Real Estate & Mortgages

The purchaser’s lawyer protects you throughout the transaction and makes sure that you obtain “good title” to your new property. Your lawyer searches title and prepares and registers your documents and co-ordinates the closing. Usually, the purchaser’s lawyer also represents the interests of your mortgage lender in preparing and registering the mortgage documents for the mortgage you have arranged. You and the lender will each receive a final report from your lawyer.

If you are selling, your lawyer looks after preparing documents, proceeding with the closing, ensuring any mortgage or debt on the property gets paid, and providing the remaining proceeds to yourself, and any service providers necessary connected to the property you are selling. 

The Agreement of Purchase and Sale is the most important document you sign when buying or selling a house. It sets out all the terms the purchaser and the vendor have agreed upon for the transfer of the property.

If you have a realtor, the realtor will prepare the Agreement. The Agreement will set out the purchase price, the deposit to be paid, the closing date, the items that are to remain with the home, and any repairs that are to be made before closing. To protect the purchaser, the Agreement should also be conditional upon satisfactory property inspection and upon mortgage financing (even if you already have been pre-approved, your bank will want to confirm that your house is worth the amount of money you are borrowing). If the property is not serviced by a municipal water and sewer service, the Agreement should also be conditional upon verification of the water supply and septic system. Once both the vendor and the purchaser have agreed to all the terms, signed the Agreement, initialed all changes, and all the conditions have been met, you or your realtor must provide your lawyer with the Agreement so that your lawyer can begin preparing the required documents, including the title search if the property is not currently registered on Land Titles.

If you are not using a realtor and are proceeding with a private purchase or sale we can provide you with a blank form purchase and sale agreement to review and help you understand what needs to be addressed in that document before signing. 

Disbursements are the various expenses over and above the lawyer’s legal fees for the work the lawyer does and which is charged to you during a real estate transaction. Your lawyer should also give you an estimate of the disbursements. “Disbursements” include the cost of a title search, government charges to register documents, land transfer tax, registry computer access fee, courier charges, photocopies, and certificates.

Land Transfer Tax in New Brunswick is an expense to keep in mind so you are not surprised. This is a tax that is paid by the purchaser for any real property in New Brunswick and, like most other disbursements, due on your closing date. The higher the purchase price the more you are going to pay in transfer tax, which could get quite expensive.

Other “unexpected” surprises a purchaser should consider in calculating funds needed to buy are oil or propane adjustments which could amount to $500.00 or more, property tax adjustments, and items like surveys (around $550.00 to $1,000.00 or more) or title insurance (around $250.00) required by your lender/mortgage company, which will add hundreds of dollars on your final amount needed to close your purchase that you may not have been expecting.

Usually your lawyer will have you bring in one certified cheque or bank draft on the day before closing payable to your lawyer’s firm “in trust” to include the lawyer’s fees and disbursements and the adjusted balance due to the vendor on closing (“Adjusted?” – see adjustments below). Those funds will be placed in the lawyer’s trust account along with the mortgage advance and will be used to close the deal. Your lawyer should provide you an exact figure before the closing date.

The final payment to the vendor is “subject to the usual adjustments.” Here are a few examples of “adjustments”:

• The vendor has paid the property taxes for the entire calendar year, and your purchase closes July 1 (meaning you will own the property for one-half of the calendar year that the vendor has already paid the taxes for) – you therefore owe the vendor on closing a reimbursement of one-half the year’s taxes.
• Your house is oil-heated; your vendor will fill the tank just before closing and add the cost of a full tank of fuel.
• If the vendor has not paid the property taxes for the year, these need to be paid at the time of transferring title. While you will receive a credit from the vendor on the purchase price for paying the vendor’s share of the taxes up to the date of closing, you will have to provide your lawyer with payment for the full year’s taxes at closing so he or she can in turn pay off the outstanding property tax bill. At some points in the year, the payments of outstanding property taxes for the current calendar year can be deferred (i.e. if they aren’t due yet) but that usually results in a nasty surprise in the mail when you get a bill for several thousand dollars in the mail a week or two later that you forgot was out there.

Or consider the following which is not strictly an “adjustment,” but is an additional closing cost that may be an unpleasant surprise; you have selected a high-ratio mortgage with mortgage insurance to protect the lender or CMHC fees. The lender/bank then deducts the full insurance premium from the mortgage funds before sending the balance of your mortgage funds to your lawyer to complete the purchase of your property, reducing the available money for closing and your lawyer calling you and telling you a day or so before closing (or sometimes the day of!) that you have an amount of money you need to bring in to close that is around $2,500.00 or so more than you were expecting or planning on.

“Insurance” will arise in many forms on your purchase.

• Your lawyer will ask you to arrange property insurance, insuring the house against fire and other perils, and to provide proof before the closing date. Ask your Insurance Agent that you are going to use for your property insurance for a “Binder Letter” to prove that your insurance is on place as of the closing date and that the policy will show the interest of you as the owner and your mortgage lender as first mortgagee. For this you will need to provide the exact name and address of the mortgage lender. The insurance you get has to cover you against loss of the house/property for at least the amount of the mortgage you are getting so that the bank is assured of payment should the house be destroyed or damaged. The binder letter will have to show that the mortgage company/bank is the first loss payable. In other words if your house burns down, your mortgage gets paid off first before you get any insurance money.
• If you have a high-ratio mortgage, your lender will be protected against default by mortgage insurance, for which you will pay a significant premium normally deducted from the mortgage.
• Mortgage life insurance has obvious benefits – it may be a great relief to you or your dependants if your mortgage is repaid following your death or the death of a co-mortgagor – BUT, compare premium rates charged by your own insurance broker for ordinary term insurance before you decide whether to take the mortgage lender’s group insurance plan. You can always take out a private life insurance plan payable to your spouse or co-borrower to cover the payout of the mortgage on your property should you die and a private insurance plan may be cheaper.
• Finally, your lawyer will arrange title insurance, to protect you in the unlikely event that your property has a legal problem that was not disclosed by a normal title search. If you do not have a recent survey available that shows the house, buildings, easements, and driveway in the property or do not wish to acquire one, your bank will insist on you obtaining title insurance which averages around $250.00 depending on the property, mortgage amount, location, etc.

Title insurance is not a substitute for a title search, which your lawyer must perform in any event. The purpose of title insurance is to give you insurance protection for title defects that your lawyer might have missed, and for any other defects that would not normally be revealed by a title search, such as a survey problem, or a technical violation of a zoning by-law. You pay a one-time premium on closing. Title insurance is now generally required by most lenders.

Keep in mind though that if you decide to switch mortgage companies or lenders five years down the road when your mortgage is up for renewal you will have to purchase a new title insurance policy to cover the new mortgage company/lender even though you are dealing with the same property.

In a real estate purchase, the only “survey” that counts is one signed and sealed by a New Brunswick Land Surveyor, and which shows the boundaries of your property, along with the location of the buildings, fences, and other physical features on that property. If you have retained the surveyor and paid his professional fee, then you have a claim against the surveyor for any inaccuracy. An engineer’s sketch is not a survey, nor is a copy of the subdivision plan.

Usually the vendors' only obligation is to potentially give the purchaser a copy of any documents in the vendors possession. For most new constructions and for fairly new houses that are being sold to a second or third owner, there is likely some kind of survey document available that may give you helpful information, but not complete legal protection. A survey obtained by the former purchaser from a surveyor does not protect you if the surveyor made a mistake. In order to do that you would need to get your own survey. You have to make an informed decision whether you want an additional expense of a survey or rely on the information that you have from the seller and a survey they may have obtained during their ownersl).ip or purchase.

You may hear that a survey is unnecessary because of title insurance. This is partly true – if you have title insurance, your mortgage lender will not insist on a survey. But bear in mind that you have a larger personal and legal interest in the property than your lender. It may benefit you to know exactly where the foundation and fences are in relation to the property lines. This would be to your benefit before you buy the house, not after you discover there is a problem. Such as discovering that your garage is sitting halfway across your neighbor's property line and now, they want you to move it. It may benefit you to know exactly where the foundation and fences are in relation to the lot lines – before you buy the house and not after trouble arises, and you discover your garage is sitting halfway across your neighbour’s property and they now want you to move it.