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  • Five most common title transfer issues

    Five most common title transfer issues

    A title is a legal term that means registered owner of a property.  A title transfer is assigning ownership, or part of the ownership to another party.

    When purchasing a property, the title must be transferred from the seller to the new owner. However, it is not always as simple as signing a document, a large number of properties may require work to "clean up" issues with a title.

    Here is a list of the five most common issues:

    Property has a Lien

    If any of the previous title holders had outstanding debt, such as unpaid property taxes, general contractor bills, or a judgement from the court to pay off a creditor, those companies may have placed a lien on the property. 

    A property lien is a legal claim on assets that allows the holder to obtain rights to the property if debts are not paid. If there is a lien on the property you are purchasing, you may inherited it upon closing. 

    This is an example of a very common issue that can be resolved by your lawyer on closing. Using a title search will identify if there is a lien on the property and you can work with your lawyer to address and resolve the issue. 

    Boundary Disputes

    If you will not be getting a survey on your potential property before closing from the sellers you run the risk of having a boundary dispute with neighbouring properties. A boundary dispute is somewhat common and the only way to resolve this issue is through an up-to-date survey on the property. 

    Your Real Estate lawyer may recommend a property survey if there is evidence to suggest it would be beneficial. However, this is quite often not the case, few closings include property surveys because of the cost and length of time it takes to complete. Without taking proper protection, this potential issue could be a serious financial burden to resolve.

    This is a case where title insurance is a great option to mitigate some of the unknowns and protect future interests in the property.

    Illegal Past Deeds and Fraud

    There are a number of illegal actions that may impact the sale of a property and the transfer of a title in the future. That could include deeds made by minors, people lying about their marital status, an undocumented immigrant. Illegal past deeds such as this may pose an issue to the transfer of a title and cost significant amounts to rectify.

    In addition to the above illegal actions, fraud is another potential issue that may impact title transfers but is much more difficult to identify. When a lawyer conducts a title search you can identify anything that can be searchable through public documents and registrations. However, fraud is often undetectable through these available documents making it one of the most difficult of these common issues to protect against. 

    Undiscovered Encumbrances

    When you purchased the property, you may not have been aware that a third-party may hold claim to part or all of the property from a previous event such as a lien. This may limit what you as the owner will be able to do with the property. These limits are known as encumbrances and are placed on the property itself, not the owner. 

    A real estate lawyer for title transfer will help discover if the property in question has unknown encumbrances. Some encumbrances are welcomed by owners, such as zoning laws that restrict properties in an area from being used for commercial purposes. Others can be more troublesome, like liens placed on a property that seek repayment of debt. 

    Almost all property, particularly in densely populated areas, is encumbered in one way or another. That is why it is important to have a knowledgeable real estate lawyer by you side when learning if there are encumbrances on a property

    Public Record Errors

    Whether it be adding an extra zero or misfiling a document, public record errors do happen. Unfortunately, when filing and clerical errors occur, they are often difficult to detect or notice because sometimes they blend in easily. Dealing with public record errors can cause serious financial stress on the title owner and be very time consuming to rectify. 

    How Can I Protect Myself?

    Throughout this article we’ve listed all issues that may arise from a title transfer and likely caused you lots of anxiety. You're probably wondering now, what can I do to protect myself from all these problems. The answer is simple, get title insurance

    While every policy is different and we recommend checking your specific policy for the details, but in general, title insurance will cover you for all of the above title-related issues and more that can affect your ability to sell, mortgage, or lease your property in the future, or its value.

    Final Thoughts

    When conducting a title transfer on a property it’s wise to use an experienced real estate lawyer that can help you ensure you have proper protection and don’t ignore any serious issues. If you have any further questions, rest assured that the Deeded team is here to support you in any way we can.

    Send us an email and we would be happy to answer any questions you have or provide recommendations for your situation.

    Important Note: This article is not Legal Advice.  No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.

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  • Title Search – What is it and Why Do You Need It.

    Title Search – What is it and Why Do You Need It.

    Before we explain what a title search is, it is important to understand what title means.

    Title is a legal term that means registered owner of a property

    Records associated with the title of a particular property are usually kept in a land registry office, which is responsible for record keeping.  These records include deeds, court records, property and name indexes, and other documents related to the property.

    Before you purchase a property, your lawyer conducts a title search to examine the property’s title history and ensure that the seller has the legal right to sell the property, and that there are no other encumbrances (such as liens, title claims, judgements, mortgages etc.) or property line issues that could prevent the buyer from taking full possession.

    What Does a Title Search Show?

    A title search clarifies the legal owner(s) of the property, any existing easements, leases, or restrictions that affect the property, any mortgages, judgements against the property, liens, or unpaid rental contracts (such as hot water tanks) that will need to be dealt with before the property can be sold to a buyer.

    What if There Are Issues Found With The Title?

    If title issues arise with the property you are purchasing, your lawyer will work with your seller’s lawyer to try to resolve.  Often times, issues can be corrected prior to closing

    What if There Are Issues Found With The Title?

    If title issues arise with the property you are purchasing, your lawyer will work with your seller’s lawyer to try to resolve.  Often times, issues can be corrected prior to closing.

    What If a Title Issue is Discovered After Closing?

    In case an issue is discovered on your title after you have closed your transaction, title insurance covers several situations and is meant to protect you against the unforeseen. For more information on title insurance, click here.

    How Much Does a Title Search Cost?

    Our transparent fees include a title search for purchases and refinances of properties.  Depending on the extent of the searches required, you may incur some disbursements for service fees incurred for the searching the land registry.

    I’m Refinancing, Why Do I Need a Title Search?

    Your lender will likely require a new title search as a condition of refinancing.  Lenders typically will need to see if there are any issues standing in the way of your property being fit to sell when approving refinancing transactions.  

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  • Hello New Home, Hello New Property Taxes.

    Hello New Home, Hello New Property Taxes.

    Buying a home is exciting.  Taxes are not. While this is the topic that everyone loves to ignore, buying or selling a home in Ontario does come with quite a few tax implications.  The more you know about them, the less stressed you’ll be down the road. 

    In this blog, we’ll dive into:

    • • Land transfer taxes
    • • Property taxes
    • • HST (Harmonized Sales Tax)
    • • Capital gains taxes
    • • Income tax implications

    Land Transfer Taxes

    In Ontario, the buyer is on the hook for a land transfer tax payment that is due on closing.  Given the average property price in your market, this can be a significant amount that you’ll need to plan for.  Here’s how it’s calculated.

    Ontario Land Transfer Tax:

    • • 0.5% of the value of the property up to and including $55,000
    • • 1% of the value which exceeds $55,000 up to and including $250,000
    • • 1.5% of the value which exceeds $250,000 up to and including $400,000
    • • 2% of the value between $400,000 and $2,000,000
    • • 2.5% for amounts exceeding $2,000,000, where the land contains one or two single family residences

    If you’re buying in the city of Toronto, you’ll also be paying a second land transfer tax .

    Toronto Land Transfer Tax

    • • 0.5% up to and including the first $55,000
    • • 1% of the value which exceeds $55,000 up to and including $250,000
    • • 1.5% of the value between $250,000 and $400,000
    • • 2% of the value between $400,000 and $2,000,000
    • • 2.5% of the value over $2,000,000

    Before you start creating excel spreadsheets and dusting off your calculator, our land transfer tax calculator will help you figure out what you will owe. 

    If you’re a first time buyer, you’re in luck (pending some conditions, of course,  you may be eligible to receive a refund for all or part of the land-transfer tax – click here for details of the Land Transfer Tax Refund Program.  Our calculator factors in any first-time buyer rebates, so once again, no need for number crunching on your part.

    Property Taxes

    Your property taxes will vary based on your municipality.  

    If your property is in the city of Toronto, you can check how much property taxes are by using the City of Toronto property tax calculator..  Other municipalities may offer similar calculators on their website. 

    The amount of your property tax is calculated on the phased-in property assessment value of your property, determined by MPAC (Municipal Property Assessment Corporation). You can read all about how MPAC determines the value of your property here.

    MPAC property assessments are usually lower than current market value so if paid $1,000,000 for your house, MPAC’s assessment probably has you paying taxes on a much lower assessed value.

    Depending on what you sign up for, property taxes are due in either two instalments (March and July); 6 instalments (March, April, May, July, August and September); or in 11 instalments (due every month except January). 

    Increases In Property Values Will Impact Your Property Taxes

    Do you plan to finish the basement or do a significant renovation, like an addition to your home?  You will likely be re-assessed for tax purposes and your taxes will increase.

    New Construction Homes

    MPAC usually assesses newly built homes within 6 months.  In the meantime, you may be responsible for paying the taxes on the land value of your property.  The most important thing to remember is that once the MPAC assessment is completed, the city will bill you for property taxes owed from the date of possession.   For most people, it’s a shock when they get their first property tax bill that is a lot larger than what they had expected. A good tip is to always set money aside to cover your first property tax bill.

    HST

    To say the HST is confusing is an understatement.  Here’s how we boil it down.

    Resale Homes

    • • HST is NOT payable on resale properties in Ontario
    • • If a residential property is used partially as commercial, HST would be payable on the percentage that was used as commercial
    • • HST may be payable on a highly renovated home (but rebates may apply)

    Vacant Land

    • • HST is not payable on vacant land (personal use only)

    Newly Constructed Houses and Condos

    • • HST applies to new construction homes
    • • Federal and provincial rebates are available in some cases
    • • Most builders will factor the HST and the HST rebate into the purchase price of the home, though some will not, so if you’re buying pre-construction, make sure to ask and have your lawyer review the agreement.
    • • To qualify for the rebate from the builder, the home must be the primary residence of the purchaser or one of their immediate blood-relatives and you’ll be required to submit proof if an audit ever occurs.
    • • If you are buying a property as an investor, you don’t qualify for the rebate automatically. Plan to pay the builder the full amount of the HST on closing and you can apply for a rebate after you’ve signed a one-year lease agreement with a tenant.  This basically means that you may be fronting the HST for a few months until the rebate is processed and approved.

    Commercial Properties

    • • HST is payable on commercial properties

    REALTOR Commissions and Legal Fees

    • • All REALTOR commissions are subject to HST
    • • HST is payable on real estate legal fees

    When closing your purchase or sale with Deeded, we apply the appropriate taxes to your closing and can help guide you through complex processes such as filling for an HST tax rebate or refund.

    Capital Gains Tax

    When you earn money on an investment, you’re subject to a capital gains tax on the amount you’ve profited.  

    The good news is that if your home is your principal residence (the home you live in), you won’t have to pay capital gains taxes.  You can only have one principal residence and may be asked to provide proof that you live in the house if audited.

    If you’re selling an investment property, even if a part of it has been rented in the past, you may be on the hook for capital gains tax that will be paid on 50% of the gain.  For example, if you bought a condo at $500K, rented it out for a couple of years and later sold it for $750K, you will pay taxes on $125K (50% of the $250K you made, less selling expenses).   

    Your taxes will be calculated after the capital gains have been added to your income for the year so if make $100K and followed our example, another $125K in income will be added to your overall income, putting you at a higher tax bracket.

    It is important to involve your accountant or financial planner before buying or selling an investment property to account for the tax implications according to the latest rules from the CRA>

    Income Tax

    If you are flipping your home or if that’s your full-time job, you’ll be taxed on the full income you make between what you bought and sold the property for, less your expenses.

    If you’re going to be a landlord and rent your property out, the rents you collect will be added to your income, less expenses that are associated with the rental property (like property taxes, interest on your mortgage, advertising, renovations, etc.)

    If you’re in the business of flipping houses, the CRA will want a piece of the action in the form of income tax. If flipping is your main gig or forms a substantial part of your income, the CRA will consider it active income and you’ll be taxed at the usual income tax rates.

    Our final take is this. Taxes can be complicated and every situation is different.  The best you can do is become aware of tax implications and plan ahead for them. There’s no worse situation than having to come up with an extra $50K at closing because there’s something you missed or were not told along the way.   

    It is always worth a brief conversation with your lawyer and accountant before you buy or sell a property to understand your obligations and tax liabilities.  You’d be amazed by how much a 10 minute conversation can save you.

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