Written by Carole Redmond, Lawyer, Oldham Law
The average person is usually not aware of the lawyer’s role in the purchase or sale of ahome or cottage, which typically has three stages:
i. The Agreement: which involves negotiating, drafting, and signing the agreement
of purchase and sale (the “agreement”);
ii. Due Diligence: which involves title-related searches, arranging title insurance,
and ensuring all conditions and terms to the agreement are satisfied; and,
iii. Closing: successfully transferring title, exchanging documents and keys, and
Agreement of Purchase and Sale
At the very early stage, a buyer and a seller should have a lawyer prepare or review the
agreement of purchase and sale. The lawyer will ensure that the parties have a valid
agreement and that the terms reflect the parties’ intentions and nothing crucial is missing
or likely to cause risks or problems for either party.
The lawyer’s role for the buyer or the seller will differ depending on whom the lawyer
The Buyer’s Lawyer
The lawyer will ensure the buyer is receiving good and marketable title to the property,
meaning that legal ownership of the property can be transferred to a new owner without
the likelihood of any claims being made against the property.
The property is subject to certain restrictions that are set out in the agreement that should
not present a problem on closing, so long as the seller can show that the terms of these
restrictions have been complied with to date, such as zoning by-laws and municipal
The buyer’s lawyer will perform title searches to find any claims that would affect the
buyer’s ownership interest. This could include existing mortgages, tax liens, construction
liens, certain easements or restrictive covenants, or court orders on title. The lawyer will
also make sure that the transaction is in compliance with the Planning Act, which has its
own set of rules pertaining to land use. The lawyer may also arrange for title insurance,
which insures against any defects to the title.
The lawyer will send a “Requisition Letter” to the seller’s lawyer requesting compliance
with the terms of the agreement, such as the delivery of keys, compliance with easements
and municipal agreements, and by-laws and rules, discharge of previous mortgages, and
deletion of any competing interests in the property. The lawyer will also prepare and
review closing documents to be signed by the seller to ensure the buyer’s rights are
protected and the documents reflect the terms of the agreement.
If the buyer will be receiving a mortgage, the lawyer will also prepare the documents
required by the mortgage lender. The lawyer will deliver the funds to the seller, pay for
disbursements, land-transfer tax, and title-insurance, and complete the registration of the
deed and any mortgage(s), and follow-up on any post-closing matters such as holdbacks
for renovations and discharge of any previous mortgages.
The Seller’s Lawyer
The seller’s lawyer ensures that the seller complies with the requirements of the
agreement to avoid a possible breach of any terms. This includes reviewing all documents
to be signed by the seller to make sure that the seller’s exposure for any representations
and warranties after closing is limited to only what is required under the agreement.
The lawyer will also obtain information of any mortgages that the seller has on title, and
confirm that the property taxes and utilities are not in arrears. The lawyer will also make
sure conditions in the agreement are complied with before closing, such as completing
renovations, removing all belongings and garbage, paying out outstanding taxes or
utilities, and so on.
The lawyer will respond accordingly to the buyer’s Requisition Letter, depending on the
nature of the requests made. The lawyer will then obtain payout statements for mortgages
registered on title and provide an “undertaking” (a promise) to ensure discharge of all
mortgages on or soon after closing.
The lawyer will prepare a Statement of Adjustments and receive funds in escrow, which
will be released in accordance with the terms of the escrow arrangement. The lawyer will
then release the deed for registration. On closing, the lawyer will payout the seller’s
mortgage(s), realtor commissions, and deliver sale proceeds to the seller. Finally, the
lawyer will report to the seller, notify the municipality of the change in ownership, and
follow-up with the previous mortgage lender to ensure timely discharge of the seller’s
mortgage (if any).
Whether you are buying or selling, a real-estate lawyer offers peace of mind and ensures
your interests are protected.