Housing: Buying A Home And The Law
by Gordon Crann and Alan Redway, Q.C.
Gordon Crann is a former East York Councillor, current President of the Rotarian Action Group for Microcredit and principal of Crann Law Firm. Alan Redway, a retired lawyer is also a former Federal Housing Minister, MP for Don Valley East and former Mayor of East York.
Business class immigrants often have the funds to buy a home in Canada. Many other newcomers, however, once they become established in a job, may also want to consider buying a home, instead of renting, especially if they can qualify for some government assistance or insurance to reduce the down payment.
Making An Offer
Most people retain a real estate agent or broker to help them search for and prepare the Offer for a home. Real estate agents/brokers must have a provincial licence and be a member of the Canadian Real Estate Association, which means they have legal obligations and agree to ethical standards.
If you need to get some approval, then the Offer should be conditional for a period of time after accepted by the seller. The following are some common conditions:
- Financing: usually 5 or more days if you need to arrange for a mortgage;
- Home Inspection: usually a week or more to get a home inspection report to tell you how well-built the house is, whether it needs repairs and estimated cost of repairs; and
- Condominium Status Certificate: usually a few days after delivery of certificate to allow your lawyer to review and advise you on status of condominium’s reserve fund, whether seller’s common expense payments are up-to-date and whether there are any unusual rules or regulations.
When preparing the Offer, it is best to list your lawyer’s name, address, and telephone and fax numbers. If you do not have a lawyer, your real estate agent/broker or a friend may be able to recommend a good real estate lawyer for you to use.
When submitting the Offer, you will have to provide a 5% or less deposit which, if the Offer is accepted, becomes part of the down payment on the purchase price. If the Offer is conditional and, at the end of the conditional period, you do not waive the condition, this deposit will be paid back.
If you qualify for a conventional mortgage, then the mortgage will only cover 75% or less of the purchase price, and you will have to provide the balance not covered by the deposit and the mortgage at the closing.
If you can only afford a down payment of less than 25% of the purchase price, you qualify for a high-ratio mortgage, which will require mortgage loan insurance from the Canada Mortgage and Housing Corporation (CMHC).
If you are a first-time homebuyer in Canada and you have a Registered Retirement Savings Plan (RRSP), you can take up to $20,000 from your RRSP for a down payment.
Your bank or credit union may be willing to provide you with a mortgage, or you may retain a mortgage broker to find you a mortgage lender for a fee, usually paid by the mortgage lender.
Searching Title and Closing
Once all conditions have been waived, the Offer becomes a legally binding Agreement of Purchase and Sale.
Your lawyer will do a title search of the property, as well as other searches to find out whether there are any property tax or utility arrears or any executions (debts) against the sellers, in preparation for making requisitions to the seller’s lawyer on or before the requisition date set out in the Offer.
Prior to the date of closing set out in the Offer, your lawyer will tell you the exact amount you will be required to pay to him or her in trust to cover the balance of the purchase price (not covered by the mortgage and thedeposit), land transfer tax plus legal fees and related expenses.
Usually, one or two days before closing, you will come to your lawyer’s office with a certified cheque for the amount required and sign all the mortgage and other closing documents required for the purchase of your home.
After the closing, the lawyer will arrange for you to get the keys and, a few weeks later, provide a written report on your real estate transaction, including copies of the deed/transfer of land and mortgage, for your records.