A purchaser has a right under the Agreement of Purchase and Sale (“APS”) to submit requisitions, meaning making enquiries of vendor to remedy “issues” on title. Requisitions may include matters of title for example objections dealing with title, conveyancing for example matter that can be rectified by a third party at vendors request such as an old mortgage, zoning, building by-laws or work orders or specific matters noted in the Agreement of Purchase and Sale. In some cases, the purchaser may put a condition in the APS to have repairs completed prior to taking possession of the property or have a large item removed which would otherwise remain on the property. The objective of title searches and requisitions is to preserve and protect the rights of the purchaser. The vendor must pass good registered title to the purchaser, and the purchaser cannot be compelled to purchase a property with “bad/clouded” title.
The Importance of Timely Requisitions and Title Searches
There are two clauses in the standard form APS provided The Ontario Real Estate Association (OREA) that address the timeline for submitting requisitions, what matter the purchaser must accept and what happens if the vendor cannot adequately answer the requisitions or remedy the matter requisitioned. Paragraph 8 of the APS indicated the date and time by which the requisition must be submitted. It is by this date that a real estate lawyer must conduct title and submit their objections to the vendor’s lawyer.
- TITLE SEARCH: Buyer shall be allowed until 6:00 p.m. on the … day of …, 20.., (Requisition Date) to examine the title to the property at Buyer’s own expense and until the earlier of: (i) thirty days from the later of the Requisition Date or the date on which the conditions in this Agreement are fulfilled or otherwise waived or; (ii) five days prior to completion, to satisfy Buyer that there are no outstanding work orders or deficiency notices affecting the property, and that its present use (…) may be lawfully continued and that the principal building may be insured against risk of fire. Seller hereby consents to the municipality or other governmental agencies releasing to Buyer details of all outstanding work orders and deficiency notices affecting the property, and Seller agrees to execute and deliver such further authorizations in this regard as Buyer may reasonably require.
Your real estate lawyer must submit requisitions in accordance with the time stipulated in the APS. It must also be received by the vendor’s solicitor by the specified time. Usually, paragraph 8 of the APS has the deadline as 6pm. If the requisitions are not submitted on time, the purchaser is deemed to have accepted the vendor’s title. Because of this practice, a lot of real estate lawyers still use a fax machine to submit their letter of requisitions as fax provides confirmation that transmission of document was successful. While objections must be brought forth to the vendors solicitors within the allocated time in paragraph 8 of the APS, off title searches have a bit more flexibility.
Dealing with Off-Title Searches and Issues
Off title searches usually done by way of a letter inquiry take longer to complete than a title search and title related issues as the letter is sent to municipality or relevant authority. The time for off-title searches such as tax certificate, zoning search, work orders and if the property can be insured is longer and ends 30 days after the specified requisition date but at least 5 days prior to completion date. Requisitioning off title matters at least 5 days prior to the date of completion allows vendors lawyer time to respond and remedy the issues. It is then possible for a solicitor for the purchaser, once off-title issue is discovered, to requisition it to be remedied even after the deadline noted in the APS.
10. TITLE: Provided that the title to the property is good and free from all registered restrictions, charges, liens, and encumbrances except as otherwise specifically provided in this Agreement and save and except for (a) any registered restrictions or covenants that run with the land providing that such are complied with; (b) any registered municipal agreements and registered agreements with publicly regulated utilities providing such have been complied with, or security has been posted to ensure compliance and completion, as evidenced by a letter from the relevant municipality or regulated utility; (c) any minor easements for the supply of domestic utility or telephone services to the property or adjacent properties; and (d) any easements for drainage, storm or sanitary sewers, public utility lines, telephone lines, cable television lines or other services which do not materially affect the use of the property. If within the specified times referred to in paragraph 8 any valid objection to title or to any outstanding work order or deficiency notice, or to the fact the said present use may not lawfully be continued, or that the principal building may not be insured against risk of fire is made in writing to Seller and which Seller is unable or unwilling to remove, remedy or satisfy or obtain insurance save and except against risk of fire (Title Insurance) in favour of the Buyer and any mortgagee, (with all related costs at the expense of the Seller), and which Buyer will not waive, this Agreement notwithstanding any intermediate acts or negotiations in respect of such objections, shall be at an end and all monies paid shall be returned without interest or deduction and Seller, Listing Brokerage and Co-operating Brokerage shall not be liable for any costs or damages. Save as to any valid objection so made by such day and except for any objection going to the root of the title, Buyer shall be conclusively deemed to have accepted Seller’s title to the property.
Depending on the market conditions, the purchaser may choose to walk away from the property if they are unwilling to accept the title defect and the vendor is not willing or able to remedy it. While not noted in paragraph 10 as a solution to a requisition, the purchaser could request an abatement of the purchaser price from vendor. The abatement by no means will resolve the issue, but the transaction will be completed with both vendor and purchaser accepting abatement as a solution to an issue that would otherwise void the contract.
It is important to note that issues that go to the root of title may be raised after the requisition date has passed. These types of issues deal with vendors ownership rights and their authority to convey title.
Navigating Complex Title Issues with Title Insurance
With the introduction of Title Insurance, the amount of off-title searches by purchaser’s solicitor has been substantially reduced. Saving the purchaser money as well as time. The title insurer has a list of mandatory searches that a purchaser’s solicitor must conduct based on the type of property that is being purchased. However, some solicitors go beyond the minimum requirements of title insurance as dealing with post-closing issues is time consuming and the issue may form a lien on title. For example, many lawyers conduct a property tax search to ensure that there are no arrears on closing. If it is discovered that property taxes are in arrears, this can be requisitioned and resolved prior to closing the transaction. If it is discovered after closing that property taxes were not paid by the vendor, the tax department has the authority to place a lien on the property. The purchaser could put a claim through title insurance and be covered for the loss. This, however, while not a complicated process, still requires purchasers time to submit the claim and deal with the unpleasant situation. As such conducting a property tax search, while not required, is highly beneficial and recommended by most real estate lawyers.
Title insurance is also extremely helpful in dealing with an objection on title that cannot be resolved. For example, an old mortgage from 1950’s belonging to previous owners is still showing on title. The previous owners have now passed and the bank where the mortgage was borrowed from no longer exists. The purchasers’ solicitor would requisition the old mortgage to be discharged from title. The vendors solicitor would not be able to remedy the issue as the charge belongs to a previous owner, third party and the only solution would be to contact title insurance. It is important to note that title insurance does not automatically cover title defects, the enquiry must be made and consent to insure over the issue received. It is important to note that title insurance does not fix the issue but simply insures the purchaser over the risk. In the above example, the old mortgage would remain on title, but should the bank who is owed the mortgage make a claim to the mortgage, title insurance would defend the purchaser.
The role of a real estate lawyer for the purchaser is complex and as such the lawyer should commence title and off-title searches upon receipt of the APS. In some cases, searches may be complex or may take more time to conduct. Once all the searches are complete the lawyer must conduct a thorough review and then draft a letter of requisitions. As this is a lengthy process, if not started ahead of time may lead to a purchaser’s solicitor missing the deadline for submitting requisitions which could have grave consequences for the purchasers.
Ready to ensure your real estate transactions are secure and legally sound? Connect with MBLAW today for expert guidance in title searching and conveying clean title. Our experienced team is here to protect your property rights and make your real estate experience worry-free.
