In this article we will look at the role of a real estate lawyer when it comes to three different types of transactions: purchase, sale and refinance. We will discuss in detail the tasks and responsibilities of the lawyer in each of the transactions and how they protect your interests. It is important to note that you cannot convey a property without a real estate lawyer. The lawyer must be licensed, and in good standing with the Law Society of Ontario as well as have additional real estate coverage. Picking a real estate lawyer that is right for you can depend on many factors: years in practice, positive feed back and knowledge/professionalism. At the end of the day, you have to pick a lawyer who you are comfortable with but also someone who knows that they are doing. Real estate practice is a complex field and lawyers who do not specialize in real estate or do not have a large volume practice may not be the best candidates to deal with a real estate closing.
What does a real estate lawyer do on a purchase transaction?
One of the most important parts in a real estate transaction is reviewing the agreement of purchase and sale before it is signed by the purchaser. In this scenario, we are able to review and assist in any drafting and make sure that the client’s intensions are clearly noted in the agreement. If the agreement comes to us already signed, we review it nonetheless to confirm what the limitations are set by the agreement.
Once the agreement is reviewed, we look at the type of property and discuss with our client their property goals (will they be living there, renting, renovating etc.) as that will determine on and off title searches that we need to conduct to ensure that our client gets a clean title. We make sure that the searches are done ahead of the specified date in the agreement of purchase and sale to ensure that should we need to conduct additional searches, we have sufficient time to do so before the requisition date. Depending on the type of property, title insurer may require specific searches to be conducted before insurance can be issued. Once all the searches are done and the results reviews, its time to write a letter of requisition. Letter of requisitions is sent to the vendors lawyer discussing search results and requiring the vendor through vendors lawyer to clean title and/or answer specific requests made in the letter as well as the agreement of purchase and sale. For example, the agreement may state that the seller is to provide confirmation that repairs were completed and provide an invoice prior to closing.
The next step is financing the transaction. The bank or financial institution sends mortgage instructions to the lawyer. Upon review of the mortgage instructions, the lawyer would prepare the required legal documents to protect the bank as well as the buyer client. The documents for closings are usually prepared a few days prior to an appointment with the buyer client. At this time, title insurance is ordered as well and final file review is conducted to ensure that the information that will be presented to the client for signature is complete. Lawyer would also reach out to any contact providers to prepare an assumption agreements for rental items that were noted in the agreement of purchase and sale to be assumed by the buyer.
At the appointment, the lawyer will review title searches results, sign closing documents and receive closing funds from buyer client. The lawyer will go through the process of closing the deal with the client and answer last minute questions the clients may have. On the day of closing, the lawyer would receive mortgage funds into their trust account, and wire balance due on closing to the sellers’ lawyer. Once funds and documents are exchanged between lawyers, the lawyer will then convey the property to the buyer client. Prior to registration , the lawyer would do a quick title search to ensure that title is still clean, and proceed with registration if all is well. Municipality and condominium property management, if any, are notified of change of ownership.
After closing, a final report with all the signed documents is prepared and sent to the buyer client as well as the bank.
What does a real estate lawyer do on a Sale transaction?
Similarly to the purchase file, the first thing that a lawyer does on the sale file is review the agreement of purchase and sale, outlining the sellers’ client obligations. The lawyer would request that the seller provide the necessary documents to start such as a mortgage statement, property tax bill with confirmation of payments, any rental contracts or anything else deal specific that was noted in the agreement of purchase and sale. The lawyer would also ask seller the required questions to ensure that the legal documents reflect correct information.
Upon receipt of letter of requisition from the buyers lawyer, sellers lawyer would review the requests and discuss them with their client. If there is something that stands out such as a fraudulent mortgage or an agreement that was registered that shouldn’t be there, it should be addressed immediately and investigated to ensure that it will not impede closing. Statement of adjustments is prepared, discharge statements are ordered and response to requisitions is sent to the buyers lawyer. Letter of requisitions and its response are one of the most important pieces of correspondence between the two lawyers. It will form a foundation for remedies for buyers and sellers.
The next step is preparation of legal documents for clients signatures. The lawyer would request a payout statement from the bank or financial institution, review commission statement and prepare the necessary documents to close the transaction. At the meeting the lawyer would sign all the papers and answer sellers’ clients questions.
On the closing date, the lawyer receives funds and closing documents from the buyers lawyer, and sends vendors documents to the buyers lawyer. Upon review by both lawyer, the transfer is released for registration. The buyer lawyer registers transfer, changing ownership from the seller to the buyer. Once transfer was successfully registered, sellers lawyer can release funds to the vendor after paying out all the items required such as a mortgage, outstanding real estate commission, property taxes if any, and legal fees. The balance of funds is then transferred to the sellers bank account. Final report with all the signed documents, confirmation of payments and change of ownership is sent to the seller as the last step in the sale transaction.
What does a real estate lawyer do on a purchase transaction?
Usually refinance transaction does not require ownership change, however, in some cases ownership of the property may change as a result of mortgage instructions from the bank. The bank may want additional security by adding a spouse or a parent onto title or alternately a person may need to be removed because the owner now qualifies for a mortgage without a co-borrower.
From a procedural stand point, the lawyer would review the mortgage instructions and conduct on and off title searches required by the bank as well as title insurance based on the type of property. Bank instructions may require a lawyer to pay out additional debts besides current mortgage. The lawyer would request statements for payout purposes from appropriate institutions to ensure that the correct balance is paid on closing. Once the search requirements are satisfied and legal documents are prepared, title insurance is ordered, an appointment is set with the refinance client.
At the appointment, the lawyer goes over legal paperwork, lender mortgage documents and all the financial documents for payout purposes. Signed paperwork is forwarded to the lender for their review. Upon lender approval, on the closing date, the bank sends mortgage funds to lawyers trust account. Once received, the lawyer goes on to register the new mortgage on the title of the property. After successfully registering a new mortgage, the lawyer disburses the funds as agreed upon with the client on the trust ledger. Final report with signed documents and confirmation of payments is sent to the refinance client as well as the bank.
As you can tell from the complexity of each transaction a real estate lawyers’ job is not a simple one. While the paperwork makes up a large part of the transaction, should anything go astray you need a competent and knowledgeable lawyer to guide you through the tough parts of the transaction. Issues can occur at any step of the process but a good lawyer would know how to anticipate and deal with the problems. It is a common misconception that real estate lawyer just prepare “paperwork”. The level of responsibility and the due diligence that the lawyer has to conduct on each real estate transaction is vast. Therefore, picking a right lawyer is the most important part in your real estate journey.
If you are planning to buy, sell, or refinance a property in Ontario, having a reliable and experienced real estate lawyer by your side can make all the difference. At MBLAW Professional Corporation, we take pride in offering thorough legal support tailored to each client’s unique transaction. Whether you need assistance reviewing an agreement, resolving a title issue, or preparing for closing day, we are here to help. Do not hesitate to contact us if you are approaching a real estate transaction or simply want professional legal guidance. We would be glad to assist you every step of the way.
