The Agreement of Purchase and Sale is the key to the completion of the sale. Therefore, whenever possible, I would like the opportunity to review your Agreement of Purchase and Sale before you sign it. However, the reality is that most Agreements of Purchase and Sale are finalized before they reach the lawyer. I must then work within the rules and terms contained in the Agreement of Purchase and Sale you have signed. The Agreement of Purchase and Sale usually obliges you to pay out and discharge any mortgages and liens registered against your property, or your name. Liens may include deferred payment for appliances, a new furnace, new windows, new doors, a Legal Aid Certificate, family support arrears, construction liens etcetera. You may not have been told by these companies that “liens” are being registered against your property. The most common lien is with the gas company. If you have updated any of these appliances in your home, for which you have elected monthly payments or deferred payments, the vendor may have registered a lien on the title to your home. If you have had a contractor do work at your home or deliver supplies to your home and you have not paid the contractor or the sub contractors in full, he or she has a limited opportunity to register a lien against your property. These “liens” must be paid from the sale proceeds unless you provide me with a copy of a Lease Assumption Agreement signed by the purchasers.
Unless the Agreement of Purchase and Sale specifies otherwise, you have a legal obligation to pay out and to register on or before closing discharges of any mortgages or encumbrances registered against the property which are not being assumed by the purchaser. Usually, purchasers will permit me to use the funds received on closing to pay out and to discharge mortgages with Banks after closing; however, they are not legally obligated to do so unless this arrangement is specified in the Agreement of Purchase and Sale. The standard form of Agreement of Purchase and Sale used by local real estate agents includes this provision for mortgages held by a bank or a trust company. If, however, this clause has been deleted, or your mortgage is held by an individual or corporate mortgagee other than a bank or trust company, or if another form of contract has been used, I recommend that you arrange for the repayment of the mortgages before closing or for discharges to be available for registration on closing. I will be writing to any Mortgagees for statements showing the amount required to discharge their mortgage on the date of closing. There will often be an administrative fee charged by the Mortgagee and sometimes a substantial prepayment penalty if you are discharging your mortgage before its maturity date.
You must be sure to notify the utility companies of your new address and to make arrangements for the payment of the final utility invoices. All property taxes falling due prior to your closing date, must be paid in full on or before closing and you must provide me with evidence of your payment to show the other side.
I also recommend that you telephone or write to each of the various public utilities and arrange to have all meters read on the closing date. The final bills should be directed to you at your new address. If your house is heated by oil or propane, you must have the tank filled prior to closing at your expense. You must provide me with a receipt confirming the tank has been filled and that this fuel bill has been paid. You will be credited with the cost of a full tank on closing. Unless otherwise specified in the Agreement of Purchase and Sale, fixtures must remain with the property, while chattels may be removed. As a general rule, a fixture is something which is permanently attached to the real estate. A chattel is something which is not permanently attached. Common examples of fixtures are chandeliers, curtain rods, built-in appliances, broadloom, mirrors which are screwed to the walls, and shrubs and flowers. Common examples of chattels include appliances which are not built-in, area rugs, curtains and plants which are in portable wooden planters on a patio. Unless the Agreement of Purchase and Sale provides otherwise, you are required to give vacant possession of the premises at the time of closing. While vendors are often moving out as the purchasers are moving in, the purchasers are entitled to insist that the premises be vacant at the time the funds and title documents are exchanged. Most often the standard form real estate Agreement of Purchase and Sale requires the Vendor to surrender vacant possession by 6:00 p.m. on the day of closing. Purchasers and vendors frequently make arrangements between themselves which permit the purchaser to move some items into the house or garage before closing or permit the vendor to remove some things a few days after closing, or even that the vendor need not vacate the premises on the day of closing. These collateral arrangements often work well, but you should be careful about making any such agreements. The purchasers are entitled to insist upon their strict legal right to receive vacant possession. Problems can arise when an oral agreement has been made and there is some subsequent disagreement concerning its exact terms.
You may cancel the house insurance coverage on the premises once the transaction has been closed. I do not recommend that you cancel the insurance effective at midnight on the day of closing because the closing may be unexpectedly delayed. Rather, I recommend you contact your insurer the day after closing, to cancel your coverage.
The Mortgagee (Lender) will usually charge a fee for preparing a discharge of your mortgage. The standard fee charged by most mortgagees in the preparation of a discharge of the mortgage, is approximately $200.00 to $350.00. Your lender may charge you a penalty for discharging your mortgage prior to its maturity date. The full amount set out on the mortgagee’s “discharge statement” which may include penalties must be paid from the sale proceeds.
The Ontario government ‘s charge to register a discharge of the lender’s mortgage, is currently $71.30. Most financial institutions are preparing their own discharges of mortgages and adding the government’s registration fees to the balance owing on your mortgage.
In accordance with the Agreement of Purchase and Sale, the balance due on closing will be adjusted so that each party pays its proportionate share of those items which have to be paid for periods of time which begins before the date of closing and end after it. Common examples of items adjusted on closing are municipal property taxes, condominium maintenance fees, fuel oil, land lease payments and assignment costs and mortgage payments and assumption fees where a mortgage is being assumed. The adjustments could amount to several hundred dollars in favour of either party to the transaction depending upon the circumstances, payments made and time of year of the closing.
Agreements of Purchase and Sale almost never confirm a specific closing time. Your Agreement of Purchase and Sale provides for the date of closing, but it does not specify the time of closing on the completion date. There are a number of factors which may affect the closing time; the vast majority of Land Registry Offices in Southern Ontario are now set up for “electronic registration”; The advantage of the electronic registration (e-reg) is that documents are now registered from our desktop and avoids the necessity of having to attend at a local Land Registry Office and stand in line for registration. With the advent of e-reg, the slowest and most unpredictable problem is the movement of money. You will be awaiting the sale funds from the purchaser’s lawyer in order to complete the sale; the purchaser’s lawyer will be delivering the certified closing funds to us via courier and as you may imagine on a very busy real estate day, such as the last Friday of the month, courier companies are overwhelmed with the volume of law firm deliveries. Often, couriers are unable to deliver the funds as fast as clients would like, leading to delay and additional costs for truck rental or moving company fees.
If you are not simultaneously purchasing another property and you are anticipating a cheque for the proceeds of your sale, you will receive a certified cheque for the net proceeds of sale once the transaction has been completed. My final report to you will include complete disclosure of all of the funds I have received and disbursed on your behalf including my itemized fees and disbursements. My report will be provided to you on the day of closing.
If you are simultaneously purchasing another home it is recommended that you to consider arranging a bridge loan with your financial institution. If you are relying on the monies from the sale of one property to complete the purchase of another property, and you do not have a bridge loan in place, you remain potentially vulnerable to unexpected delay in closing your sale which must be completed before your purchase can be closed. A bridge loan represents the net proceeds you expect to receive from your sale transaction. For example, if you expect to receive $100,000.00 clear from your sale and you intend that same $100,000.00 to be used for your purchase transaction, the Bank will require you to sign a bridge loan agreement and a Direction to your lawyer that upon completion of the sale transaction your lawyer will immediately pay off the bridge loan. In exchange for these documents, the Bank will provide your lawyer with a cheque on the morning of closing in the amount of the bridge loan which can be used immediately to close your purchase transaction. The advantage is that you may move into your new home without having to wait for your sale property to be completed. You save the costs in movers, truck rentals not to mention frayed nerves while you anxiously await the closing of your sale.
Depending upon your relationship with your bank, the bank may be willing to waive any administration fees applicable to arranging the bridge loan, or they may have a small administration fee. The cost of the bridge loan far outweighs the emotional cost of worrying about when and if, you may begin moving into your new home.
Alternatively, you could stagger your closing dates so that your sale closes on Thursday and your purchase closes on Friday. Your sale money is immediately available for the scheduled purchase closing the next day. However, this arrangement requires you to leave your household contents on the truck overnight and arrange for yourselves to stay overnight with family, friends or a hotel. These arrangements will have some additional cost. The Family Law Act, in the Province of Ontario, requires all married spouses to consent to the sale of property if it the property is the parties’ “matrimonial home”. A matrimonial home is the home used or occupied by the married couple at the time of the transaction if they are living together or at the date of separation if they are separated. The Family Law Act also provides that there may be more than one “matrimonial home” between married spouses, such as a vacation property, condominium, or cottage. If you are a married spouse, your spouse must sign the sale transaction documents.
At the present time the family law does not grant common-law spouses the same property rights as married spouses. If you are a common-law spouse, the net proceeds of sale will be paid to the registered title owner. If you and your common-law spouse own the property jointly, the net proceeds of sale will be paid equally to each of the common-law spouses.
I will meet with you at least two or three days before the closing date and I will review with you, the calculation of the amended balance due on closing including the Statement of Adjustments, you will be asked to sign the Electronic Transfer authorizations (Deed), you will be asked to review and sign a Vendors’ Declaration confirming your ownership history of the property, confirming you have paid the property taxes, confirm there are no utility arrears, or property tax arrears, confirming you have not sold to the purchasers, any appliances which are subject to deferred payment plans, that you have complied with all of the terms of the Agreement of Purchase and Sale including repairs if required, you will also be asked to sign an Affidavit that there are no outstanding Court Orders against you for the payment of money which takes priority over the net proceeds of sale, you will be asked to review any survey you have provided and confirm there have been no changes to the property since the survey was prepared, and finally, you will be asked to provide proof of your identification with two pieces of identification one of which must be a Driver’s Licence, or Passport. An Ontario Health Card cannot be used as photo identification.
Please Note: This information is not intended to contain advice specific to your situation. There are no cookie cutter solutions. After all, you are reading this information on the internet. Your situation is special and unique and you must be guided by specific individual advice from your Lawyer, Certified Financial Planner or Accountant.