I have been a solicitor in Hamilton since 1981 and I have practiced in the field of Real Estate Law throughout that entire period of time. I was born in Hamilton. My father was a new home builder in our City and the surrounding area for well over 50 years, allowing me an opportunity to work on the job site and learn the industry from the inside out.
I have represented thousands of Vendors and Purchasers, new homes and resales, multi-unit, commercial and residential properties, and presently represent several builders in our community. Consequently, my experience in real estate law is quite extensive and well rounded.
On a conventional mortgage/”80% of purchase price or more” (purchasers down payment is 20% or more) there are generally no additional mortgage administration costs, other than possibly an appraisal cost to the client, which may or may not be deducted from the mortgage proceeds available. It is imperative that the client understands these costs in order to budget appropriately.
I find that most customers expect that they will be receiving toward the purchase or refinance, the amount that they were approved for on the original loan application. Certainly, that is not always the case, and I take the opportunity of pointing that out to the customer on the initial phone call when the offer, or refinance instructions, arrive in our office. In the event that the mortgage is a “high ratio mortgage” (81% of purchase price/appraised value, or larger) the CMHC insurance premium is grossed up onto the mortgage. However, the provincial sales tax is not grossed up on the mortgage, and is deducted from the net proceeds available to the customer. In addition, some lenders will also deduct an interest adjustment from the net proceeds rather than deducting that amount from the client’s bank account on that interest adjustment date. Again, we would generally try and point this out to the customer so that they properly understand the amount that will be available to them on the closing.
In refinance transactions, I find that often when we are involved in a transaction which is being completed for the primary purpose of consolidating debt, customers are unaware that the lending institution has required that certain debts be paid from the mortgage proceeds and are unaware that the arrears and property taxes must be paid in full. Again, we advise the client at the outset and review the list of debts that the lending institution may be instructing our office to pay out in order to, not only verify that the list is consistent with that which the client is aware, but also that the client has current statements for all of those debts in order that they can be paid promptly upon the closing without delay and without causing a problem in the completion of the transaction. Often we find that some of the debts listed from the lending institution, are debts that the customer is not even aware of (debts that appear on the Credit Bureau). We point out this information at the early stage of the file.
The acquisition of a home is not only likely the largest financial transaction that the customer has entertained up to that point in their life, but it is also the purchase of their very own “castle”. I find it surprising how often potential buyers will be “shopping for the best price in town without a referral”. I advise them to contact their agent or broker, friend or family member, which in my view is the starting point. Contact the lawyer/lawyers recommended, to discuss the transaction and hopefully get a sense for whether this lawyer feels right. I find that I will generally spend anywhere from 15 minutes to 30 minutes on an initial phone call to a prospective customer who has contacted me by recommendation or otherwise in order to fairly guide them through the process involved rather than merely quoting them the figure and hanging up the phone. Whether they retain my service or not, if I have been recommended, I can certainly be satisfied that I have provided them with useful information which will assist them ultimately in their goal and at the same time reflect well upon the referral source for that transaction.
In many instances, clients are particularly young and first time buyers are unable to qualify for the size of mortgage needed for their real estate acquisition and often have a parent or other relative available to sign on as co-applicant on the mortgage transaction. Now a days, it is quite typical that banking institutions/lending institutions will not allow a co-applicant as a “guarantor” only, but insist that the particular individual also be shown on the deed as a co-owner. In most of those instances, the co-applicant/co-owner who is merely a relative agreeing to go on title in order to enable the buyer to qualify for the mortgage, is nothing more that a “bare trustee” without any beneficial interest in the real estate transaction. A trust declaration is absolutely essential in these types of circumstances in order to not only protect the beneficial owner (the real owner) establishing the proper ownership by way of documentation, but also to protect the relative who has signed on in order to document the trust relationship and avoid potential income tax consequences to the relative in relation to capital gains or otherwise. The trust declaration is also essential in order to avoid a problem occurring where the relative might die while named as an owner on the property which could result in demands being made for that portion/interest in the property by the heirs of the estate when in actual fact the relative was nothing more than a bare trustee holding the property in trust for the co-owner. Again, our office makes those inquiries at the outset and ensures that all proper documentation is completed for very little additional cost.
KEYS AND MONIES ON CLOSING A PURCHASE TRANSACTION:
At the outset, I again inform and enlighten the customer as much as possible and in this regard generally advise clients not to expect their keys on the completion of a purchase transaction until early, mid or late afternoon on day of closing.
On a refinance or a sale, the availability of the net proceeds again is generally sometime in the afternoon on the day of closing. We provide an additional service to the client whereby we will actually deposit the net proceeds of the sale or refinance to the client’s bank account (by way of certified cheque) in order to avoid the necessity of the client making an extra trip down to our office to pick up funds. We will generally contact the client immediately upon closing and then again immediately upon deposit having been made. Those funds are deposited by way of bank draft or certified cheque in order that the client may have access to those funds immediately without any hold from their banking institution. There is no additional cost for our office to attend to this service.
BRIDGE FINANCING- PURCHASE AND SALE:
Often customers will attempt to complete a purchase transaction prior to the closing date of the sale in order to avoid the typical inconveniences that are experienced when a customer buys and sells same day. When I receive an Agreement of Purchase and Sale on behalf of a client for the purchase and sale with the purchase closing anywhere from one day to several weeks prior to sale, I generally find that the customer is aware and is applying for “bridge financing” in order to “bridge the gap” as between the purchase date and sale date and borrow the additional funds required for the completion of the purchase that would otherwise represent their additional down payment from the sale proceeds. The error that many buyers make in this regard, however, involve the amount of the bridge financing. Generally the customer does not wish to attempt to fund any monies for the purchase of the transaction and yet the banking institution on a typical bridge will only fund the purchase price, unless the purchaser/borrower/customer requests that the lending institution adds the additional closing costs into the bridge financing. In this way the customer in not scrambling at the last minute to find the closing costs which can be quite sizeable depending upon the purchase price. Those closing costs include the government land transfer tax, as well as the legal fees and disbursements and those monies would be monies that the customer would need to obtain (less the original deposit paid) in the event that the lending institution in only bridging the purchase price and no more. Consequently, again, I point this out to customers at the outset in hopes that they could go back to their banking institution or broker in order to arrange for the additional monies necessary on the bridge finance.