When you purchase a home, you must hire a lawyer to carry out the transaction, but you may be left wondering what you are paying them to do. Below is an overview of what your property lawyer does for you.
1. Searches the title of the land
Your lawyer performs a title search. A title search is the lawyer’s way of checking the land you are buying, not the house sitting on the land. The act of searching title looks at the public record regarding the land you are buying and ensures the seller is the true owner with the right to sell the land. The title search also looks at various characteristics of the land. These characteristics may include, but are not limited to, the following:
- Restrictive covenants: restrictions on the use of the land;
- Easements: the right for you to use someone else’s land, or someone else’s right to use the land you are buying for a particular purpose; and
- Access: whether you access the land by a private or public road.
Your lawyer may need to know more about how you intend to use the property to determine whether the characteristics of the land found in the title search are acceptable to you. They will ensure that you have a legally enforceable right to access the land you are buying. For example, if you access the land by a private road, your lawyer will ensure that you have an easement to guarantee access over the private road you use.
2. Checks for judgments and liens on title
When your lawyer conducts the title search, they will check for any existing mortgage on the property. Your lawyer will ensure the seller’s lawyer pays out and releases the mortgage.
Your lawyer also checks for legal judgments against the seller, such as where they have debts owing that could be placed as liens on the property. This ensures when you take ownership of your new home on the closing date, there are no outstanding liens on the property.
3. Communicates with the seller’s lawyer
Your lawyer will communicate with the seller’s lawyer regarding aspects of the transaction, such as how you wish to take title (under your name personally or in a corporation, by joint tenancy with right of survivorship, or as tenants-in-common).
Your lawyer will receive a commitment (called an undertaking) from the seller’s lawyer to pay out any existing mortgage(s) on the property, and have any mortgages released from the property. If there are any problems discovered in the title search, your lawyer will let the seller’s lawyer know what needs to be fixed prior to closing.
4. Represents your mortgage lender
Your lawyer will also have a limited scope to represent your lender when you purchase. Your lawyer will assist your lender to the extent required to have the mortgage funds provided for your purchase. If there were ever a conflict of interest, your lawyer would not choose your lender’s interests over yours.
The tasks required by your lender are typically items like checking your ID, ordering title insurance, and ensuring taxes are paid up to date.
As you near your closing date, your lawyer will request the mortgage funds. On the closing date, before you will be able to get the keys to your new home, your lawyer will receive the funds in their trust account and send the money to the seller’s lawyer.
5. Orders title insurance
The title searches your lawyer conducts will work to ensure you take clear title. However, title insurance protects you from potential loss due to defects in title your lawyer could not have reasonably been able to detect in their title search.
A few examples of title insurance claims are:
- There is a mistake in the tax certificate stating taxes have been paid where they were not. You take ownership of the property and now you are responsible to pay the taxes owing from the time a past owner failed to pay. Title insurance pays these taxes.
- There are restrictive covenants requiring that no trees be cut down. A previous owner cut down trees and now the covenants are being enforced against you. Title insurance will pay to have the new trees planted.
Title insurance for both you and the lender is not strictly required for all transactions, but your mortgage lender will usually require you purchase a policy protecting them. The cost of obtaining an owner policy along with a lender policy is usually relatively low, and is charged as a one-time fee. For more information on what title insurance is, see this article.
6. Checks taxes
Your lawyer will check with the municipal tax office to ensure the seller has paid any property taxes they owe, so you will not be liable for these taxes when you take ownership of your new home. Your lawyer may call the tax office and check over the phone, if this is permitted, or they may order a tax certificate. The price of checking on taxes varies by municipality. If you are buying a property in the Halifax Regional Municipality, a tax certificate is required and it costs $75.00.
7. Calculates closing costs
A statement of adjustments will be prepared a few days before your closing date. The statement of adjustments calculates the amount of money to be sent to the seller in order to close the transaction. This will include the purchase price of the property, and the municipal property taxes will be adjusted so you will be paying the taxes starting on the day after the closing date. If the seller has paid the taxes beyond the closing date, there will be a credit back to the seller. If there is an oil tank or propane tank on the property, you will pay the seller for a full tank on the statement of adjustments.
The statement of adjustments will also include closing costs such as Deed Transfer Tax, Registration of Mortgage, Registration of Deed, Title Insurance, legal fees, and disbursements (e.g., copies, couriers, electronic searches, tax certificate, etc.). With all adjustments calculated, your lawyer will indicate the total amount payable, taking into account the funds received from your mortgage lender and your remaining down payment.
8. Receives your mortgage funds from your lender
Your lawyer will work with your lender to obtain your mortgage funds. The lender will send detailed instructions describing what information your lawyer will be required to obtain from you and how the mortgage document should be prepared. Then your lawyer will request the funds from the lender.
On the closing date, the lender will send the mortgage funds to your lawyer’s trust account. The funds will be held in the trust account before being transferred to the seller. Law firms’ trust accounts are heavily monitored to ensure your money is secure and properly handled.
9. Checks the deed and transfers funds
The seller will send your lawyer the paper deed that transfers ownership of the property to you. Your lawyer checks the deed to ensure it spells all names correctly, states the seller is conveying the property, correctly describes the property, and grants you the full right to the property.
Once your lawyer has confirmed the deed is in proper form, they will transfer the funds for the purchase.
10. Registers your deed and your mortgage
Finally, after the property has closed, and you have your keys and are moving in, your lawyer will register your deed and your mortgage with the land registry. While registering these two documents, your lawyer will also pay the Deed Transfer Tax you owe from the purchase.
The Arcus Legal property team aspires to provide the smoothest transaction possible for our clients. We will communicate with you at every step to ensure you understand and are prepared for what your transaction will entail. If you’re buying a new home, speak to property paralegal Tracey DeAdder (firstname.lastname@example.org, 902-706-4550 ext 206), who will connect you with one of our property lawyers, or contact Amanda Forsey directly (email@example.com, 902-706-4550 ext 104).
– Written by Amanda Forsey