior to the signing of the Agreement, and which the seller did not conceal from you is your own responsibility. If problems do arise, we will write to the seller's lawyer to try and have them resolved. If this is not successful, then additional legal action may be taken and additional legal costs may be incurred by you for that purpose. We will discuss all details and costs with you if such an event arises.

What Documentation will you Receive After the Closing?

Usually we will report to you in two stages. Immediately after closing, we will provide you with a written summary of the financial details of the transaction. A few weeks later, we will provide a complete report which will include our professional opinion as to the quality of your title and give you copies of all important documents. This report should be kept in a safe place with your valuable papers.

Should I Have A Will?

Purchasers often consider the need for a new Will when purchasing a home. We agree! However, most clients don't appreciate the problems that can arise if an owner becomes incapable. A Will won't help in that case. A Power of Attorney under the Substitute Decisions Act is needed. Usually, we offer a significant price reduction for Wills and Powers of Attorney prepared in conjunction with a real estate transaction. Ask us for details!

It is important to understand that the answers we have provided are general in nature. If you have any specific questions relating to your particular circumstances or transaction, please do not hesitate to contact us.