Completing a Home Purchase – A Buyer’s Guide

So you have decided to buy a new home.  The question is, what happens after you sign the Contract?  If you don’t know the answer to that question, don’t worry, you’re not alone.  Most new buyers are not aware of the extent of the work actually done by their lawyer to ensure that they obtain title to their new home on the terms that they had agreed to in the Contract.

This Guide has been prepared for you as the buyer and will attempt to simplify the “conveyance” process and take the mystery out of all those documents that your lawyer will present to you for your signature.

I.     GATHERING INFORMATION

After receiving instructions from your Realtor, the first step taken by your lawyer will be to gather information concerning the property that you are about to purchase.

First, a title search of the property, as well as the relevant sub-division plan, is ordered from the Land Title Office (the “LTO”).  A review of the search will indicate who legally owns the property now and what charges are currently registered against it.  The charges may be financial, (e.g., a mortgage to be removed by the seller) or they may be non-financial (e.g., an easement or right of way) in which case the charge must be reviewed with you to ensure that it will not interfere with your intended use of the property.

The sub-division plan, which shows the location of the property relative to adjacent properties, will be reviewed with you to ensure that the property that you have agreed to buy is actually the same property that you intended to buy.

Second, your lawyer will request tax information from the particular municipal authority.  This search will reveal the amount of the annual property taxes and whether or not those taxes are up to date or are in arrears.  This specific information is necessary so that an adjustment can be made between the seller and you to ensure that each party pays its fair share of the current year’s taxes.

Third, if you are going to rely on mortgage funding to complete your purchase then you should request your mortgage lender to instruct your lawyer to prepare and register the mortgage.  Thereafter, the mortgage lender will forward the mortgage instructions to your lawyer for preparation and registration.

Fourth, assuming that you are relying on a mortgage loan to complete your purchase, the mortgage lender will require your lawyer to ensure that fire insurance coverage on the home has been arranged before it will release the mortgage funds.

Finally, it may be necessary to order a site survey as prepared by a licensed surveyor.  Essentially, a site survey is a line drawing that outlines the boundaries of the property and the house as it is situated within those property boundaries.  A site survey is only necessary if it is requested by the mortgage lender to confirm that the buildings on the property meet Municipal set-back requirements and to ensure that the buildings do not encroach on neighbouring properties.  Of course, you may have your own reasons to confirm this information and can request that a site survey be prepared.  If you prefer not to purchase a site survey, most mortgage lenders will accept a title insurance policy instead of a site survey.

It should be noted that if you are buying a strata lot (i.e., a townhouse or a condominium) the LTO will require that your lawyer obtain and file certain additional documents.  The intent of this additional requirement is to protect you, the buyer.

 II.     PREPARATION OF THE DOCUMENTS

After your lawyer has gathered all the necessary information, the next step is to prepare the documentation required to complete the conveyance of the property and the registration of the mortgage.  In British Columbia, the standard form Contract of Purchase and Sale stipulates that it is the buyer’s responsibility to prepare all the documentation necessary to complete the transaction.  This means that your lawyer will prepare all the documentation required, at your expense.

For the seller’s signature your lawyer will prepare a Form A Transfer (the “Transfer”), a Seller’s Statement of Adjustments and documents concerning the applicability of GST/HST to the particular sale and a statutory declaration concerning the seller’s residency (altogether, the “seller’s documents”).  The Transfer, when signed and registered in the LTO, is the document that will actually transfer title in the property from the seller’s name to your name.  The Seller’s Statement of Adjustments is a formal statement that will set out all of the financial adjustments to the sale price to be made between you and the seller and will also serve to “calculate” the exact amount the seller will be entitled to receive from you as net sales proceeds.

Next, your lawyer will prepare the Buyer’s Statement of Adjustments, a Property Transfer Tax Return and a Form B Mortgage (the “Mortgage”) for your signature.  Similar to the Seller’s

Statement of Adjustments, the Buyer’s Statement of Adjustments will adjust the purchase price and it will also calculate the amount of money required from you to complete the purchase.

Preparing the Mortgage, on behalf of the lender, and advising you on its content and consequences will place your lawyer in a conflict of interest.  This arrangement is the normal situation for a standard conveyance and mortgage transaction.  However, this conflict situation is allowable only if you have been made aware of the existence of the conflict faced by your lawyer and you have consented to it in writing.  The alternative to consenting to this arrangement is for you to pay for a second lawyer to act for the mortgage lender alone.

III.      SIGNING THE DOCUMENTS

After completion of the documentation, the seller’s documents are sent to the seller’s lawyer for signature by the seller.  It is at this time that undertakings (i.e., promises or guarantees) are arranged between your lawyer and the seller’s lawyer.  These undertakings are relied upon by real estate lawyers to close the transaction and to ensure that upon the seller’s lawyer receiving the net sale proceeds from your lawyer, the seller’s lawyer undertakes (or promises) to pay out immediately any financial charges that were registered against the property.  Without the reliance on undertakings, the closing process would be very complicated and cumbersome.

Finally, your lawyer’s office will contact you to arrange a meeting so that you and your lawyer can review the documents that you will have to sign: the Buyer’s Statement of Adjustments; the Mortgage; the Property Transfer Tax Return; and any other necessary documentation.  After signing the documents, but before the date for completion of the purchase, you will be asked by your lawyer to bring in any funds required to add to the mortgage proceeds in order to complete the transaction.  These funds must be in the form of a certified cheque or a bank draft made payable to your lawyer – in trust.

IV.     REGISTRATION AND COMPLETION

On the completion date, as set out in the Contract of Purchase and Sale, your lawyer will register the Transfer, the Mortgage, the Property Transfer Tax Return, as well as all other necessary documents, in the LTO.  The strict registration procedures followed by your lawyer on that day are designed to ensure that, at the end of the day, you will be the registered owner of the property, subject only to your lender’s mortgage and the seller’s financial charges which will be cleared from title by the seller’s lawyer, pursuant to the undertaking mentioned above.

After receiving confirmation from the LTO that the Transfer and Mortgage have been successfully registered, your lawyer will advise the mortgage lender that it has a valid first charge on the property and, at that time, the lender will advance the mortgage funds to your lawyer.  Upon receipt of the mortgage proceeds, your lawyer will combine those funds with the amount brought in by you and send the total amount, less any monies payable to realtors or other designated parties, to the seller’s lawyer on their undertaking to clear the existing financial charges.

The actual closing or completion of the transaction is complete when you take possession of the property.  Possession of the property will be granted to you on the possession date, as specified in the Contract of Purchase and Sale, or after the seller’s lawyer has received the net sale proceeds, whichever is later.  The keys for your new property will usually come to you via your Realtor once the seller’s lawyer has received the net sale proceeds.

 V.     FINAL REPORTING

Aside from reporting to you in writing immediately after the completion date, the only task remaining for your lawyer is to obtain the State of Title Certificate, or “STC”, for the property.  The STC will be available approximately three to six weeks after the completion date.  The STC is issued by the LTO and it will show you as the registered owner of the property, subject to your mortgage registered as a first charge on title.  Ordinarily, the seller’s mortgage will no longer appear on title.

Upon receipt of the STC your lawyer will forward a copy to the mortgage lender and a copy to you, thereby confirming to each party that the transaction has been successfully completed and that your file will be closed.