Overview

This chapter examines the critical final phase of a real estate transaction—the closing—and the legal mechanisms that transfer ownership of property from seller to buyer. In Ontario, closing is not merely a meeting where documents are signed; it is a coordinated series of steps involving registration of title, financial adjustments, disbursement of funds, and delivery of possession. Understanding these procedures is essential for licensees to guide clients through a successful and legally compliant transaction. The chapter also covers title examination, common issues such as clouds on title, and the protections offered by title insurance.

Key Concepts Explained

Definition and Nature of Closing

Closing is the stage in a real estate transaction where all conditions precedent have been satisfied (or waived), the deed of transfer is registered in the Ontario Land Titles system, purchase funds are disbursed, and possession is transferred to the buyer. It finalizes the sale and makes the buyer the legal owner. A common misconception is that closing involves re-negotiating the offer to purchase; in fact, the offer is a pre‑closing contract and is not a document prepared or reviewed at closing itself.

The Role of Electronic Registration: Teraview

Ontario operates a Land Titles system (as opposed to the older Registry system). Title transfers are registered electronically through Teraview, the province’s official electronic portal for land documents. Registration in Teraview is instantaneous and legally effective the moment it is completed. A transfer registered at 4:30 PM on a Thursday, for example, takes effect immediately—there is no delay until the next business day. The buyer becomes the legal owner upon that electronic registration.

Key Documents at Closing

While the list of closing documents can vary, certain documents are almost always present:

Transfer/Deed of Transfer – The document that conveys title. It must contain an accurate legal description of the property.
Statement of Adjustments – Details the financial apportionments between buyer and seller (see below).
Discharge of Mortgage – Issued by the seller’s lender, removing the mortgage from title so the property can be transferred free of that encumbrance.

Status Certificate – Required for condominium purchases; contains information on finances, reserve fund, and any planned or ongoing special assessments.
Title Insurance Policy – Often arranged by the buyer’s notary to protect against undisclosed title defects.

The offer to purchase is not a closing document – it is the contract that sets the terms, but it is already signed and executed before closing.

Financial Adjustments: The Statement of Adjustments

The Statement of Adjustments ensures that ongoing expenses (such as property taxes, condominium fees, utilities, and oil) are apportioned fairly between buyer and seller based on the date of possession.

Example – Property taxes: If the seller paid the full annual tax bill on January 1 ($3,600 for the year), and possession occurs on March 15 (day 74 of the year), the seller has paid for 74 days. The buyer must reimburse the seller for the 291 remaining days. The credit to the seller is calculated as:

\frac{\text{Days from possession to year-end}}{\text{Total days in year}} \times \text{Annual tax}

(In practice, 365 days is used; $3,600 × 291/365 ≈ $2,870). The adjustment appears as a credit to the seller on the statement.

Holding deposits: The deposit paid by the buyer is held in trust by the brokerage (or, if so instructed, by the notary) until closing. It is released to the seller on completion.

The Notaries and Their Roles

Each party in a typical transaction may be represented by a notary (or lawyer) who handles the legal steps of closing:

Buyer’s notary: Responsible for examining the title to ensure the seller can convey clear title, reviewing the statement of adjustments, ensuring financing conditions are met, and arranging for registration of the transfer and any new mortgage. The buyer’s notary also arranges transfer of the balance of the purchase price to the seller’s notary’s trust account, usually by bank draft or electronic transfer (not cash or personal cheque) for security and traceability.
Seller’s notary: Prepares the transfer deed, obtains the discharge of any existing mortgage, and confirms that all seller conditions are satisfied. Upon registration and receipt of funds, the seller’s notary releases the keys and final documents to the buyer.
Lender’s notary (if financing is involved): Represents the mortgage lender, ensuring the mortgage is properly registered and that all lender conditions (e.g., title insurance, appraisal) are met before the loan funds are advanced.

The Final Inspection (Pre‑closing Walkthrough)

Before closing, the buyer should conduct a final inspection (often within 24‑48 hours before closing) to verify:

The property is in the condition agreed upon and has not been damaged.
Any repairs promised in the agreement have been completed.
All items included in the sale (e.g., appliances, window coverings) are present and in working order.

This inspection is not a second home inspection but a confirmation that the property is being delivered as expected.

Delivery of Possession and Keys

Keys are handed over to the buyer only after two conditions are met:

The transfer has been successfully registered in Teraview.
The seller’s notary has received the purchase funds.

This typically occurs on the closing date itself. The exact time of key release is determined by the notaries’ schedule and may be late in the day.

Important Regulations, Procedures, and Code of Ethics Provisions

“Time Is of the Essence” Clauses

Many purchase and sale agreements include a clause stating “time is of the essence” with respect to the closing date. This means the exact date and time of closing are essential terms of the contract. If the buyer fails to finalize financing or otherwise complete performance by that date, the seller may treat the contract as breached. The seller can then retain the deposit as liquidated damages (provided the contract so states) and resell the property. However, there are protections: the seller must usually provide a reasonable notice period to the buyer before declaring default, and a court may relieve against forfeiture in cases of minor delay. Licensees must warn clients of the seriousness of this clause.

Death of a Party Before Closing

If a seller dies after accepting an offer but before closing, the contract remains binding on the seller’s estate. The notary will proceed with closing through the estate representative (executor or administrator), who signs documents on behalf of the deceased. The buyer’s rights are not extinguished. Similarly, if a buyer dies, the estate is generally bound to complete the purchase or may be sued for breach.

Clouds on Title and Corrective Deeds

A cloud on title is any claim, lien, or irregularity that casts doubt on the validity of the title. Examples include:

An undischarged mortgage.
An easement that was not disclosed.
An error in the legal description of a previously registered deed.
A court judgment against the seller that encumbers the property.

If a legal description error is discovered in the deed of transfer after registration, it creates a cloud. Correction requires a corrective deed (or a new deed) to be registered. Title insurance usually covers the cost of correction, but the cloud must be resolved to ensure marketable title.

HST and New Homes

When a buyer purchases a newly built home from a builder, the contract may state “HST included” or “HST in addition to purchase price.” If “HST included,” the purchase price already covers the tax. The builder is responsible for remitting the HST to the government; the buyer has no additional payment at closing. If “HST in addition,” the buyer must pay the tax on closing, and may later apply for a rebate if the home qualifies as a primary residence. Licensees must clarify this in the offer to avoid surprises.

Title Examination and Title Insurance

In Ontario, the buyer’s notary is responsible for examining the title. This involves reviewing the registered title history , checking for encumbrances, and ensuring that the seller can convey good title. The notary will also arrange for title insurance, which protects the buyer (and the lender) against:

Errors in deeds or descriptions.
Undisclosed liens (e.g., a mortgage that was not discharged).
Encroachments or boundary issues.
Forged documents or fraud.
Title defects that would not be revealed by a standard title search.

Title insurance is often required by lenders and is strongly recommended for buyers. It covers risks that might otherwise require a costly legal action to correct.

Condominium Purchases and the Status Certificate

When buying a condominium, the buyer’s notary will obtain a status certificate from the condominium corporation. This document reveals:

The current monthly common expenses.
The reserve fund balance.
Any pending lawsuits against the corporation.
Planned or ongoing special assessments (which can require the buyer to pay a lump sum shortly after closing).

Failure to review the status certificate can lead to unexpected financial obligations. The buyer has a statutory right to review it and may, in some cases, rescind the offer if undisclosed special assessments are found before closing.

Common Relationships Between Concepts

The Offer → Closing → Registration: The offer sets the terms (price, deposit, conditions). Closing is the execution of those terms. Registration is the legal act that formalizes the transfer under land law. The deposit held in trust bridges the gap between offer and closing.
Statement of Adjustments ↔ Possession Date: The adjustment calculations depend directly on the possession date. A change in possession date (e.g., due to a delay) requires a revised statement. The notary prepares the statement just before closing to reflect the actual date.
Title Examination ↔ Discharge of Mortgage: The buyer’s notary examines title to find existing mortgages. The seller’s notary must obtain a discharge for each mortgage on title. Without the discharge, the title cannot be transferred free of the encumbrance, and closing may be delayed.
Time Is of the Essence ↔ Breach ↔ Deposit Forfeiture: The clause makes the closing date a strict deadline. If the buyer defaults (e.g., cannot get financing on time), the seller may retain the deposit if the contract so provides. This relationship underscores the importance of ensuring financing is secured well before closing.
Cloud on Title ↔ Title Insurance: A cloud created after registration (e.g., an undischarged mortgage) is a risk. Title insurance covers the cost of removing the cloud or compensates the owner for loss. Many buyers rely on title insurance rather than a full historical title search because the insurance covers hidden clouds.
Buyer’s Notary ↔ Lender’s Notary ↔ Seller’s Notary: The three notaries coordinate. The lender’s notary releases mortgage funds only after the buyer’s notary confirms that title is clear and that the mortgage will be registered. The seller’s notary receives the purchase funds and in turn provides the discharge. This interdependence ensures that all steps happen in proper sequence.
Final Inspection ↔ Condition of Property at Delivery: The inspection confirms that the property matches what was agreed. If damage occurs between inspection and closing (e.g., a fire the night before), the buyer’s notary will withhold funds or demand a remedy because the condition was not met.

By mastering these concepts and their interconnections, licensees can effectively guide clients through the closing process, anticipate common pitfalls, and ensure a smooth transfer of ownership.

Chapter 4: Conditions, Amendments and Closing