When investing in real estate, the property transfer is a crucial process that requires caution on both the buyer’s and seller’s side. This article will focus on the key legal considerations and potential pitfalls in Canadian real estate transfers based on an analysis of common provisions in a standard real estate investment agreement document. Core issues like title search, mortgage definition, lawyer’s role, and precautions around the closing process will be elaborated in detail.
Importance of Using Standard Real Estate Agreement Template
The standard real estate purchase agreement template codifies years of case law and aims to reduce litigation. Although not mandatory, it helps interpret contractual terms more predictably. Creating an ad hoc agreement from scratch brings risks of ambiguity that make the court decision process less certain.
Mortgage as a Legal Promise Rather Than Debt
Contrary to common belief, a mortgage represents the mortgagor’s promise to repay the loan to the bank, rather than the loan itself. The mortgagor promises, and the mortgagee receives the promise. This distinction is key to understand the legal terminology in investment documents.
Lawyers Playing Trusted Intermediary Roles
Lawyers facilitate real estate transactions by verifying titles, registering charges, and bridging communications between buyers, sellers and banks. Their professional duties ensure protection of client interests in high-value deals.
Closing Process Involving Gradual Legal Binding
Signing the initial purchase agreement only indicates willingness to close and transfer ownership later pending due diligence. The closing legally binds the contract through registering title/charge changes, fulfilling promises, and securing bank consent on mortgages.
Reviewing key legal considerations around agreements, mortgage, lawyer roles, and closing process will prepare real estate investors to better understand investment documents, ask informed questions to lawyers, and avoid preventable disputes.