An Agreement of Purchase and Sale (APS) is a written contract between a seller and a buyer for the purchase and sale of a particular property. It is an integral part of any purchase and sale transaction and must be handled with utmost care.

The agreement process begins when a buyer makes an offer on a property, which cannot be revoked for a certain period of time. If there are no counter offers made, and the offer is accepted by the seller, then the agreement becomes legally binding within a time-period established by the buyer. When this agreement is made, the written contract cannot be terminated unless both parties agree. Equally important is to ensure all the required terms and conditions are written in the APS for legally binding the other party in a contract.

The process of a real estate transaction begins with a Purchase and Sale Agreement. It is the first and one of the many important steps in the transaction. It is crucial to understand the contents including the terms and conditions described in this Agreement and a lawyer can help customize it considering your circumstances.

For example: if you’re buying a Condominium, the condition could be to review the Status Certificate before the Agreement becomes binding. A lawyer can review the Status Certificate even before putting an offer in order to put an offer without that condition, increasing your chances to strike a deal. 

Once the lawyer receives the signed Agreement of Purchase and Sale, they review it, check if the terms and conditions are met, and prepare for closing.

In preparation for the closing, one of the most important steps conducted by the buyer’s lawyer is Title Search. The buyer must get a clean and clear title (ownership) free from any encumbrances, issues, liens, mortgages that are on the title of the property. The buyer’s lawyer will search for any issues and will draft a requisition letter that is sent to the seller’s lawyer, requesting requisition for removing all issues identified during the title search. As a next step, the lawyer may recommend buying title insurance to safeguard the buyer’s title and if agreed, will purchase it on the buyer’s behalf. The lawyer will then prepare the numbers, prepare the required documents and send it to the buyer for their review and signing. The lawyer will discuss the funding plan with the buyer and receive the required funds from the buyer before the closing and mortgage funds on the day of closing. On closing, the lawyer will transfer the funds to the seller’s lawyer and arrange for the transfer of ownership. Once the transfer is confirmed, lawyer arranges to provide the keys of the property to the buyer. Shortly after the closing, the lawyer sends the closing documents to the buyer, thereby ending the buying transaction.

In case of selling, the seller’s lawyer has to arrange to provide a clean title to the buyer. On receipt of the requisition letter from the buyer’s lawyer, the seller’s lawyer arranges to remove all the issues identified on the title. A statement of adjustment is then prepared and share with the buyer’s lawyer to arrive at the funds that need to be transferred on the closing day. On closing day, the seller’s lawyer receives the funds from buyer’s lawyers and after conducting the required checks, arranges to transfer the ownership.

When you are a buyer and like a property that you would want to put an offer on, it is best to consult a lawyer at the Purchase and Sale Agreement drafting stage. This ensures protection of your best interests from a legal point of view. Given the time constraints in the fast-moving real estate market where your real estate agent will most likely prepare this Agreement for you, ensure that this Agreement is vetted by a lawyer before you sign it.                                                                                                                                                                                                                                                                                                                When you are a seller and receive an offer from a prospective buyer, consult a lawyer before you accept the offer or send a counter offer. A lawyer can help highlight the pitfalls in the agreement, if any, and get you the best out of the deal.

Whether you are a buyer or a seller, it is prudent to engage a lawyer at an early stage of the transaction. Most of the times, your real estate agent will refer a lawyer to you, but it is always best to talk to the lawyer before handing over your transaction to make sure they understand your requirements and have your best interests at heart.

Look out for these minimum characteristics in the lawyer:
– Professional approach
– Knowledge
– Clear and concise communication
– Willingness to listen
– Problem-solver
– Approachable and empathetic

A title search examines public records to determine the legal ownership of a property and identify any liens, mortgages, or other encumbrances on the property. A title search is conducted by a buyer’s lawyer to facilitate transfer of clean title to the buyer on closing.

Title insurance is a form of insurance that offers protection against losses that may arise from title defects in real estate transactions. It covers issues such as errors in public records, unknown liens, encroachments, and fraud that may not be discovered during a standard title search. Title insurance is not a legal requirement in Ontario. Consult your lawyer to decide you need a title insurance. The benefits of coverage offered by title insurance usually outweighs its costs. In some cases, you may be required by a bank or lender to purchase title insurance if you are using a mortgage to finance the sale.

When two or more people take title to a property, they have options to be joint tenants or tenants in common. In Ontario, joint tenancy includes the right of survivorship, which means that if one owner dies, the surviving owner automatically owns the property without probate. This might be a significant advantage since it can save time and money on legal fees. Joint tenancy is common among married or common-law partners. Tenants in common is another form of co-ownership in which multiple owners hold a specific percentage of the property, which can be unequal and can be dealt with separately. In contrast to joint tenancy, tenants in common do not have the right of survivorship. If one owner dies, their share of the property does not automatically pass to the other owner(s); instead, it passes to their estate and is distributed according to their will or provincial laws.

In Ontario, the provincial government levies a tax on the purchase of land or an interest in land called “Land Transfer Tax” at the time of closing, payable by the purchaser. The tax amount is based on the value of the property being transferred and is calculated using a sliding scale, meaning that the rate increases as the property value goes up.

First-time home buyers may be eligible for a refund of all or part of the Land Transfer Tax subject to the following:
• The purchaser must be at least 18 years old.
• The purchaser must occupy the home as their principal residence within nine months of the date of transfer.
• The purchaser cannot have ever owned an eligible home, or an interest in an eligible home, anywhere in the world, at any time.
• If the purchaser entered into an agreement of purchase and sale before December 14, 2007, the home must be a newly constructed home and the              purchaser must be eligible for the Tarion New Home Warranty.
• If the purchaser has a spouse, the spouse cannot have owned an eligible home, or had any ownership interest in an eligible home, anywhere in the              world, while he or she was the purchaser’s spouse. If this is the case, no refund is available to either spouse.
• The refund will be reduced if one (or more) of the purchasers is not a first time homebuyer. The refund will be proportionate to the interest acquired by      the individuals who qualify for the refund.

If you or your spouse bought your first home in 2023, you might qualify for the First-Time Home Buyers’ Tax Credit (HBTC). This tax credit is available to first-time home buyers, who purchased a qualifying home in 2023, such as:
• Single-family houses
• Semi-detached houses
• Townhouses
• Mobile homes
• Condominium units, and
• Apartments in duplexes, triplexes, fourplexes, or apartment buildings

In Ontario, real estate closing transactions are traditionally done by exchanging closing documents, funds and key(s) between the buyer’s lawyer and the seller’s lawyer. This is the final stage in the transaction. Your lawyer concludes the transaction by sending you a report with all the related documentation and new ownership information.