I thought it would be useful to take a look at some of the folks you may encounter during a typical residential real estate transaction so that you can better understand what role they play in the process, what they do for you and help in determining their value to you.
First up the real estate lawyer – depending on the type of transaction, they can deal with different aspects. If you are purchasing a new build for example, you’ll want to have someone who is familiar with the builder friendly forms so that they, along with your sales rep, can identify the costs that you may encounter, and help put a cap on them before it’s too late and docs are signed off on.
In a typical residential purchase, the lawyer comes into play after you have a firm, accepted Agreement of Purchase and Sale – so you and your agent have negotiated your offer, fulfilled or waived your conditions and now you need to get your required legal representation. First thing – you, and the seller, need to have your own independent counsel – you can’t have the same lawyer representing both sides of the transaction – though in some cases, you may be able to have lawyers within the same firm as long as they can remain arms length.
Some people may think they want to go for the cheapest legal representation because what are they doing other than just shuffling some papers around, filling out some forms and charging big bucks for it. I spoke with Casey Vandeputte, of Vandeputte Law in Hamilton to find out what their role typically is, and what it CAN be.
All real estate transactions begin at the position of caveat emptor — buyer beware. When representing a buyer, our goal is to ensure that the property being acquired is what our client expects. Our focus is therefore on ensuring that the buyer delivers on what is promised in the agreement of purchase and sale, thereby reducing the risk of surprises after the transaction has closed.
When representing a vendor on the other hand, our role is to manage liabilities after closing. The vendor liabilities would typically arise out a breach of representation or warranty regarding the property being sold. Therefore we scrutinize the statements our client is asked to sign to ensure that the statements only extend as far as the agreement for purchase and sale requires.
In either case, our role revolves around the promises made by each party under the agreement of purchase and sale.
A brief list of some of the work we have done in the context of a transaction:
– We made an application to court for removal of a construction lein in order to avoid a delay in closing. In this case I attended court without filing any documents and asked the court’s indulgence to bring the motion. The order was granted and the transaction closed without any delay.
– We made an application to court for a order to sell a matrimonial home without consent of a spouse. In this case the husband had absconded to the other side of the world leaving the wife to pay for a home purchased based on his off shore income. Obtaining consent would have been impossible. He was also in default of his spousal support. We obtained an order for the sale of the home and further order that the sale proceeds to which he would have been entitled were applied against the arrears in support.
– I had a client call me on a Monday evening to ask me to represent her on a farm sale that was closing the same week. We closed the transaction without delay even though we had to deal with a registered claim under the Line Fences Act and a registration regarding mining rights that was on title.
– I have obtained a certificate of pending litigation (CPL) over a property. This matter was referred to me after a transaction had fallen off the rails and my clients ( the purchasers) were dedicated to obtaining the property. The CPL prevented the vendor from selling the property to someone else and I was able to persuade them to sell the property to my clients after all.
– I have assisted clients in negotiating with the CRA to allow for refinancing of a home in the face of a CRA lein where the proceeds of the new mortgage were insufficient to pay all debts. A compromise was reached under which the lein was lifted and partial payment remitted. The clients were then able make their monthly payments and have begun to rebuild their credit.
– We acted opposite an unstable purchaser where baseless issues were raised one after the other in an effort to avoid closing the deal. Our clients needed the transaction to close in order to complete their own purchase. We tendered on the transaction, a process that crystallizes our clients’ rights by showing that our client was ready, willing and able to perform. This step is performed in preparation for suing the obstinate purchasers. They revised their position and agreed to close the transaction and my clients successfully completed their sale and were then able to also complete their purchase and move to their new home.
The title search date is the deadline that the purchaser agrees to, and after which the vendor may refuse to address any title issues. A purchaser’s lawyer will always take careful note of the title search date as any defects in title not raised by this date are deemed to have been accepted by the purchaser. In many cases this could be disastrous and would likely lead to a professional negligence claim against the lawyer.
Title insurance insures over a number of issues including gaps in title, unreported arrears in taxes, unpaid utility accounts that are added to the tax roll and several types of fraud that could occur after the transaction. Title insurance may also provide protection against any work having been done to the property without acquiring the necessary building permits.
A lawyer does not need to purchase title insurance for a client. In place, the lawyer can provide a solicitor’s opinion of title, a lengthy process which provides less coverage for a greater price than title insurance. For example, most lawyers do not inspect the property for renovations performed without a permit.
Title insurance is a one time premium that is well worth the protection it affords.
A savvy client will, when requesting a quote, be aware of the distinctions between fees, taxes and disbursements. Fees are the amount paid for the legal services. Disbursements are costs incurred in performing the transaction that are passed on to the client. Taxes are paid by a purchaser to the government as Land Transfer Tax. Tax is unavoidable. However, you should consider your lawyers fee schedule and standard disbursements. Good questions to ask are:
How much are the legal fees and how much are the disbursements? This question shows how much of the bill is just fees, allowing you to compare apples to apples in other quotes.
Do you include title insurance as a standard disbursement in your quote? This can make a difference of $400-700 in the quote you receive.
Good lawyers will be transparent in how the costs break down and will be happy to explain their account to you. My recommendation is that you work with a lawyer that you are confident will represent your interests, has time to answer your questions and charges a reasonable fee.