How to Prepare Closing Documents in a Residential Condominium Transaction

Updated May 2010

This How-To-Brief deals solely with the preparation of closing documents in respect of a residential re-sale condominium transaction and does not deal with closing documents in a residential new condominium transaction.

1Things to consider prior to the preparation of closing documents

  • In the majority of cases, the solicitor will be receiving a fully executed copy of an Agreement of Purchase and Sale (the "APS") directly from their client or their client's real estate agent. Ideally, the APS will be conditional on the review of the status certificate and any and all related condominium documentation. The status certificate should be reviewed by the solicitor in detail and the solicitor should ensure that the dwelling unit, parking and/or locker unit(s) set out in the status certificate correspond to those that are referred to in the APS. The solicitor should also review the most current budget of the condominium corporation in order to determine, at the very least, the amount in the reserve fund and whether same is adequate, having due regard to any comments in the status certificate about the adequacy of the reserve fund, and, in particular, if there is a reserve fund study and what its impact is on the amount of the reserve fund, as well as any comments by the auditors of the audited financial statements.
  • The purchaser's solicitor should advise the purchaser of the options available to protect the purchaser's title interest (i.e., title insurance versus a solicitor's opinion on title.).
  • The purchaser's solicitor should recommend that the purchaser procure an insurance policy that covers betterments and improvements to the dwelling unit. This insurance coverage is separate and apart form the master condominium insurance policy provided by the condominium corporation, which only covers the standard unit as defined in the declaration and its schedules and the description plan sheets, which specifically set out the boundaries of a condominium unit. It is important for the purchaser's solicitor to point out to the purchaser the standard unit definition described in any Standard Unit By-Law registered on title. This will enable the solicitor to advise the purchaser of his or her repair and insurance obligations.
  • Closing documents should be reviewed in detail to ensure that they are consistent with what is being provided in the APS and that there are no representations or warranties being made by the vendor in the closing documents that are superfluous or not contemplated in the APS.
  • The purchaser's solicitor should review the surveyor's plans and appropriate plan sheets filed in the Land Registry Office in order to confirm with the client, prior to the time of closing, the location of the residential unit and the parking and locker spaces, and whether the parking and locker spaces are units, part of the common elements or exclusive use common elements.
  • The purchaser's solicitor should also confirm that the unit or units described in the APS (and the parking and locker unit(s), if applicable) correspond to those set out in the surveyor's plans and plan sheets and the registered title of the vendor, so that the purchaser is actually acquiring what they think they have bargained for under the APS.
  • Solicitors should try to send draft closing documents well in advance of closing so that the wording of same can be agreed upon prior to their execution so as to ensure that there are no surprises on the eve of closing.
  • Client Identification and Verification
    The solicitors are required to identify and verify the identity of their client's and any third party who instructs or has the authority to instruct the client, and to keep records of the information obtained or examined in accordance with By-Law 7.1 of the Law Society of Upper Canada's By-Laws (see link to this By-Law in the Resources section of this How-To Brief).

2Vendor's closing documents and a brief description thereof

The following closing documents are typically prepared by the vendor's solicitor (unless otherwise provided by the APS or agreed upon by the respective solicitors to a transaction. (See web links to sample documents in the Resources section of this How-To Brief.)

  • Electronic Transfer
    The electronic transfer is usually prepared by the vendor's solicitor electronically using the Teraview software and messaged to the purchaser's solicitor or their law clerk so that the land transfer tax statements can be filled in on behalf of the purchaser(s). The vendor's solicitor should ensure that the transfer includes the correct PINs for the dwelling unit and any ancillary parking and/or locker unit(s) to be conveyed in the transfer, and should cross reference same with what is being conveyed in the APS. The Planning Act statements should not be checked off, nor should the tax statements be filled in under the tax branch of the electronic transfer. The tax statements and all tax information should be completed by the purchaser's solicitor (or their law clerk). Recent legislative amendments provide that the transfer ultimately has to be signed for completeness by the solicitor for the vendor and the solicitor for the purchaser.
  • Acknowledgement and  Direction
    This document is produced by the Teraview software in Teranet. An acknowledgment and direction executed by the client authorizes the solicitor to enter in the Document Registration Agreement (hereinafter referred to as the "DRA", as more particularly described below), with the purchaser's solicitor, and also acts as an acknowledgment that the contents of the transfer have been explained to the vendor and that the execution of same has the same effect as if the electronic transfer was actually signed by the vendor.
  • Document Registration Agreement
    The DRA is a form of escrow agreement in which solicitors agree on behalf of their clients to exchange funds, closing documents, keys, etc. (the "Escrow Deliveries") before the registration of any instruments on title. The solicitor on each side agrees to hold onto the Escrow Deliveries until such time as the registration is confirmed and to return such items to the other party's solicitor should the transaction not be completed for any reason.
  • Statement of Adjustments
    This statement sets out the credits and debits for each of the purchaser and the vendor. The vendor will be credited with the sale price (as per the APS), and the purchaser will be credited with any deposits paid or any vendor take back mortgage amounts (if applicable). Taxes will most likely be adjusted on an annual basis and common expenses will be adjusted on a monthly basis. The credits and debits will be determined by the vendor's solicitor ascertaining whether the taxes and common expenses have been paid, and when. The calculation of debits and credits will culminate into a balance due on closing which is payable by the purchaser on the closing date.
  • Vendor's Undertaking/Bill of Sale/Direction/Warranty and GST Certification
    This document is a hybrid document that deals with a plethora of closing issues, including but not limited to: (a) providing the purchaser with an undertaking to readjust any items on or omitted from the Statement of Adjustments after closing, (b) a warranty regarding urea formaldehyde foam insulation which confirms that during the time vendor owned the property, they did not insulate it with insulation containing urea formaldehyde, (c) a bill of sale with respect to any chattel items sold pursuant to the APS, (d) a certificate confirming that no goods and services tax is payable on the sale of the property, and finally, (e) a direction to the purchaser and their solicitor to make the balance due on closing payable to the vendor's solicitor or as they may otherwise direct. Only those warranties that are expressly intended not to merge on closing should be included in the warranty so that warranties that are intended to merge on closing, would.
  • Solicitor's Redirection Re: Funds
    This document is prepared by the vendor's solicitor and addressed to the purchaser and their solicitor and it provides that the balance due on closing is to be paid to one or more parties (for example, a real estate brokerage on account of commission, a bank on account of a discharge of a mortgage, the vendor's solicitor on account of legal fees, etc.).
  • Affidavit re: Writ of Execution
    This affidavit confirms, among other things, that the vendor is not one and the same person as a judgment debtor named in a writ of execution with a similar or same name. Similar name executions in the sum of $50,000.00 or over require a solicitor to personally swear a separate affidavit confirming that their client is not one and the same as the judgment debtor. Solicitors should only swear such affidavits after having satisfied themselves that the vendor is not one and the same as the judgment debtor. This is usually achieved by the solicitor writing to the judgment creditor's solicitor and providing the Social Insurance Number and date of birth of the vendor and requesting confirmation that the vendor is not one and the same as the judgment debtor named in the writ of execution.
  • Vendor's Statutory Declaration
    This document confirms the vendor's compliance with certain provisions of the Family Law Act, the Income Tax Act, and any other matters contemplated in the APS. In the condominium context, this document also usually includes a declaration that the vendor has not received notice convening a special meeting of the unit owners of the property respecting certain matters relating to the common elements and the condominium corporation.
  • Electronic Discharge of Charge 
    This document is often prepared electronically by the vendor's solicitor pursuant to their undertaking to discharge any existing mortgage(s) on title to the property within a reasonable time after closing, after having paid out any outstanding encumbrances from the sale proceeds upon completion of a transaction. However, there has been an increasing trend whereby institutional lenders are preparing and registering their own discharges internally and charging the client a fee in respect of same on the final mortgage payout statement. Whether the solicitor is preparing this on behalf of an institutional lender or a private lender, an acknowledgment and direction must also be executed by a representative or authorized signing officer of the lender, authorizing the discharge of the charge.
  • Solicitor's Undertaking re: Discharge of Charge
    This type of undertaking is typically delivered by the vendor's solicitor to the purchaser's solicitor when undertaking to discharge an institutional mortgage from title. It usually provides that the vendor's solicitor will pay out and arrange for the registration of a discharge in respect of any outstanding institutional mortgages within a reasonable time after closing. Private mortgages (i.e., mortgages that are not in favour of institutional lenders) should be discharged on or before closing. Solicitors should refer to the provisions of the APS and the Law Society guideline regarding discharges of mortgages.
  • Consent to act re: Joint Retainer
    This document should always be in a solicitor's file (whether acting for the purchaser or the vendor) in situations when the solicitor is acting for more than one party. The document provides, among other things, that in the event of a conflict, the solicitor must cease to act for one or both parties depending on the nature and the severity of the conflict. If the solicitor decides to act for one of the parties in a conflict situation, they must do so only accordance with the Rules of Professional Conduct (hereinafter referred to as the "Rules").  This document is not to be sent to the purchaser's solicitor as part of the closing package, but should remain in the vendor's solicitor's file.

The following closing documents are typically prepared by the vendor's solicitor (unless otherwise provided by the APS or agreed upon by the respective solicitors to a transaction); however, these documents are used less frequently than the aforementioned documents

  • Mortgage Discharge Statement
    These statements are usually prepared by lenders (in the institutional mortgage context). The vendor's solicitor in this case should request a discharge statement well in advance of closing. If a private mortgage is registered on title (and the mortgage is not intended to be assumed by the purchaser), same must be discharged on or before closing, since an undertaking to discharge a private mortgage (or a mortgage from a non-institutional lender) will not be acceptable after closing. In this case, the solicitor for the vendor should contact the lender's solicitor and request a mortgage discharge statement. The lender's solicitor will prepare a mortgage discharge statement and ensure that the principal and interest outstanding is set out therein, and that any interest penalties as well as a per diem rate of interest is included so that the vendor's solicitor knows how much interest to add to the payout amount to account for the payout not being made on time. The solicitor for the lender should always ensure that a discharge statement for a private lender is always executed by the lender(s) personally, or one or more authorized signing officer(s), if the lender is a corporation. The vendor's solicitor will most likely redirect a portion of the balance due on closing directly to the lender's solicitor in accordance with the balance owing on the mortgage discharge statement, so that the lender's solicitor can attend to the registration of the discharge. Sometimes, arrangements are made involving all three solicitors (the purchaser's solicitor, the vendor's solicitor, and the lender's solicitor), with respect to payout arrangements, timing, and ultimate responsibility for the registration of the discharge.
  • Solicitor's undertaking to pay arrears of condominium common expenses and/or realty taxes (as the case may be)
    This type of undertaking usually requires the vendor's solicitor to hold back the appropriate funds from the closing proceeds and remit them to the condominium corporation and/or the appropriate tax department (as the case may be), within a few days of the completion of the transaction. Once the payouts that are the subject of the undertaking are fulfilled, the solicitor should notify the solicitor/purchaser to whom the undertaking was addressed, and confirm that payment has been made (while enclosing proof of payment), and that the obligations pursuant to the undertaking have been fulfilled.
  • Polaris Form Transfer/Deed of Land
    This is the paper form of transfer which will rarely be used since virtually every land registry office in Ontario has been fully automated by Teranet. The solicitor must ensure that the Transfer/Deed of Land is executed by the vendor, that the PIN's for the dwelling unit and any ancillary parking and/or locker units are properly set out in box 3, and that the condominium corporation number and the appropriate registry land registry office is properly set out in box 5. The correct name(s) of the purchaser(s) and date(s) of birth should also be set out. Once again, the Planning Act boxes should not be checked off.
  • Polaris Form Discharge of Charge/Mortgage
    This is the paper form of Discharge of Charge/Mortgage, which will rarely be used since virtually every land registry office in Ontario has been fully automated by Teranet. The solicitor must ensure that the discharge is executed by the lender, that the PIN's for the dwelling unit and any ancillary parking and/or locker units are properly set out in box 3, and that the condominium corporation number and the appropriate registry land registry office is properly set out in box 4. The registration number of the charge to be discharged should be set out in box 5. In box 6, the solicitor should select whether the discharge is a partial or final discharge. Any related deletions (such as a discharge of a notice of assignment of rents) should be set out in box 7. The solicitor should ensure that the discharge is executed by the lender (if an individual) or an authorized signing officer of the lender (if a corporation).
  • Assignment of Lease(s)
    When there are leases that affect the property being purchased, this document will take the form of either a general assignment of all the leases in the building or specific assignments of each lease. The written assignment will transfer the benefits of covenants contained in the leases.
  • Direction to Tenants and Tenants Acknowledgments
    This document is to be used in situations where the purchaser is assuming existing tenancies. The direction informs the tenants that as of a certain date (usually the closing date of the purchase transaction), the property will be sold and that the tenant(s) should direct all rental payments to the particular name or entity and address as set out in the notice. A purchaser's solicitor may request an indemnity from any vendor (as landlord) for any breach under the lease existing prior to closing, for which the tenant may make a claim against the successor landlord (which is the purchaser). Alternatively, a vendor's solicitor may request an indemnity from the purchaser (the new landlord), to give the vendor a corresponding indemnity for any claims that the tenant makes against the vendor because of the purchaser's (the new landlord's) breach or default which the vendor may be responsible for by virtue of the vendor's privity of contract with the tenant. These reciprocal indemnities are usually difficult to procure if same are not provided for under the APS.

3Purchaser's closing documents and a brief description thereof

The following documents relate to the Purchaser's closing documents pertaining to the purchase portion of the transaction only. (See web links to sample documents in the Resources section of this How-To Brief.)

  • Acknowledgement and Direction
    This document is produced by the Teraview software in Teranet. An acknowledgment and direction executed by the purchaser authorizes the solicitor to electronically sign and register the electronic transfer and enter into the DRA on behalf of the purchaser, with the vendor's solicitor. The acknowledgment also states that the contents of the transfer have been explained to the purchaser and the execution of same has the same effect as if the electronic transfer was actually signed by the purchaser.
  • Document Registration Agreement
    The DRA is a form of escrow agreement in which solicitors agree on behalf of their clients to exchange the Escrow Deliveries before the registration of any instruments on title. The solicitor on each side agrees to hold onto the Escrow Deliveries until such time as the registration is confirmed and to return such items to the other party's solicitor should the transaction not be completed for any reason.
  • Direction re: Title
    This document sets out (for the vendor and their solicitor) how the purchaser wishes to take title to the property. The purchaser should also set out the dates of birth of any and all purchasers as well as the purchaser's address for service. If there is more than one purchaser, the manner in which they wish to take title must also be specified (i.e. as joint tenants or tenants and common). The purchaser's solicitor should advise the vendor's solicitor in advance of the closing (usually with the requisition letter) of the manner in which the purchaser wishes to take title in order to give the vendor a chance to prepare the transfer. The direction re: title is signed by the purchaser prior to the closing and delivered to the vendor's solicitor on closing. The direction re: title must be signed by the purchaser(s) named in the agreement of purchase and sale. One common mistake made by solicitors is that when a purchaser requests that title be taken in the name of X, the purchaser's solicitor erroneously insists on X executing all of the purchaser's closing documents. This practice is not correct. The original purchaser is still responsible for executing the undertakings and directions, and nothing is to be signed by transferee X. Transferee X's name is to be simply engrossed on the transfer and nothing more.
  • Undertaking to Re-Adjust
    With this document, the purchaser is providing the vendor and their solicitor with an undertaking to readjust any items on or omitted from the Statement of Adjustments after closing.
  • Consent to act re: Joint Retainer
    This document should always be in a solicitor's file (whether acting for the purchaser or the vendor) in situations when the solicitor is acting for more than one party. The document provides, among other things, that in the event of a conflict, the solicitor must cease to act for one or both parties depending on the nature and the severity of the conflict. If the solicitor decides to act for one of the parties in a conflict situation, they must do so only accordance with the Rules.  This document is not to be sent to the vendor's solicitor as part of the closing package, but should remain in the purchaser's solicitor's file. Furthermore, a purchaser's solicitor should require the purchaser to execute this document at the commencement of the retainer and not on the eve of closing with the rest of the closing documents, since if there is ever a conflict between the respective purchasers at any time prior to closing, an executed consent to act re: Joint Retainer will assist to insulate the solicitor from any adverse consequences arising from the conflict. Where the purchaser's solicitor accepts employment from more than one party in a transaction, he or she must comply with rule 2.04(6) and advise the parties of the above information. This should be done in the initial letter to the parties wherein the purchaser's solicitor requests the parties to acknowledge their approval of this situation by signing the enclosed Consent to act re: Joint Retainer and returning it to the purchaser's solicitor's office. Otherwise, the solicitor must get the parties to sign this document with the balance of the closing documents.
  • Acknowledgment and Direction re: Title Insurance
    This document is an acknowledgment and authorization from the purchaser to their solicitor (and law firm) consenting to the procurement of a title insurance policy instead of a solicitor's opinion on title.

The following documents relate to the Purchaser's closing documents pertaining to the mortgage portion of the transaction only (if applicable), and should not be delivered to the vendor's solicitor on closing. The terms `purchaser` and `borrower` will be used interchangeably in this section. (See web links to sample documents in the Resources section of this How-To Brief.)

  • Acknowledgement and Direction
    This document is produced by the Teraview software in Teranet. An acknowledgment and direction executed by the borrower authorizes the solicitor to electronically sign and register the electronic charge on behalf of the borrower. The acknowledgment also states that the contents of the charge have been explained to the borrower and the execution of same has the same effect as if the electronic charge was actually signed by the borrower.
  • Electronic Charge
    The electronic charge is usually prepared by the purchaser's solicitor pursuant to the instructions received by the lender. The purchaser's solicitor should ensure that the charge includes the correct PINs for the dwelling unit and any ancillary parking and/or locker unit(s) to be charged, and should cross reference same with what is set out in the electronic transfer, and what is being conveyed in the APS. The correct Family Law Act statements must be made, and the solicitor should ensure that any schedules to be attached are scanned and imported into the electronic charge.
  • Acknowledgment of Receipt of Standard Charge Terms
    This document is simply an acknowledgment by the borrower that they have received a copy of the standard charge terms. The actual standard charge terms are attached to the acknowledgment. Institutional lenders will usually have their own form of standard charge terms which are incorporated by reference into the electronic charge.
  • Consent to Act Re: Conflict
    In residential real estate transactions, it is quite common for the solicitor for the purchaser to also act as the solicitor for an institutional lender, without there being a violation of the Rules. It would be prudent practice for the solicitor to ensure that the borrower executes an acknowledgment of conflict, which document confirms that the solicitor will be acting for both the purchaser and the lender and that the solicitor cannot keep any information received in connection with the transaction confidential, insofar as the other party is concerned, and that in the event that a material conflict between the borrower and lender materializes that cannot be resolved, then it may be necessary for the solicitor to discontinue acting for one or both parties, depending on the nature and the severity of the conflict.
  • Direction to Lender
    This document is executed by the borrower and addressed to the lender directing the lender to make the net loan proceeds payable to the solicitor's law firm in trust.

The following documents are typically prepared by the purchaser's solicitor; however, these documents are used less frequently than the aforementioned documents.

  • Polaris Form Charge/Mortgage of Land
    This is the paper form of charge which will rarely be used since virtually every land registry office in Ontario has been fully automated by Teranet. The solicitor must ensure that the charge is executed by the borrower(s), that the PIN's for the dwelling unit and any ancillary parking and/or locker units are properly set out in box 3, and that the condominium corporation and the land registry office number is properly set out in box 4. The salient terms and provision of the charge should be set out in box 9, as well as the standard charge terms reference number, which should be set out in box 8. All borrowers should execute and date the charge and any consenting spouse should also execute the charge in the event that the property being charged is a matrimonial home.
  • Affidavit of Residence and Value of Consideration [also known as the Land Transfer Tax Affidavit (the "LTTA")]
    This is the paper form of LTTA, which is usually prepared by the purchaser's solicitor when also utilizing the Polaris form of Transfer/Deed of Land. The LTTA should be executed by the purchaser(s) and commissioned. Three copies of the LTTA will be attached to the transfer when the transfer is submitted for registration (in duplicate). It may be prudent practice for a purchaser's solicitor to have the LTTA executed by the purchaser even when dealing in the realm of electronic registration. This practice affirms the validity of the information that the purchaser is providing to their solicitor, and that the solicitor is relying in to include in the tax statements of the electronic transfer on behalf of the purchaser.

4Post-closing matters

When acting for the purchaser, the solicitor should ensure that:

  • the property manager for the condominium corporation is notified that the property has been sold to the purchaser (as of the closing date) and that the purchaser should be noted as the new owner for the purposes of the condominium's voting record (Note: a copy of the registered transfer should be included in the written correspondence to the property manager so that the property manager can update their records accordingly on behalf of the condominium corporation);
  • the tax department is notified that there has been a change in ownership (Note: a copy of the registered transfer should also be sent to the tax department in the jurisdiction in which the property belongs);
  • the final mortgage report to the lender is delivered within 60 days of the registration of the mortgage in accordance with subrule 2.02(14) of the Rules; and
  • the final reporting letter to the purchaser is prepared and delivered to the purchaser on a timely basis.

When acting for the vendor, the solicitor should ensure the following:

  • Closing funds should not be released to the vendor(s) until confirmation is received by the purchaser's solicitor or law clerk that the transfer has been registered.
  • Any commissions owing to the real estate agent (if applicable) out of the closing proceeds are to be paid out to the real estate brokerage.
  • The final reporting letter to the vendor is prepared and delivered to the vendor on a timely basis.
  • All outstanding undertakings given on closing are fulfilled within the specific timelines set out in the respective undertakings.
  • Confirm the registration of the discharge and the discharge particulars to the client of any outstanding mortgages not being assumed.

Resources

Statutes and Rules