Selling a Home in Ontario: A Step-by-Step Closing Guide

Are you selling your home in Ontario and need a real estate lawyer?

Selling a home involves more than accepting an offer and handing over the keys. Once an Agreement of Purchase and Sale is signed, several legal and financial matters must be addressed before ownership can be transferred to the buyer.

Understanding the closing process can help you prepare the necessary documents, avoid last-minute complications and know what to expect from your real estate lawyer.

Step 1: Review the Agreement Before You Sign

An accepted Agreement of Purchase and Sale is a binding contract. Before accepting an offer, review its terms carefully and obtain legal advice if anything is unclear.

Important terms include:

• The purchase price and deposit
• The closing date
• Conditions relating to financing, inspection or the sale of another property
• Items included or excluded from the sale
• Rental equipment, such as a hot-water tank
• Representations and warranties made by the seller
• The buyer’s right to revisit the property before closing

Pay close attention to fixtures and chattels. Fixtures are generally items attached to the property, while chattels are movable items. The agreement should clearly state whether appliances, light fixtures, window coverings and similar items are included.

If the offer is conditional, the transaction will not become firm until the conditions are satisfied or waived. Sellers should continue to comply with the agreement and avoid making assumptions about whether a condition will be fulfilled.

Step 2: Retain a Real Estate Lawyer

Once the agreement has been signed, provide a complete copy to your real estate lawyer as soon as possible. Early involvement gives your lawyer time to review the transaction, obtain mortgage information and address potential title issues.

Your lawyer will typically ask for:

• Government-issued identification
• Your most recent property tax bill
• Mortgage or line-of-credit statements
• Contact information for your lender
• A copy of any survey or reference plan in your possession
• Details of rental contracts affecting the property
• Condominium information, if applicable
• Your forwarding address
• Banking information for the sale proceeds

You should also tell your lawyer about any judgments, liens, court orders, bankruptcy proceedings, matrimonial claims or other matters that could affect the property.

Ontario’s land registration system is electronic, and authorized professionals register transfers and other property documents online. Your lawyer coordinates the legal transfer of title and the exchange of closing funds through this system.

Step 3: Identify Ownership and Family Law Issues

Everyone registered as an owner will normally be required to sign the closing documents.

A person who is not on title may also need to participate if the property is a matrimonial home. Under Ontario’s Family Law Act, a married owner generally cannot sell or mortgage a matrimonial home unless the other spouse consents, has released their rights, or another statutory exception applies.

Tell your lawyer immediately if:

• You are married and your spouse is not on title
• You are separated or involved in a family law proceeding
• An owner has died or has lost capacity
• Someone will sign under a power of attorney
• The registered owner’s name differs from the name used in the agreement

These issues can often be addressed, but they should not be left until closing day.

Step 4: Satisfy the Seller’s Obligations

The seller must comply with the Agreement of Purchase and Sale until the transaction closes. Depending on the agreement, this may include completing repairs, maintaining the property, removing unwanted belongings and leaving included items in good working order.

The property should remain insured until the sale has legally closed. Do not cancel your home insurance simply because you have moved out. A delay in closing could leave the property uninsured at a critical time.

If the buyer has a right to conduct one or more pre-closing visits, the home should be accessible at the agreed times and remain in substantially the same condition as when the agreement was signed, subject to ordinary wear and tear.

For condominium sales, make sure common expenses and any special assessments are brought to your lawyer’s attention. If the property is tenanted, provide the lease, rent information, deposit details and any notices given to the tenant.

Step 5: Deal With Mortgages and Other Claims

A buyer is generally entitled to receive title free of the seller’s mortgages and other financial claims, except for matters the buyer has agreed to assume.

Your lawyer will request a payout statement from each secured lender. On closing, the required amount is paid from the sale proceeds. The lender then provides or registers a discharge of the mortgage. Because a discharge may not be registered immediately, lawyers commonly use professional undertakings to ensure the mortgage is paid and removed from title after closing.

Ask your lender about prepayment penalties, discharge fees and other charges well before the closing date. These amounts can reduce the funds you receive.

If the sale proceeds will not be sufficient to pay the mortgage, commission, taxes and closing costs, speak with your lawyer immediately. The shortfall will usually have to be resolved before the transaction can close.

Step 6: Review the Statement of Adjustments

Before closing, the seller’s lawyer prepares a statement of adjustments. This document starts with the purchase price and adjusts the amount payable to account for expenses that relate partly to the period before closing and partly to the period after closing.

Common adjustments include:

• Municipal property taxes
• Condominium common expenses
• Fuel, where applicable
• Rent and rent deposits for tenanted properties

For example, if you prepaid property taxes covering a period after closing, the buyer may reimburse you for the buyer’s share. If taxes relating to your period of ownership remain unpaid, the amount may be deducted from the funds payable to you.

Land transfer tax is ordinarily the buyer’s responsibility, not the seller’s. A seller’s usual deductions may instead include the mortgage payout, real estate commission and HST, legal fees, property tax arrears and any agreed holdbacks.

Step 7: Sign the Closing Documents

Your lawyer will arrange for you to sign the required closing documents before the closing date. These may include:

• The transfer of the property
• Directions concerning the payment of funds
• Declarations about residency, possession and family status
• Documents required to discharge mortgages
• A bill of sale for included chattels
• A statutory declaration or other documents required by the agreement

Your lawyer must verify your identity. Depending on the circumstances, the signing appointment may take place in person or through an approved remote process.

Review your name, the property address and payment instructions carefully. Wire-transfer fraud is a serious concern in real estate transactions. Confirm banking instructions through a trusted method and contact your lawyer directly if you receive an unexpected request to change them.

Step 8: Prepare for Closing Day

Unless the agreement says otherwise, the seller should leave the property vacant, reasonably clean and free of belongings by the time the buyer is entitled to possession.

Before leaving:

• Remove all items that are not included in the sale
• Leave included appliances and fixtures at the property
• Gather keys, garage remotes and access devices
• Record utility meter readings where appropriate
• Follow the agreed process for delivering keys
• Keep your insurance in place until closing is confirmed

Do not give the buyer early access or possession without first consulting your lawyer. An informal arrangement can create insurance, liability and contractual problems.

Step 9: The Legal Closing

On closing day, the buyer’s lawyer sends the required funds and closing documents to the seller’s lawyer. Once the closing conditions have been met, the transfer is released for electronic registration.

After the transfer is registered, the lawyers confirm that the transaction has closed. The buyer may then receive the keys or access instructions.

Closing does not always occur first thing in the morning. The timing depends on the arrival of funds, document registration and the completion of both law firms’ closing procedures. Sellers should avoid scheduling movers, flights or other time-sensitive commitments on the assumption that the transaction will close early in the day.

Step 10: Payment of the Net Sale Proceeds

After closing, your lawyer pays the amounts that must be deducted from the sale proceeds. These may include:

• Mortgage payouts
• Real estate commission and HST
• Legal fees and disbursements
• Property tax arrears
• Condominium arrears or related charges
• Other debts secured against the property
• Contractual holdbacks

The remaining balance is paid to you in accordance with your instructions, usually by electronic transfer or bank draft. Your lawyer will also provide a financial report showing the funds received and the amounts paid from the proceeds.

Do Not Overlook the Tax Consequences

The sale of a principal residence must be reported on the seller’s income tax return, even where the entire gain is expected to qualify for the principal residence exemption. The Canada Revenue Agency generally requires the disposition to be reported on Schedule 3 and may also require Form T2091(IND).

Additional tax advice may be necessary if:

• The property was rented or used for business purposes
• It was not your principal residence throughout your ownership
• You sold the property shortly after purchasing it
• The property is owned by a corporation or trust
• You are not a resident of Canada for income tax purposes

Non-resident sellers should obtain advice well in advance. Section 116 of the federal Income Tax Act may require the seller to notify the Canada Revenue Agency and obtain a certificate of compliance. If the required certificate is unavailable, a substantial portion of the sale proceeds may have to be withheld.

A Smooth Closing Starts With Early Preparation

Most residential sales close without difficulty when the agreement is clear, documents are provided promptly and potential problems are identified early.

A real estate lawyer can review the agreement, address title and family law issues, arrange mortgage payouts, prepare the closing documents and account for the sale proceeds. If you are planning to sell a home in Ontario, DJC Law can provide practical guidance throughout the transaction and help you approach closing day with confidence.

This article provides general information only and is not legal, tax or financial advice. The closing requirements for a particular transaction depend on the terms of the agreement and the seller’s individual circumstances. Speak with a qualified professional about your situation.