Legal documents 101: What am I signing for my new home?

The following article is written by Jeff Fung, Founder & CEO of MyLawBid.com, a Canadian lawyer referral service that connects you directly with lawyers.

Have you ever wondered what some of those legal documents really mean as you’re signing them for your new home? The excitement of owning a new home can make us all a little impatient or uninterested in the fine-print legal details. While your residential real estate lawyer will explain to you the purpose of each document, the following should add further insight into some of the legal documents that you may be reviewing and signing.

Consent to Also Act for Your Bank

If you are financing the purchase of your new home with a mortgage, your lawyer may be able to act for both you and your bank to save you the cost of paying for two lawyers. According to the Law Society of Upper Canada, the governing body for Ontario real estate lawyers, a lawyer owes a duty of loyalty to clients and must avoid any conflict of interest, such as acting for a borrower and a lender in the same transaction. An exception to the rule permits a lawyer to act for both parties only if he/she is given permission from both parties to do so. When signing legal documents for the purchase of your new home, you may come across a document called “Consent to Act…” where you clearly provide your lawyer with:

(i)  Permission for him/her to act for both you and your bank,

(ii)  Confirmation that you understand that information received from you or your bank by your lawyer cannot be treated as confidential from either party

(iii)  Confirmation that you understand that your lawyer may not be able to continue acting for you or your bank if both parties cannot resolve a point of conflict.

Acknowledgments and Directions

Acknowledgments and directions are documents signed by you and used by your lawyer as written confirmation of your instructions. An acknowledgment states that you have reviewed certain documents and that the information is accurate. A direction states that you authorize and direct your lawyer to take certain action. Your lawyer may require you to review and sign an acknowledgment and direction before your mortgage or the transfer of title is registered. Your lawyer may also require you to review and sign a direction for the transfer of funds from your bank to be held in trust by him/her until the amount is paid to the home seller.

Charge/Mortgage

The Charge/Mortgage is the document registered against your home in the Ontario land titles registry if you need a mortgage to buy your new home. “Mortgage” and “charge” are used interchangeably colloquially but have distinct legal meanings (we’ll leave that discussion for another time). When reviewing the Charge/Mortgage, you may notice in the “Chargor(s)” section reference to whether or not you are a spouse. Spousal information is included because, in general, a spouse must provide his/her consent to the mortgage even if he/she is not on title. If parties to the mortgage do not have spouses, each party will need to make such a representation in the Charge/Mortgage.

Transfer of Title

The Transfer of Title, once registered with the Ontario land titles registry, is the document by which the home seller transfers to you his/her interest in the home. If you’re buying your home with other people (i.e. your partner, a family member), next to your names in the “Transferee” section of the Transfer of Title will either be the words “Joint Tenants” or “Tenants in Common”. Your choice of one legal status over another may affect your ability to transfer, sell or will your share of the home to others.

With joint tenancy, you co-own 100% of the home with the other people on title and no one person owns a specific share of the home. For example, spouses may purchase a home together as joint tenants because, in the event that one of the spouses passes away, 100% of the ownership of the home then automatically belongs to the surviving spouse.   On the other hand, with tenancy in common, you own a specified share of the home and may be able to transfer or sell that share to others. Upon death, the share of the home will pass to the tenant in common’s heirs.

Conclusion

The above is only a summary of some of the more common documents that you will come across in a real estate transaction. The more complicated the transaction, the more likely there will be more complicated legal documents to review and sign. If you have any questions about what you are signing, be sure to ask for clarification from your residential real estate lawyer before signing so that once you move in, you can sleep soundly in your new home.