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How to Prepare Closing Documents in a Residential Real Estate Transaction

Updated June 2012

This How-To Brief outlines the steps to take when preparing closing documents in a residential real estate transaction.

1Interview the client

  • Acting for the seller(s):
    • Have a thorough client intake sheet so you are prepared to ask as many questions as possible.
    • Confirm the seller(s) as set out in agreement of purchase and sale is/are on title. If the seller’s spouse is recently deceased, a survivorship application may be required. If the agreement of purchase and sale is executed under a power of attorney, the power of attorney may need to be registered.
    • If you are acting for more than one seller, obtain consent to act for both parties.
    • Determine if any of the sellers is a non-resident and be prepared to holdback 25% of the proceeds of sale (based on the total sale price, not just the amount after paying out a mortgage).
    • Send an engagement letter to the client(s) to outline your retainer and things the client(s) need to do.
    • Obtain identification and information to comply with the "know your client" rules (By-Law 7.1, made under the Law Society Act, Part III, Client Identification and Verification). (See the link to By-Law 7.1 in the Resources section of this How-To Brief.)
     
  • Acting for the buyer(s):
    • Have a thorough client intake sheet so you are prepared to ask as many questions as possible.
    • If you are acting for more than one buyer, obtain consent to act for both parties.
    • Send an engagement letter to the client(s) to outline your retainer and the things the client(s) need to do.
    • Confirm whether the client is engaging you to provide an opinion regarding a potential future use of the property.
    • Determine if the buyer(s) are obtaining a mortgage to assist in the purchase of the property.
    • Receive the mortgage instructions promptly and review them.
    • Confirm with the lender that all conditions have been met and it’s okay to proceed.
    • Obtain the "standard charge terms" and any additional schedules in the instructions.
    • If a mortgage broker is involved, obtain the mortgage commitment and any direction(s) re: the proceeds of the mortgage.
    • If it is a private lender, send an engagement letter to the client to outline your retainer and the things the client needs to do.
    • If it is a private lender, obtain identification and information to comply with Part III of By-Law 7.1.
    • If it is a private lender, complete Forms 9D and 9E in accordance with By-Law 9.
     
  • Acting for borrower(s) and lender:
    • Do all of the above.
    • Consider whether independent legal advice (ILA) is appropriate, and advise the client early so they can make arrangements.
    • Consider whether you can act for both sides in accordance with the Rules of Professional Conduct, rr. 2.04 (11)–(12).
    • Obtain consent to act for all parties in accordance with the Rules of Professional Conduct, r. 2.04.
    • Self-directed RRSPs lenders are not trust companies, and you cannot act for a borrower and a self-directed RRSP lender unless you fall within the exceptions in r. 2.04.
     

2Gather the information


  1. Title search

    Order your title search on behalf of the buyer(s) and review for the following issues:
    • Planning Act  
    • ownership (have all owners executed the agreement of purchase and sale)
    • registry/land titles non-conversion
    • road access/environmental protection/other agreements
    • existing encumbrances:
      • When you act for the seller(s), the clients may not know their line of credit is registered against their house, and this may affect the mortgage instructions.
       
    Even if not required by any of the parties, you should have a deleted instruments search to help flag any mortgage fraud issues.
  2. Other information

    The following are other things you should obtain:
    • Personal Property Security Act (PPSA) searches, if applicable
    • execution certificates for the seller(s) and the buyer(s)
    • discharge statement for any mortgage that will be paid out and removed from title on behalf of the seller(s)
    • property tax information
    • property insurance information
    • title insurance coverage options
    • building and zoning compliance letters
    • environmental searches or reports
     
  3. Corporate parties

    In addition to the above, you will want to obtain
    • a certificate of status
    • an incumbency certificate
    • confirmation of authority to borrow/lend
    • authority of the person giving direction to bind the corporation
    • a letter of opinion from the corporate solicitor
     

3Prepare the closing documents at the earliest opportunity

  • Prior to preparing the documents, carefully review the agreement of purchase and sale.
  • As soon as possible upon being retained, obtain from the client all the information required to complete the documents.
  • Whenever possible, prepare documents well in advance of closing and send or message them to the other law firm.

4Be aware of which documents are usually prepared by the vendor's solicitor

Subject to the terms of the agreement of purchase and sale, and unless otherwise agreed upon, the following documents are usually prepared by the vendor's solicitor:

  • electronic Transfer/Deed, if the parties have agreed and the agreement of purchase and sale provides that the document will be prepared by the vendor's solicitor (except the electronic Land Transfer Tax Affidavit — Purchaser)
  • Polaris form Transfer/Deed (except the Land Transfer Tax Affidavit — Purchaser)
  • statement of adjustments
  • sample form work sheet for calculating the statement of adjustments (for the vendor's solicitor's own use)
  • direction re: funds
  • direction re: Charge/Mortgage to be given back to the vendor (if applicable)
  • solicitor's redirection re: funds
  • mortgage discharge statement, if you are acting for a private mortgagee and the mortgage is not being assumed (an institutional mortgagee will usually prepare the mortgage discharge statement)
  • mortgage statement for assumption purposes, if you are acting for a private mortgagee and the mortgage is being assumed (an institutional mortgagee will usually prepare the mortgage assumption statement)
  • declaration re: writ of execution
  • statutory declaration in support of compliance with law statements that are made by the vendor's solicitor
  • Polaris form Discharge of Charge/Mortgage
  • electronic form Discharge of Mortgage
  • solicitor's undertaking re: discharge of institutional mortgage and letter to financial institution enclosing certified funds necessary to discharge the mortgage
  • acknowledgments and directions for documents to be electronically signed and registered by the vendor's solicitor
  • solicitor's undertaking to pay arrears of condominium common expense payment
  • solicitor's undertaking to pay arrears of hydro
  • directions to tenants, tenants’ acknowledgements, and assignment of leases, if tenancies are being assumed
  • solicitor's undertaking to pay arrears of realty taxes and letter to municipality enclosing cheque covering outstanding arrears
  • document registration agreement (DRA) if closing in the electronic registration system—it is not uncommon for the vendor's solicitor to also prepare and forward a DRA to the purchaser's solicitor
  • purchaser's undertaking to re-adjust items in the statement of adjustments, if necessary

(See the links to the sample documents in the Resources section of this How-To Brief.)

5Be aware of which documents are usually prepared by the purchaser's solicitor

Subject to the terms of the agreement of purchase and sale and unless otherwise agreed, the following documents are usually prepared by the purchaser's solicitor:

  • electronic Transfer/Deed if parties agree and the agreement of purchase and sale provides that the purchaser's solicitor will prepare the document
  • Planning Act statement in the Transfer/Deed of Land
  • affidavit of residence and value of consideration (Land Transfer Tax Affidavit)
  • GST/HST certificate
  • declaration of possession
  • declaration re: accuracy of the survey
  • statutory declaration in support of compliance with law statements that are made by the purchaser's solicitor
  • Polaris form Charge/Mortgage to vendor, if acting for the mortgagee or if the mortgage is being given back to the vendor
  • electronic Charge/Mortgage, if acting for the mortgagee or if the mortgage is being given back to the vendor
  • standard charge terms and acknowledgment of receipt of standard charge terms
  • direction to lender re: funds
  • statutory declaration regarding the  Family Law Act, the Income Tax Act and residency status
  • warranty re: UFFI
  • guarantee (where applicable)
  • certificate of independent legal advice for a guarantor, if required by the financial institution and the Rules of Professional Conduct
  • amortization schedule for the mortgage
  • direction re: title
  • purchaser's acknowledgments re: non-conforming use, title problems, survey etc.
  • DRA
  • acknowledgment and direction for documents to be electronically signed and registered by the purchaser's solicitor
  • undertaking to re-adjust and bill of sale
  • acknowledgement re title Insurance for signature by the purchaser
  • acknowledgement re conflict of interest when acting for both purchaser and financial institution.

6Review all documents received or messaged from the other side in a timely manner and inform the other side well in advance of closing if you require changes to the documents

  • When reviewing documents, ensure that the documents comply with the agreement of purchase and sale and that they do not extend the vendor's responsibilities under the agreement of purchase and sale.

7Send your documents (or the other side's amended documents) to the other side

This will

  • ensure their acceptability
  • avoid problems closer to or on the day of closing

8When documents are to be electronically registered, contact the other law firm to determine who will prepare the Transfer/Deed of Land and give written instructions as to whom the draft Transfer/Deed of Land should be messaged

  • Where documents are to be electronically registered (absent a specific provision in the agreement of purchase and sale requiring one of the parties to prepare the Transfer/Deed of Land), you should contact the other law firm as soon as possible after being retained to confirm who will prepare the Transfer/Deed of Land and to whom the draft Transfer/Deed of Land should be messaged.

Resources

Statutes and Rules