I am purchasing a new home. I heard from my real estate agent that I would have to get title insurance. Is this necessary?
Title insurance has been around for the last 15 years and is used in almost all residential real estate purchases, especially those involving mortgages.
What is title insurance and how much does it cost?
Title insurance is an insurance policy covering a variety of risks involving the purchase and ownership of real estate. The policy coverage lasts for the entire period of ownership and is, in general, a cheaper option than having a real estate Lawyer perform full title and off-title searches so as to provide a legal opinion on title. Mortgage providers insist on either a Lawyer providing them with an opinion on title (and the searches that go with it) or to have the transaction title insured. An average one-time premium for title insurance ranges from $300 to $400 for a policy insuring a new owner and the mortgage provider.
What does title insurance cover?
Title insurance covers a variety of issues associated with purchasing a home, such as conflicting ownership claims, spousal claims, title defects, encroachments and subsequent removal of structures, unpaid property taxes and utilities, by-law infringements, such as renovations without a building permit, and many other issues. Some title insurance companies also cover errors made by a real estate Lawyer representing a purchaser.
Common Exclusions of Title Insurance
The most common exclusions (i.e. not covered) by title insurance are environmental issues and soil contamination, title issues known to the purchaser or their Lawyer prior to closing and aboriginal claims. Title insurance only covers issues that crystalized prior to closing but were discovered following the closing. For example, renovations made to your home without a work permit after you have moved in would be excluded.
Home buyers in Ontario purchase their new homes without any obligation on the seller to disclose issues with the property. Title insurance is a very efficient way to protect your investment and deal with any surprises that may come up after your purchase.
I want to transfer my house to my son. Do we have to pay Land Transfer Tax on such a transfer?
As long as there is no consideration passing between you and your son, and the transfer is a gift to your son, there is no Land Transfer Tax payable.
What is Land Transfer Tax?
Land Transfer Tax is a tax levied by the Ontario government on every transfer of property, subject to some exemptions. The Land Transfer Tax is paid by a person acquiring the property at the time of a transfer. The amount of the Land Transfer Tax is based on consideration passing between a person disposing of property and a person acquiring it. Therefore virtually all purchases of real estate are subject to Land Transfer Tax.
Exemptions to Land Transfer Tax
The Land Transfer Tax is not payable when real estate property being transferred is a gift and there is no consideration passing between the parties. Assumption of an existing mortgage by person acquiring the property or giving a personal loan by person disposing of property to the person acquiring it is a form of consideration and therefore such a transfer would be subject to the Land Transfer Tax.
Transfer of property between married spouses pursuant to a separation agreement is also exempt from the Land Transfer Tax, regardless of the type and amount of consideration passing between the parties. There are some other exemptions under the Land Transfer Tax Act such as transfers involving trusts, transfers to a charity or transfers to a government organization.
First Time Home Buyer’s Rebate
First time home buyers may qualify for a Land Transfer Tax rebate of $2,000 if they have never owned a real estate property anywhere in the world. Further, a spouse of a first time home buyer cannot own any real estate at the time of purchase and must have disposed of previously owned property prior to becoming a spouse of a first time home buyer.
We placed an offer on a house, which was accepted by the sellers. The agreement is conditional upon a satisfactory home inspection. The house was built only a few years ago and we are considering waiving our right to a home inspection. If we do, what rights do we have if we discover some deficiencies in the house after the closing date? Should I wave my right to a home inspection?
The law in Ontario is pretty clear: “let the buyer beware”. Unless there is a fraud, misrepresentation or mistake made by the seller, the buyer takes the existing property as he finds it. Therefore, most of the time the buyer can’t make a claim against the seller for any deficiencies discovered after closing. The general rule is that there is no obligation to disclose any defects that the seller is aware of. The only exceptions to this rule are serious hidden defects. Hidden defects are those that are not discoverable by a reasonable inspection. Further, such defects have to be serious enough to either affect the integrity of the house or render the house unfit for human habitation. Hidden defects are also those defects that the seller is trying to conceal.
Representations and Warranties
The sellers of residential real estate in Ontario are not obliged to provide any representations or warranties to the buyer.
The standard Agreement of Purchase and Sale for a resale home used by real estate agents does not contain any warranties in regards to the physical condition of real estate property, except for a very limited warranty related to ureaformeldahyde insulation. The buyer might try to negotiate warranties into the agreement of purchase and sale, however this is very rare.
A proper home inspection performed by an experienced home inspector is the best way to protect you from any unpleasant surprises. While a home inspector might not be able to identify all defects, especially hidden ones, it is the only way to learn what you are buying and to make an informed decision about one of the most important purchases of your lifetime.
We are buying our first home. The bank insists that we add my father as a co-owner of the home since in order to qualify for the mortgage amount that we need to include both incomes. The entire down payment is coming from our savings and we will be making all the mortgage payments. I really don’t want to include my father. What are your suggestions?
Guarantor of the mortgage v. being registered on title as owner
Adding a person that is not going to be living at the property as a co-owner is generally not recommended, unless you are buying an investment property. You should talk to your bank whether it would be sufficient to have your father as a guarantor on the mortgage, rather than a co-owner.
If the bank still insists on your father’s ownership, there are ways to structure the co-ownership in order to protect everyone’s interest and to minimize your father’s exposure to any tax related consequences of owning a second home.
Joint Tenancy and Tenancy in Common
There are two ways how two or more individuals can own a real property together. They can either own it as joint tenants or as tenants in common. The main difference between the two is that people who own a property as joint tenants have a right of survivorship, meaning that if either one of them dies, his or her ownership share passes automatically to the other surviving joint tenants. This is in contrast with tenancy in common, which does not have a right of survivorship, meaning that the share of the deceased tenant in common becomes part of such person’s estates. With tenancy in common you can also specify a size of a share that each co-owner owns. For example, your father can own 1% share of the home and you and your spouse remaining 99% share, with all of you owning the home as tenants in common, to make sure that your and your spouse’s share becomes part of your estate rather than transferring to your father in case something happens to both of you.