Standard Purchase Transaction

Standard House and Condominium Purchase Transaction in Ontario

1. Pre-Purchase Preparation

• Budgeting: Before you choose to purchase new-build or resale property or condominium unit, please ensure to determine your budget based on your financial situation, including income, savings, and expenses.
• Mortgage Pre-Approval: If you intend to obtain a mortgage for buying your property, ensure to have a mortgage pre-approval from a lender to understand how much you can borrow and at what interest rate.

Finding a Property

• Real Estate Agent: You can take assistance of a real estate agent to help you find properties that meet your criteria.
• Property Search: Look for properties within your budget and preferred location using online real estate property search tools and websites such as realtor.ca.

Making an Offer

• Offer to Purchase: Once you have found a property that you are interested in buying, submit an offer to purchase to the seller, outlining the price and conditions with the help of your realtor.
• Negotiation: Negotiate terms with the seller, including the purchase price, closing date, and any conditions (e.g., home inspection). Your realtor can help you with that and if needed, you can seek legal advice from your real estate lawyer as well.

2. Agreement of Purchase and Sale (APS) to Close

Conditional Period

• Home Inspection: Conduct a home inspection to identify any potential issues with the property with the seller’s permission along with your realtor and a professional before you sign the APS. If there is any issue/repair to be fixed on the property, please outline them in form of conditions of the closing on the APS.
• Financing: Please ensure to finalize your mortgage with your lender to ensure there’s no last minute back and forth and you have enough financial resources to make the purchase without causing default or additional costs.
• Legal Review: Have your real estate lawyer review the purchase agreement and ensure all conditions are met before the revocation date that is mentioned on the APS so that any needed amendments can be made in the APS before the APS is finalized.

3. Closing the Deal

• Title Search: Your lawyer will conduct a title search to ensure there are no liens or encumbrances on the property, and if there are, your lawyer will notify the seller lawyer to initiate removal of the said encumbrances.

• Title Insurance: On your behalf, your real estate lawyer will purchase a title insurance policy to protect you against potential title defects, fraud, survey errors, and other issues not discovered during the title search and before closing. If you are obtaining a mortgage with the purchase, then your lawyer will purchase a title insurance policy for the lender as well as per the lender’s requirements. Title Insurance Fees is a one-time cost until you change ownership status of the property and/or get a new mortgage and refinancing on your property, at which time you will need to purchase another title insurance policy and pay a one-time fees for that policy with the new purchaser/lender details.

• Fire/Home Insurance: Before closing, you will need to procure a fire/home insurance policy to cover the replacement cost of your property. If you are obtaining a mortgage on the subject property, it will have your mortgagee’s details as first/second/third loss payee depending on the mortgagee’s interest on the property as required by your lender. If you are not obtaining a mortgage for purchase, you will still need to have a home insurance policy to protect yourself. Please ensure, all the purchasers are noted as insurers in the policy, the policy should be effective from the closing date and the insured property’s address is correct along with correct postal code.

• Land Transfer Tax: Every purchaser pays a land transfer tax on the property they are buying in Ontario. The tax is calculated based on the purchase price of the property. Rates vary and are subject to change, so consult current guidelines. First-time home buyers, who purchase the property as their primary/principal residence and don’t rent it out, are entitled to land transfer tax rebate of up to $4,000.00 outside City of Toronto and upto $8,475.00 for properties purchased in City of Toronto.
• Registration of Transfer: Your lawyer will register the Transfer of the property at the local land registry office or electronically via Teraview and there will be a registration fees payable to the land registry during registration.
• Disbursement of Funds: The lender will disburse the mortgage funds to your lawyer’s trust account with your direction on the closing date to initiate the closing.
• Charge Registration: Your lawyer will prepare and register the mortgage document, called Charge with the land registry office along with the Transfer.

5. Ownership and Title – Know the Types of Ownership

• Joint Tenancy: Ownership is shared equally in joint tenancy, making each owner 100% owner of a property, and upon the death of one or more owners, their share automatically passes to the surviving owner(s). One thing to remember here is that if you are a first time home buyer and you are not a spouse or your spouse has never owned a house before and one or more of the purchasers with your are not first time home buyers, it’s recommended to register yourself as tenant in common with specific shares, based on which your land transfer tax rebate will be determined. In such situation, you won’t be eligible for first time home buyer rebate if you get joint tenancy.
• Tenants in Common: Ownership shares can be unequal in Tenancy in Common, for example 30% for one buyer and 70% to another buyer, and upon the death of one or more of the owners, their share passes to their heirs or as directed by their Will.

6. First-Time Home Buyer Rebate Eligibility

• Criteria: To qualify for the first-time home buyer rebate, you must be a Canadian citizen or permanent resident, or one eligible to buy a property in Ontario and you (or your spouse) must not have owned a home anywhere in the world. Additionally, the home that you are buying should be your primary residence only.
• Rebate Amount: The rebate can be up to $4,000 or $8,475.00 on the Ontario land transfer tax and Toronto land transfer tax, depending on where you are buying a property in Ontario.

Purchasing a home or condominium in Ontario involves several steps, from financial preparation to closing the deal and registering ownership. It is crucial to engage professionals such as real estate agents, lawyers, and mortgage brokers to guide you through the process and ensure all legal and financial obligations are met.

For more detailed information and resources, visit the Ontario Ministry of Government and Consumer Services website or consult with our lawyers today.