What is the real estate lawyer’s role in a residential transaction?

What is the role of your real estate lawyer?

First and foremost, you are encouraged to retain a real estate lawyer for your purchase or sale transaction as early as possible. If you retain MRK Law, you incur no additional expense for having your lawyer review the agreement of purchase and sale, status certificate or condominium disclosure package. See our blog post titled When should I hire a lawyer for my real estate closing? to learn more.

If your agreement is conditional on solicitor review, and it should be for a number of reasons, the lawyer will ensure that the terms reflect the parties’ intentions and nothing crucial is missing.

Once the agreement is finalized, the lawyer’s role differs depending on if he or she is acting for the purchaser or the seller.

A Lawyer’s role when acting for a purchaser:

The lawyer’s number one responsibility is to ensure the purchaser is obtaining good and marketable title to the property. Purchasers are entitled to receive good and marketable title, i.e. good legal ownership, which essentially means that title, or legal ownership, can be transferred to a new owner without the likelihood that claims will be made on it by another party.

The purchaser is, however, obligated to accept title to a residential property subject to certain restrictions and competing interests that are set out in the agreement of purchase and sale. For example, airport zoning by-laws and municipal easements, agreements and restrictions do not present a valid objection to close by a purchaser, so long as the vendor can demonstrate that the terms of these easements, restrictive covenants or other agreements are in good standing and have been complied with to date.

The lawyer will take a number of steps to ensure that the purchaser does in fact receive good and marketable title on closing. First, he or she will search title to the property to confirm if there are any claims that would affect the purchaser’s ownership interest which the purchaser is not obligated to accept. Examples of this include previous mortgages, construction liens, liens for tax arrears, certain easements or restrictive covenants, or court orders registered on title.  The lawyer will also make sure that the transaction is in compliance with the Planning Act.

The lawyer will also conduct “off-title searches” to look for anything that might affect ownership interest which would not be revealed during a search of title. Examples of these off-title searches include execution searches to confirm there are no court judgements against any of the parties, as well as ordering tax and utilities certificates and zoning and work order reports, which are optional if title insurance is being ordered.

Off-title searches usually result in additional disbursements which can quickly add up as each government institution charges a fee for their own report or certificate. To help alleviate this, the lawyer will, in most circumstances, bind a title insurance policy to give added protection to the purchaser and lender. The protections provided by the title insurance policy will significantly reduce the number off-title searches required and, in the vast majority of cases, the one-time premium for the title insurance policy ends up being cheaper than the cumulative costs of those additional searches and the requirement for obtaining an up-to-date survey. To learn more about title insurance, read our blog post titled What is title insurance? Do I need it?.

Next, the lawyer will send a “requisition letter” to the purchaser’s lawyer requesting completion or compliance with standard terms in the agreement, such as delivery of funds, keys, compliance with municipal agreements and easements, compliance with condominium by-laws and rules, discharge of previous mortgages, and, if required, also requesting deletion or settlement of any competing interests in the property which the purchaser is not obligated to accept.

Your lawyer will also proceed with preparing closing documents and reviewing the closing documents to be signed by the seller to make sure your rights are protected and the documents reflect the terms of the agreement of purchase and sale.

If financing is being arranged, the lawyer will also process the mortgage and prepare and compile documents required by the lender. You will then sign the closing documents when you meet with your lawyer. The lawyer will take care of delivery of funds received from you and the lender to the vendor, pay for disbursements, land transfer tax and title insurance, and attend to completing registration of the deed (or “Transfer”), and any mortgage(s) (or “Charge(s)”). Finally, the lawyer will report to you and the lender and follow up on any post-closing matters such as holdbacks for renovations and discharge of any previous mortgages.

Although the lawyer’s office does take care of administrative tasks such as preparing and processing forms and documents and collecting and disbursing closing funds, the lawyer’s ultimate role is to protect the purchaser and ensure that they obtain good and marketable title to the property on closing.

A Lawyer’s role when acting for a vendor (seller):

The lawyer’s role when acting for the seller is a little different. Ultimately, the lawyer is responsible for ensuring the seller complies with the requirements of the agreement of purchase and sale so that he or she is not liable for any damages after closing because of a breach of any terms of the agreement. A part of this role includes the lawyer reviewing all documents to be signed by the seller to make sure the seller’s exposure for any representations and warranties after closing is limited. That is, the seller should not make any representations or warranties (“promises”) he or she is not obligated to make; he or she is only required to provide what was agreed to in the agreement of purchase and sale.

The lawyer will request particulars regarding any mortgages the seller has on title, and confirm that property taxes and certain utilities that run with the land are not in arrears. Further, he or she will follow up with the seller to make sure conditions in the agreement are complied with. Examples of typical terms include completion of certain renovations before closing, removal of all belongings and garbage before the closing date, payout of any tax or utilities arrears, and so on.

The lawyer will review the purchaser’s requisition letter and reply accordingly. If the purchaser’s requisition is valid, the lawyer will address it and follow up with the seller. If the requisition is not valid, the lawyer will deny it.

The lawyer will then obtain payout statements for mortgages registered on title and provide an “undertaking” to ensure discharge of all mortgages on or soon after closing.

The lawyer will also prepare a statement of adjustments and receive funds in escrow and in trust which are to be released only in accordance with the terms of the escrow arrangement. The lawyer will then release the deed (or “Transfer”) for registration.

On closing the lawyer will attend to payout of the seller’s mortgages, pay out any balance of commissions owing to any realtor involved, and deliver closing proceeds to the seller. Finally, the lawyer will report to the seller, advise the municipality of change of ownership, and follow up with the previous mortgagee (or lender) to ensure timely discharge of the seller’s mortgages.

Again, although the lawyer’s office does take care of administrative tasks such as preparing and processing forms and documents and collecting and disbursing closing funds, the lawyer’s ultimate role when acting for a seller is to ensure the seller’s compliance with the terms of the agreement of purchase and sale, and limit the seller’s exposure for any representations and warranties if they were never agreed to in the agreement.

Given the extent of potential liability to the parties even after the deal has closed, they are encouraged to seek out knowledgeable, experienced lawyers who devote a large part of their practice to real estate law. Although a number of steps are fairly straight forward, issues often arise that require the skill, wisdom and judgment of knowledgeable, experienced real estate lawyers. Anyone looking to retain a lawyer for their real estate closing should consider more than just fees.

This site and any blog articles provide general information on various legal matters. The information is not intended to constitute professional advice or a legal opinion of any kind and may not be appropriate for a specific individual or fact situation. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Further, nothing contained herein or anywhere on the firm’s site shall be inferred to have created a lawyer-client relationship. Readers should always consult with their lawyer in respect of their particular situation.

© MRK Law Professional Corporation (“MRK Law”)

2 thoughts on “What is the real estate lawyer’s role in a residential transaction?”

  1. That is really nice that a lawyer’s responsibility is to ensure the purchaser is getting a good title on the property they are buying. My husband and I would like to purchase some land, and it would be really nice to have help from a lawyer to make sure we are getting the best deal we can. I’m glad that the lawyer will take a good number of steps to ensure that we get a great title. Thank you for the information!

    1. You are welcome. It is absolutely the lawyer’s job to review title and to discuss and review any potential issues with you. If you have a specific intended use for the land you plan to purchase, be sure to let your lawyer know as early as possible in the process.

Leave a Reply

Your email address will not be published. Required fields are marked *