By: Jayson Schwarz LLM
As a first time homebuyer hiring a lawyer for your real estate deal is probably the first time most of you will have had contact with a lawyer. Lawyers are professionals but like doctors they come in all shapes, sizes and specialties. Find a lawyer that understands and practices real estate and closes new homes as well as re-sale. Today’s new home agreement of purchase and sale is a long and complex document and although many of them look alike there are many key amendments that need to be made to equalize the playing field between you and the builder and to protect you from economic surprise.
Ensure, that when you pick a lawyer, that you agree with him in advance as to the fee, what it includes and get it in writing.
Once you have the lawyer his first job will be to review the agreement of purchase and sale and ensure that all of those matters that are important to protect you are taken care of. The offer review should be free or included in you fee quote. Next your lawyer should explain the general terms and conditions of the offer pointing out everything from the extension possibilities to changes which could occur and in a condominium how it is measured. Often these changes are out of the builders control and are caused by the municipality’s planning department. Now comes the first decision; who will approach the builder for the changes? Generally I believe the client should go back to the sales office and make the agent he dealt with work for their commission and get the proposed amendments to the builder. If we are asked to do it, we will, but we charge our normal hourly rate for such actions and this can become expensive. Don’t let the sales agent push you around! Make them do their job!
Once the amendments are accepted and signed off, ensure your lawyer has copies and sit back and watch your home going up. In the meantime what is your lawyer doing?
Here is a list of those things that should be include in your contract of services to be performed by your lawyer for freehold purchases:
- Review executed Agreement of Purchase and Sale (but not including negotiating or drawing agreement and advising in connection therewith;
- Investigate title, make requisitions on title and or other matters recited in the agreement;
- Search for arrears of realty and all other taxes and rates constituting statutory liens;
- Advise on the applicability of HST legislation
- Search for executions (judgements against the builder or you)
- Review transfer (deed) and prepare one charge (mortgage) given back or taken;
- Review statement of adjustments and arranging title insurance if applicable;
- Subject to the use of title insurance make such examinations of survey (if available) or zoning, building by-laws, and work orders as is necessary and reasonable;
- Answer any questions of Purchaser relating to title, zoning and statement of adjustments while attending to execution of documents;
- Arrange for Closing, giving opinion on title or provide title policy, report and all other services necessarily incidental thereto:
Add the following for condominiums:
- Advise Client on how to review condominium documents;
- Check the description;
- Obtain and review status certificate from Condominium Corporation;
- Examine condominium unit plan (if available);
Now that you know what your lawyer is supposed to do what should you pay for the service? This is the lawyers FEE. The fee is the money your lawyer is paid for the services (i.e. his time) your lawyer provides. As I jokingly say “the fee is the money that pays for my children’s shoes.” It is his pay.
As a rule of thumb for real estate deals under $750,000 expect to pay legal fees in the $800 to $950 range for freehold and $850 to $1,000 for condominium (there are 2 closings)
The next question is always: “Is that the total cost?” The answer is no, you also have to pay for disbursements. Disbursements are the monies your lawyer pays to third parties exclusive of the builder as part of your closing costs.
Land Transfer Tax is not a disbursement, but be aware that it may apply to you and it is percentage of the purchase price. There are special options (exemptions) for first time home purchasers of newly constructed homes.
Remember your lawyer is a very important part of the process, so take your time and find the right one.