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Importance of a Real Estate Lawyer When Selling Your Home

For the past 15 years, the Canadian housing market has demonstrated an average annual appreciation rate of 6.11%. This makes it a highly lucrative investment option for Canadians. However, it’s important to note that the appreciation rate of real estate can fluctuate based on local area developments and inflation.

In January 2023, the typical Canadian home had an average price of $612,204, representing an 18.3% decrease compared to the same period in 2022. Housing sales in the Greater Toronto and Vancouver areas significantly influence the national average. However, excluding these two high-priced markets from the calculation substantially reduces the national average price by almost $113,000.

Predictions suggest the housing bubble bursting will likely happen soon, resulting in a decrease in real estate prices. It would be best if you protected yourself before this happens. Working with a real estate lawyer is advisable whether you’re selling property now or later. They can help protect your interests and ensure a seamless conveyance process.

Key Takeaways
  • Real estate lawyers are critical when selling a property in Canada. 
  • The services of a real estate lawyer are usually lower than the cost of hiring a real estate agent. 
  • When selling a property in Canada, the seller usually appoints a real estate lawyer. However, lawyer’s fees are paid by the buyer.

What is a real estate lawyer? 

A real estate lawyer specializes in legal matters about real property. They help their clients resolve real estate disputes, consummate a sale, or quiet a title. Here are some areas of expertise: 

  • Property transactions: This is the legal process wherein the seller offers their property to the buyer, and the latter agrees to the purchase. 
  • Land use: This refers to how human activities alter the natural landscape, emphasizing the functional role of land in economic activities. This process is often nonlinear and can have far-reaching consequences. These may include system feedback, stress on living conditions, and increased vulnerability for affected populations.
  • Zoning issues: These are laws and regulations established by local authorities dictating the uses of real property within specific geographic regions.
  • Disputes between parties involved in any real estate transaction: This can come in various forms, like disputes on ownership, encumbrances, liens, and other attachments on the property. 

Real estate lawyers provide legal advice and guidance to clients, review and draft contracts and agreements, and conduct title searches. They also ensure that all legal requirements are met in real estate transactions. Real estate lawyers may work for law firms, government agencies, or as solo practitioners.

When do you need a real estate lawyer?

Hiring a lawyer can be expensive and may not always be necessary. However, there are specific instances when a real estate owner needs to work with a lawyer.

Real estate conveyancing 

Conveyancing refers to legally transferring ownership from one party to another through liens, mortgages, or property titles. 

Liens are securities attached to a property secured by debt. A creditor may seize a property subject to a lien. On the other hand, a mortgage is a binding legal agreement wherein the mortgagor gives the lender the right to seize their property if they can’t pay the loan. 

Titles are proof of ownership of a piece of land. If the land owner decides to sell their property, the title will be transferred to the buyer upon full payment of the agreed price. 

Whether you’re transferring ownership by title, mortgage, or lien, it’s best to speak with a real estate lawyer. They can ensure that the transfer is legal and valid in both form and substance. They can also help you draft contracts protecting your interest. 

Title search

One common issue attached to selling real properties is determining whether or not the seller is the actual owner. Titles can be faked. Aside from that, creditors might assert their right to the property because of an encumbrance or lien. A lawyer can help you clear up these issues. 

A real estate lawyer can conduct a title search to ensure the property has a clear title. They will also ensure that there are no liens, encumbrances, or other legal issues that could affect your ownership or use of the property.

Zoning and land use issues

A zoning law implements the policies and objectives outlined in a municipality’s official plan. It also provides a precise and legally-binding framework for land use and development. Along with the official plan, it safeguards communities against incompatible and potentially hazardous land uses.

Local zoning ordinances can prevent property owners from making the most of their properties. A real estate lawyer can help navigate zoning laws if you plan to develop or use the property. They can also help you obtain permits and ensure that your plans comply with local regulations.

Disputes and litigation

Real estate disputes are pretty common. While you can resolve some of them out of court, others require a trial. Either way, you can better protect your interest if you work with a lawyer. A real estate lawyer can represent your interests and help you navigate the legal process in the following scenarios: 

Boundary or easement dispute

When you fail to identify or register the correct boundary lines of your property, the other party may resort to litigation. You can prevent this when you work with a real estate lawyer. They will review your title to ensure that you registered the correct boundaries. 

Breach of contract 

Selling a property requires you to enter into a contract with the buyer. The contract specifies the necessary earnest money, the object of the agreement, the price or condition of conveyance, and other relevant stipulations.

Among these conditions are those that would render the contract void or rescindable. If either party fails to perform what is incumbent upon them, the agreement can be nullified. 

Breach of diligence 

Each party to the sale, including the realtors, must maintain a certain level of diligence. The seller, for instance, must ensure there are no liens and encumbrances attached to the property before the sale. The buyer must also protect their rights by checking the contract’s validity.

Real estate agents must keep their client’s best interests in mind. Diligence requires them to keep their client’s financial situation and other sensitive information confidential. Failure to comply with this diligence requirement may result in damages.

Foreclosure

Foreclosure happens when the debtor fails to pay the obligation secured by their property. When facing foreclosure, a real estate lawyer can provide advice on your options and represent you in negotiations with the lender or in court.

Some property owners think that they don’t have a legal remedy to stall foreclosure. Your lawyer may negotiate for a loan condonation, restructuring, or other remedies allowed by the lender. 

In some instances, homeowners may qualify for mortgage deferral. Ask your real estate lawyer if you are eligible for this option.

Laws and Terms Every Real Estate Owner Should Know

Owning and selling real estate has legal ramifications. Below are some real estate laws and key terms every real estate owner and new home buyer should know.

Federal Real Property Act and Regulation

The Federal Real Property Act repealed Canada’s Public Lands Grants Act, though some provisions of the repealed act carried over. Under the old law, federal properties are only distributed through traditional letters patents. 

The new law gave the government a right to grant federal properties through deeds and other modern conveyancing methods. This significantly made conveyance management easier. 

Apart from this change, the new law also introduced the concept of “federal property administration.” This now refers to department ministers’ use of federal real estate properties.  

The Federal Real Property Act generally does not have a direct impact on private property owners. However, there are some circumstances in which it may indirectly affect private property owners. 

For example, suppose the federal government is looking to acquire land for a public project. In that case, it may need to negotiate with private property owners to purchase their land. Similarly, if the federal government wants to dispose of surplus property, it may do so through public auction. That may be of interest to private buyers.

Provincial law

Provincial laws govern real estate properties in Canada. This means each province has different rules guiding real estate transactions within their respective jurisdictions. In nine out of ten provinces, property laws derived from the English common law process apply to real estate transactions. 

For example, real estate properties in Alberta are governed by the Real Estate Act of Alberta (RECA). Owners of real properties in British Columbia refer to the Real Estate Services ActOn the other hand, Ontario citizens look to the Trust In Real Estate Services Act 2020 regarding real estate transactions in their province.

While slightly different in some aspects, these laws generally follow the same principles. The exception is Quebec, which follows the Civil Code of Quebec in dealing with property issues. 

Key terms

Canadian real estate law recognizes two primary types of ownership. The first is a “freehold,” which denotes perpetual ownership of the property. The next is the “leasehold,” which imposes a specified duration of ownership. An example of a leasehold estate is a one-year lease.

An escrow account in Canadian law means a dedicated account used by an official, like a lawyer, to hold funds on behalf of the buyer. Once certain conditions are met, these funds will be paid to the seller or their representative. An escrow account helps homeowners manage their funds by allowing them to save up for a significant expense. For example, the lender may include property taxes in the monthly mortgage payment. At the end of the year, the lender will pay the full amount from the escrow account. 

Another important term is the chattel mortgage, a loan secured by personal, movable property or chattel. When the debt becomes due and demandable, and the mortgagor can’t repay the loan, the mortgagee assumes ownership of the chattel.

Capital improvement refers to any restoration, addition, or permanent structural alterations by the owner to improve the property’s overall value

 

Real estate ownership systems

Canada has three property ownership systems: registry, land title or Torrens system, and cadastre system. 

A land registry system is the public recording of real instruments like leases, deeds, and mortgages. Here, the person who was “first-to-file” the title is considered the real estate owner. Prince Edward Island and Newfoundland and Labrador use this kind of registry. 

Under the “land title” or “Torrens” system, the basis of real estate ownership is on a “government guarantee” basis. Here, the government is deemed the owner of real properties within a specific jurisdiction. Citizens wanting to register a title should do so against the government. This system applies to Saskatchewan, Manitoba, British Columbia, and Alberta

The third system, the cadastre system, uses real estate position, shape, area, and dimensions as the basis of registration. Quebec is the only Canadian province to utilize this registration system. 

Taxation

When you buy residential property for personal use, as a long-term investment, or for rental, it’s classified as capital property. Any increase in value, like a sale, is considered a capital gain. Conversely, if you buy property on speculation, any profit from its sale shall be treated as business income.

If you buy real estate property in Canada, you must pay provincial and municipal taxes apart from land transfer taxes. These property taxes are the lifeblood of any local government. They collect these from industrial, commercial, and residential property owners. These are then used to fund public services like garbage collection, snow removal, roads, police stations, and schools. 

The frequency and components of property taxes vary per municipality. Citizens can also pay quarterly, semi-annually, or annually. Property tax bills usually inform taxpayers of the allocation of payment. In Toronto, for example, property taxes are utilized for city building funding, education tax, and city tax.

Here are examples of property taxes in different Canadian municipalities. 

  • Calgary: 0.71%
  • Charlottetown: 1.67%
  • Edmonton: 0.94%
  • Fredericton: 2.53%
  • Halifax: 1.15%
  • Montreal: 0.57%
  • Ottawa: 1.14%
  • Saskatoon: 1.25%
  • St. John’s: 0.83%
  • Toronto: 0.63%
  • Vancouver: 0.27%
  • Victoria: 0.45%
  • Winnipeg: 2.80%

Suppose you can’t pay your taxes on time. In that case, contacting the Canadian Revenue Agency for a payment plan is advisable.

Ban on non-Canadian buyers 

Suppose you’re a non-Canadian or non-permanent resident wanting to buy property in Canada. In that case, you might need to put off that decision for a while. A law banning foreign home ownership in Canada took effect last January 1, 2023.

The prohibition may look simple on the surface. However, its rules, effects, and implications are quite complex. The law’s rationale is to free up more properties for Canadians within the next two years.

The law defines non-Canadians as any of the following: 

  • Not bonafide citizens of Canada 
  • Not permanent residents of the country 
  • Individuals registered under the Indian Act 
  • Non-Canadian privately-held corporations 
  • Corporations not registered with Canada’s stock exchange
  • Corporations controlled by non-Canadian individuals 

One consequence of the law is the prohibition of non-Canadians from buying properties directly or through partnerships and trusts. However, the law allows exceptions in the following cases: 

  • Non-Canadians who assumed interests in a residential property under a divorce, separation, or death. 
  • Non-residents who are married to a Canadian citizen
  • Members of international organizations and diplomats residing in Canada 
  • Individuals with a temporary resident status 
  • Refugees 
  • Workers who filed their tax returns in the country for at least three years before purchasing a property
  • International students who spent a significant period within the last five years in Canada 

Why You Need the Help of a Real Estate Lawyer When Selling Your Home

You can sell property without the help of a real estate lawyer in Canada. However, consider the following reasons for hiring one.

They will represent your best interests 

In a contract of sale, the seller and buyer have different interests. The former wants to sell their property to gain profit. On the other hand, the latter wants to buy it at a price favourable to them. 

The seller’s lawyer will protect their wellness and interests. If the buyer doesn’t agree to the seller’s price, the lawyer can help negotiate terms that would still favour their client. 

Apart from this, the lawyer will also ensure that the seller agrees voluntarily. If there are grounds that could affect the agreement’s validity, the lawyer would be the first person to raise it. 

They can navigate the complex real estate world 

The real estate market is complicated. Sellers are often under the impression that since they’re property owners, no one can take advantage of them. Unfortunately, this is not true in real life. 

The buyer could defraud the seller to compel the former to sell it at a lower price. The agent may also collude with the buyer and defraud the seller. On top of that, creditors might want to foreclose the property to fulfill an unsecured debt. 

A real estate lawyer can shield their client from all these complexities. They will ensure that every claim or agreement is valid and legal. 

They can handle legal issues that might arise 

Many legal issues may arise in selling a property. This is especially true if the subject property was only transferred to the current seller. 

For example, suppose it’s an inherited property. In that case, the other surviving heirs may challenge the transfer and subsequent ownership of the property. The testator’s creditors may also seek to nullify the title, arguing non-payment of debts.

Regardless of the legal issue, a real estate lawyer is the best person to fight for your rights. They can trace the allegations against you and protect your interest in the property. 

They can draft, review, or change your real estate contract 

Under Canadian law, a contract can only be valid if it has the following requisites: 

  • The capacity of parties to the agreement 
  • Offer 
  • Unconditional and voluntary acceptance of the offer 
  • Consideration 
  • Mutual agreement 
  • The legality of terms and conditions 

All of these elements must be satisfied. If either party fails to perform what is required from them under the sale contract, the aggrieved party can go to court. They can ask the court to compel the non-performing party to make good on their contractual obligations. 

However, you must have a contract to give rise to a cause of action. Without this agreement, you can’t enforce any obligation on anyone. This is precisely why the services of a real estate lawyer are crucial. They can draft, review, or modify the contract of sale to ensure that it’s valid in form and substance.

They will help you understand and fulfill your legal obligations

A contract legally binds two or more parties to an agreement. The buyer and seller have rights and obligations under the contract. Your lawyer will ensure that you are well informed of all these.  

Suppose the buyer defaults on their monthly obligation as stipulated in the contract. In that case, your lawyer can demand the payment of this obligation. If, after numerous attempts, the buyer still won’t honor the contract, your lawyer can take steps. They can go to court to enforce the agreement or file a petition for its nullification.

Lawyers can ensure that real estate transactions are conducted lawfully, and clients know their rights and responsibilities throughout the process.

They can represent you in court or to other parties 

A real estate lawyer can represent and advocate for clients in various legal settings. This includes representing them before a court or in negotiations with other parties involved in a real estate transaction.

For example, in an expropriation case, the seller may get less than they want for the property. Expropriation is the right of the government to take over private land for public use. It is similar to the eminent domain doctrine in the US. 

While the government in Canada ensures that property owners get fair compensation, there may be instances when the owner feels shortchanged. A real estate lawyer can guarantee the valid exercise of the power of expropriation in your case. They can also advocate for appropriate and reasonable compensation for their client.

Suppose your real property becomes a subject of litigation for “quieting of title.” In that case, your lawyer can build your case and show evidence proving your rightful ownership of the disputed property. 

Real estate lawyers provide legal representation whenever and wherever you need them. In the end, they leave you with peace of mind.

Did you know?

As of 2020, the Canadian real estate market has an estimated market value of USD 58.52 billion. By 2025, analysts predict its value will rise to USD 63.74 billion, with a compound annual growth rate of 2.0%.

Protect Your Interests by Working With a Seasoned Real Estate Lawyer

Partnering with an experienced real estate lawyer is an excellent safeguard your interests. They can offer valuable legal guidance and representation to protect your rights throughout the sales process.

They can also help you navigate intricate legal issues related to property sale. They can advise you on legal requirements, including disclosure obligations, and appropriately prepare all necessary legal documents. Their involvement ensures that all transactions run smoothly and you get the best possible outcomes.

Diamond & Diamond Law is an excellent place to find experienced real estate lawyers. The firm has a superb team of lawyers who can help you sell your properties efficiently and safely. Talk to them today for a free case evaluation.

Are you in need of the assistance of a real estate lawyer to help in a real estate purchase? The Diamond & Diamond team is here to help. Contact them today for a free consultation!

When selling your home, a real estate lawyer is the best person to call. The Diamond & Diamond team can handle all aspects of your real estate transactions.

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