A Guide to Real Estate Transactions in Ontario
Beyond the Standard Closing:
A Guide to Real Estate Transactions in Ontario
Buying or selling property can seem straightforward. The buyer and seller agree on a price, documents are signed, financing is arranged, and the property changes hands on closing day.
But not every transaction follows a simple path.
A title issue may appear during a search. A property may be subject to an easement or right-of-way. A buyer may be purchasing a building with existing tenants. Several people may be buying together. A commercial buyer may need to review leases, zoning, financing, environmental concerns, or other matters before deciding whether to proceed.
These situations can add legal and practical questions to a transaction. They may also affect what needs to happen before closing.
Understanding these issues early can help buyers, sellers, property owners and businesses make informed decisions and reduce the chance of an unexpected problem near closing.
This guide provides a practical overview of some of the issues that can make real estate transactions Ontario more involved than a standard purchase or sale.
In this guide, we’ll walk you through:
When a Real Estate Transaction Goes Beyond the Standard Closing
Every real estate deal has legal steps. An agreement must be reviewed, title must be addressed, funds and documents must be coordinated, and ownership must ultimately be transferred.
Some transactions, however, require additional investigation or planning.
A residential purchase may become more complicated when the title search shows an unexpected lien. A shared driveway may raise questions about access rights. A property being purchased by siblings, friends or business partners may require careful thought about how ownership will be structured.
Commercial real estate can involve another layer of review. Buyers may need to understand existing leases, zoning, permitted uses, financing arrangements, environmental concerns and the legal structure being used to acquire the property.
The important point is that complexity does not always mean something is wrong.
It may simply mean there are more questions to answer before the transaction can safely move ahead.
A Lawyer’s Role in a More Complex Transaction
An Ontario real estate lawyer can help identify legal issues, explain their possible effect on the transaction, prepare or review documents, communicate with other parties and help ensure legal requirements are addressed before closing.
Depending on the transaction, this work may include:
- Reviewing the agreement of purchase and sale
- Conducting or reviewing title searches
- Identifying registered interests affecting the property
- Reviewing financing and lender requirements
- Examining leases and other agreements
- Reviewing ownership structures
- Preparing closing and transfer documents
- Addressing problems that arise before closing
The earlier an issue is identified, the more time the parties may have to understand it and decide how to respond.
Title is central to a real estate transaction because it deals with legal ownership of the property and registered interests that may affect it.
As part of a purchase, a lawyer typically reviews title to determine whether the seller is in a position to transfer the interest that the buyer has agreed to purchase and whether registered matters affect the property.
Sometimes the search is straightforward. Other times, it reveals something that requires more attention.
Possible title issues can include:
- Mortgages or other registered charges
- Liens
- Easements
- Rights-of-way
- Restrictions registered against the property
- Problems with the legal description
- Unexpected interests held by another person or entity
A title issue does not automatically prevent a transaction from closing. The question is what the issue is, how it affects the property and what needs to happen before or after closing.
For example, an existing mortgage may simply need to be discharged as part of the sale. A registered easement, however, may continue to affect the property after the buyer becomes the owner.
Other issues may require additional documents, undertakings, title insurance or further investigation.
Why Title Problems Should Be Addressed Early
A title problem discovered shortly before closing can create pressure for everyone involved. Buyers may already have financing in place and moving plans arranged. Sellers may be relying on the sale proceeds to complete another transaction.
That is why title review is an important part of real estate transactions Ontario buyers and sellers should not treat as a formality.
A lawyer can help determine what is registered against the property, explain how it may affect the transaction and work with the parties to address issues that need to be resolved.
Not every legal interest affecting a property involves ownership.
An easement generally gives someone a legal right to use part of another person’s property for a particular purpose. A right-of-way is a common type of easement that may allow someone to travel across a portion of a property.
These rights can exist in both residential and commercial settings.
A homeowner may share a driveway with a neighbour. Utility companies may have rights over part of a property to access infrastructure. A commercial property may rely on another parcel for vehicle access, parking, deliveries or services.
Why Easements Matter to Buyers
An easement can affect how a property may be used. It may also create responsibilities or restrictions that are not obvious during a showing.
For example, a buyer may need to know:
- Who has the right to use a shared driveway
- Which part of the property is affected
- Whether access is limited to a particular purpose
- Who is responsible for maintenance
- Whether an easement affects future construction or development plans
The fact that an easement exists does not necessarily make a property undesirable. Many easements are routine and cause little difficulty.
The important part is understanding the right before completing the purchase.
A lawyer can review the registered documents connected to an easement or right-of-way and explain what they mean for the property being purchased or sold.
That can be especially important when a buyer plans to renovate, expand, redevelop or change the use of a property.
Buying commercial property often involves more investigation than buying a typical home.
The buyer is not only acquiring land and a building. The property may also be part of a business plan. Its value may depend on tenants, zoning, access, financing, redevelopment potential or the ability to use the property for a particular purpose.
Due diligence is the process of investigating those issues before the transaction is completed.
What Commercial Real Estate Due Diligence May Involve
The scope of due diligence depends on the property and the proposed transaction.
Legal due diligence may include reviewing:
- Title and registered interests
- Existing commercial leases
- Zoning and permitted uses
- Access and easement rights
- Financing requirements
- Corporate ownership
- Agreements affecting the property
- Searches relating to the property or seller
- Closing conditions and required approvals
Other professionals may also be involved. Depending on the property, a buyer may obtain accounting, tax, environmental, building, engineering or planning advice.
The purpose is not simply to find reasons to avoid a deal. Due diligence gives the buyer a clearer picture of what is being purchased.
A problem discovered during this stage may lead to further investigation, a change to the agreement, an additional condition, a request that the seller address the issue, or a decision not to proceed.
Look Beyond the Building
A commercial building may look suitable but still raise legal questions.
A buyer planning to operate a specific business will want to know whether that use is permitted. An investor purchasing a tenanted plaza may need to understand the leases generating the property’s income. A business purchasing its own premises may need financing arrangements that create additional closing requirements.
Good due diligence helps connect the legal details of the property to the buyer’s actual plans.
For businesses considering real estate transactions Ontario, involving a lawyer early in the process can provide more time to identify questions before important deadlines pass.
Buying a tenanted property is different from buying a vacant property.
The buyer may be acquiring not only the real estate but also an existing landlord-tenant relationship.
This can occur with a house containing a rental unit, a residential investment property, an apartment building, an office property, a retail plaza or another commercial building.
Existing tenancy arrangements should be reviewed carefully because they may affect what the buyer can do with the property after closing.
Residential and Commercial Tenancies Are Different
Ontario has specific legislation governing many residential tenancies. Buyers should not assume that purchasing a property automatically ends an existing residential tenancy or gives them immediate possession.
Commercial leases operate differently and may contain detailed terms dealing with rent, operating costs, renewal options, assignments, maintenance, insurance, use of the premises and other obligations.
Before purchasing a tenanted property, a buyer may need to understand:
- What leases or tenancy agreements are in place
- How much rent is being paid
- Whether deposits have been collected
- Whether there are renewal or extension rights
- What obligations will continue after closing
- Whether there are existing disputes or arrears
- What rights the tenants have in relation to the property
For a commercial buyer, the leases may be a major part of the value of the investment. For a residential buyer, an existing tenancy may affect plans to occupy or change the use of the property.
These questions should be considered before the transaction is completed rather than after the buyer becomes the owner.
Real estate is not always purchased by one individual or one married couple.
Friends may buy a home together. Parents and adult children may share ownership. Siblings may purchase an investment property. Business partners may buy commercial premises. A corporation may also acquire property for business or investment purposes.
When more than one person has an ownership interest, the parties should think about more than who contributes the down payment.
They should also consider what happens after closing.
Questions Co-Owners Should Consider
Before buying property together, potential co-owners may want to discuss:
- How much each person will contribute
- How ownership interests will be divided
- Who will pay ongoing expenses
- Who can make decisions about the property
- Whether the property can be rented or renovated
- What happens if one owner wants to sell
- How disputes will be addressed
- What happens if an owner dies or becomes incapable
- Whether one person can buy out another owner
These questions can feel unnecessary when everyone is getting along. But circumstances change.
One owner may want to move. A business relationship may end. Someone may face financial difficulty. Family circumstances can change.
A clear written agreement can help co-owners understand their rights and responsibilities before a disagreement arises.
Choosing an Ownership Structure
How ownership is registered can also have important legal and estate consequences.
The appropriate structure depends on the parties and their circumstances. Individual purchasers, corporations, family members and business partners may have different legal, tax and estate-planning considerations.
A real estate lawyer can explain the legal ownership options. Buyers may also need advice from accountants or other professionals where tax or financial planning is involved.
For more involved real estate transactions Ontario, thinking about the ownership structure before closing can prevent difficult questions later.
Closing day is supposed to be the point when the transaction is completed. The required documents are finalized, funds are transferred and ownership changes hands.
But sometimes a problem appears before or on closing.
A buyer may experience a financing issue. A title problem may still need to be resolved. Required documents may be missing. One party may not be ready to complete the transaction. A condition or obligation in the agreement may become the subject of a disagreement.
Common Issues That Can Affect Closing
Closing problems may involve:
- Mortgage or financing delays
- Outstanding title issues
- Liens or other registered interests
- Problems obtaining required documents
- Disagreements about the condition of the property
- Unmet contractual obligations
- Delays in transferring funds
- A buyer or seller who is unable or unwilling to complete the transaction
What happens next depends on the agreement, the reason for the problem and the surrounding circumstances.
Some issues can be resolved quickly. Others may require an extension, a written agreement between the parties or further legal steps.
A failed closing can have serious consequences. A party may incur additional expenses or face a claim for losses. In some situations, a dispute may continue after the scheduled closing date.
Do Not Wait Until Closing Day to Raise Concerns
Good communication matters throughout the transaction.
If a buyer is worried about financing, a seller is having difficulty meeting an obligation, or either side becomes aware of a legal issue, it is usually better to raise the concern with the appropriate professionals as early as possible.
Waiting until the final hours before closing can leave fewer options.
A lawyer can review the agreement, explain the parties’ legal positions and help determine what steps may be available when a transaction is at risk.
- Kate C.
How a Real Estate Lawyer Helps Manage Risk
A lawyer cannot guarantee that every transaction will be problem-free.
What legal advice can do is help identify issues, explain their significance and provide options for dealing with them.
That role may begin before an agreement is signed and continue until the transaction is completed.
For buyers, legal advice can help clarify exactly what is being acquired and what obligations come with it.
For sellers, a lawyer can help identify issues that may need to be addressed before title is transferred.
For businesses and commercial investors, legal review can form part of a broader due diligence process involving other professional advisers.
The most effective approach is often to involve the right professionals before an issue becomes urgent.
- Ed F.
Real Estate Transaction: Frequently Asked Questions
What can make a real estate transaction more complicated?
A transaction may become more involved when there are title problems, easements, multiple owners, existing tenants, commercial leases, unusual financing, zoning concerns, corporate ownership, or issues that could delay closing. The level of complexity depends on the property, the parties and the terms of the agreement.
When should I contact a real estate lawyer in Ontario?
It can be helpful to speak with a lawyer before signing an agreement when the transaction involves unusual terms or legal questions. Early advice can provide more time to review risks, add appropriate conditions and investigate concerns before deadlines arrive.
What happens if a title search finds a problem?
It depends on the problem. Some registered interests may be routine or may be discharged as part of the transaction. Others may affect how the property can be used or require further investigation. A lawyer can review the issue and explain what may need to happen before closing.
Can I buy a property in Ontario if it already has tenants?
Yes, but an existing tenancy can affect the transaction and the buyer’s rights after closing. Residential and commercial tenancies are subject to different legal rules. Buyers should understand the existing tenancy or lease arrangements and obtain advice about how they may affect their plans for the property.
What happens if a buyer or seller cannot close?
The consequences depend on the agreement and the reason the transaction cannot be completed. Possible outcomes may include an agreed extension, negotiations between the parties or a legal claim. If you believe a closing may be at risk, speak with your lawyer as early as possible.
Beyond the Standard Closing
Most property purchases and sales involve many moving parts. When title issues, tenants, co-owners, commercial concerns or closing problems are added to the mix, careful planning becomes even more important.
The purpose of legal review is not to make a transaction more complicated. It is to understand the legal details before they become surprises.
Boardwalk Law is a full-service Ontario law firm with offices in Brampton and Georgetown. Our lawyers assist individuals and businesses with residential and commercial real estate matters and provide practical guidance throughout the transaction.
If you are buying, selling or dealing with a property matter that goes beyond a standard closing, contact Boardwalk Law to book a consultation.
Learn more about our Real Estate Law services.