Thank you for consulting this firm to represent you in closing your purchase. We will review your Purchase Offer/Agreement and will attend with thoroughness to the matters required for closing. We will also assume that you have read the agreement and any other documentation carefully and will consult us if any matter is incorrect or needs clarifying. This memo covers most of the important issues you should be aware of in making what is often one of your life’s biggest investments, but of course not all items discussed here may apply to your transaction.

1. WAIVING CONDITIONS. Many offers contain conditions which the Realtors insert to protect you, such as conditions which give you the right to arrange satisfactory financing, sell your present home, obtain a home inspection report, etc. Please remember not to waive any such condition until you have written confirmation that the condition has been fulfilled to your satisfaction. Also, if you are renting, do not forget about your legal obligations to your present Landlord.

2. PROFESSIONAL BUILDING INSPECTION. Please remember that it is not part of a lawyer’s responsibility to inspect the property or arrange for any warranties regarding the physical condition of the building, except for purchases from builders and except as set out in the purchase agreement. A professional inspection of resale homes, including a urea formaldehyde foam insulation (UFFI) test, is recommended to ensure that the buildings and improvements on the property are safe and well-built. If the property is not on municipal services, well(s) and septic systems must also be tested.

3. PLAN OF SURVEY. We will ensure that your legal title is good, but our title opinion will be subject to any discrepancies or encroachments revealed by an up-to-date survey of the property. The surveyor certifies that the physical extent and size of your property in the field are correct and that proper sideyards, setbacks, etc., exist without encroachments, easements, etc. He also confirms the location of all improvements, including buildings, fences, hedges, pools, etc. Please advise as soon as possible regarding the availability of a recent survey showing all improvements.

4. PRE-CLOSING INSPECTION. Please confirm arrangements to inspect the premises yourself on the morning of the closing day. It is the policy of this firm not to close a client’s purchase unless (s)he has made a thorough inspection of the premises on the morning of closing, or unless we have firm instructions to the contrary. The reasons for this are obvious: items that are supposed to be left (appliances, etc.) are often missing, or the opposite — things that are not supposed to be there (like garbage, etc.), are still there. More importantly, the premises may 

have been damaged in some way by flood, fire, vandalism, etc., since the last time you inspected the property, and we should obviously know about such a situation before the actual closing. You will also be able to make sure the vendors (or tenants) will be out that day. 

Although we do get covenants and undertakings from the vendor with respect to these issues, if there is a problem, and we do not find out until after closing, you may be faced with a court case to collect from the vendor. Again, it is obviously better to find out beforehand and negotiate a settlement to cover the problem(s). Unfortunately, even after all these years, the law is not settled on whether a purchaser has the right to inspect the premises on the morning of closing where this right is not provided for in the Purchase Agreement. Therefore, we are advising you of the situation now, so that you can make arrangements with the vendor and/or Realtors to inspect the premises on the morning of closing, before we turn over your cheque to the Vendor’s solicitor. Please confirm the arrangements you have made for this inspection as soon as possible.

5. FINANCING. If you are arranging financing, please ensure that the lender uses our office to close for them as well to keep costs down. Please confirm what amounts will be deducted from the advance and what conditions must be satisfied (for example, appraisal, debt consolidation, etc.). For new homes, those “high ratio” insurance fees can sometimes be avoided by using creative financing techniques that depend on your personal situation and the nature of the transaction (for example; RRSP’s, small family loans, assumable mortgage, renovation credits, small vendor take back mortgages, small unsecured personal lines of credit, etc.).

6. TAX ASPECTS: For first time home buyers, we need information on any Ontario Land Transfer Tax Refund Plans, etc. Other tax angles may include using an RRSP for financing (equity and/or mortgage). Generally speaking, “used” or re-sale residences (but not chattels) are exempt from GST. For new homes, the builders generally include the GST in the purchase price and take whatever rebate may be applicable.

7. TITLE: We will confirm how you wish to take title to the property and ask for birthdates. We will discuss matters such as creditor-proofing your property, avoiding probate and estate tax on an owner’s death, guaranteeing financing, spousal rights, etc. Please call as soon as possible to provide full names and birthdates.

8. PRE-PURCHASE RESEARCH: Unless they are registered on title, our searches will not reveal any pending municipal issues or planned land uses nearby which may adversely affect property values (such as re-zonings, road widenings, industrial noises and smells, schools, walkways, group homes, mail delivery, etc.). You and your realtor should make these broader inquiries before submitting your offer to purchase. Please remember that it is not part of a lawyer’s responsibility to inspect the property or to arrange for any warranties regarding the physical conditions for the building, except as set out in the Purchase Agreement.

9. INSURANCE: Please arrange sufficient liability and fire insurance for the guaranteed replacement cost of the building and contents, effective as of the closing date, and ask your agent to forward a “Binder Letter” to our office showing all mortgagees (private and institutional).

10. TITLE INSURANCE: Another matter we will have to consider before closing is the question of whether you should purchase title insurance. Although it is an extra expense for you at closing, the cost is minimal to cover you and your mortgage lender for a normal residential transaction. Unlike other insurance, it is a one-time premium, and does not repeat every year. It covers you for many problems not shown in any of the surveys, searches, reports, etc., that we review on your behalf, and it covers you from any mistakes made by building and zoning staff, surveyors, etc. The coverage is also wider than that provided by our legal opinion.

You get the peace of mind that if any problem does come up, you may be able to claim on your title insurance instead of having to finance a lawsuit against the municipality, surveyor, lender, etc. In addition, for problems where you have no recourse to court — such as anything not disclosed by an up-to-date survey — you should be covered by title insurance, as no other party is responsible to you. Although the purchase of title insurance may not be absolutely necessary for every purchase, it is the policy of our firm to recommend that you purchase this coverage.

11. ADJUSTMENTS: The financial statement prepared for closing is called the Statement of Adjustments and gives credits to you and to the vendor for amounts paid by either one of you which are chargeable to the other party. For example, you will get credit for your deposit(s). Continuing expenses for the property, such as realty taxes, must also be adjusted between the parties. Utility meters must be read and billed to the vendor. Please remember to contact the utility companies (hydro, gas, water) to arrange to open your own accounts for these services, effective on your closing date. If you are buying from a builder, your contract will almost always provide for many extras that will be charged to you – these are items such as the ONHWP fee, meter hook-up charges, etc. When you come in to sign your closing documents, we will review this statement with you in detail.

12. CLOSING FUNDS: Also please arrange for closing funds sufficient to cover the closing balance with adjustments, land transfer tax, legal fees and disbursements, after net mortgage advances. We will confirm the exact amount with you shortly before closing and this amount must be brought in, no later than the morning of the closing day, by certified cheque or bank draft, payable to our firm in trust.

13. LEGAL FEES: We believe our fees are competitive and reasonable but we do not try to attract business from people who are “shopping” for the cheapest lawyer they can find. The old adage that you always get what you pay for is true here too. A thorough lawyer who pays attention to your file can often save at least the amount of his fees with just a few words of advice. Sometimes those few words can even save your whole investment; so it can be pretty foolish to try to “save” a small amount on such a major investment by retaining a lawyer who does not give your file his full attention. Fees generally go up with the purchase price because of the insurance/responsibility factor for the lawyer. We strive to do a thorough job for a reasonable price and make sure we give our clients good value for their money.

14. DISBURSEMENTS: Disbursements are costs we incur for the title search, all clearance letters, registrations, etc., and are always in the $800.00 range. This does not include title insurance and land transfer tax, which is .5% for the first $55,000.00 and 1% for the next $250,000.00 and 1.5% for any balance up to $400,000.00, and then 2% for the balance of the purchase price for a residential transaction. These expenses are not controlled by the lawyer and are necessary no matter what firm you retain – if they are doing a proper job for you.

15. CONDOMINIUMS: All of the issues discussed in this memo apply to condominiums, except that your homeowner insurance only covers improvements, contents and liability. In addition, for new projects, you will have a short (hopefully!) occupancy period during which you pay rent pending registration of the Condominium Declaration. Townhouses are relatively straightforward, but for condo apartments, please find out as much as possible about the state of repair of the building and parking garage to make sure they are not going to require massive uninsured repairs during your ownership. Structural defects affecting roofs, exterior cladding, parking garages, etc., can require expenditures in the millions of dollars. Every Condominium Corporation is required by law to maintain a reserve fund for repairs, but some are very inadequate.

16. COMMERCIAL PROPERTY: For vacant land and commercial/industrial purchases, all of the above and many other issues such as zoning, environmental audits, GST, financing and leasing must be covered. These transactions are very complicated and far beyond the scope of this memo. They should not be entered into without advice from your lawyer (and tax accountant) as well as from your realtor.

17. UTILITIES: As most utility companies will no longer accept requests from solicitors, please remember to contact the hydro, water and gas companies to have the meters read on the closing date, with final billings to be forwarded to the sellers, and to arrange to have the accounts set up in your name(s) as of the day of closing. If you have purchased a property with rental equipment (ie: hot water tank), please contact the rental company to determine if an Assignment of Rental is required to be entered into by you. 

As a further service for our clients, we have prepared memos on Wills and Powers of Attorney, and if you wish copies of these for your personal review and information, please advise.

Should you have any questions or concerns with regards to the foregoing or your transaction, please do not hesitate to contact myself or my law clerk, Diana at diana@daylaw.ca.

Yours truly,

Richard B. Day

 © Richard Day – March 2018 Client Advisory