The Essential Role of a Real Estate Lawyer in your Home Buying Process
Introduction
Whether you are buying your first home, or have bought and sold multiple times, the real estate lawyer is an integral part of the team that works with you and your Realtor® to help you get your keys into your hands on closing day.
For a home purchase, the real estate lawyer’s role is to help protect your interests when buying a home, and also ensure that all the requirements for your financing are met to allow your mortgage funds to be received on time so you can purchase your home on closing day.
Protecting your Interests
In terms of protecting your interests, one of the first things your real estate lawyer will do is review your Agreement of Purchase and Sale and the land registry information for the property you are buying. This allows them to make sure the agreement reflects your wishes, and that you fully understand what you are buying.
If there is anything that is important to you which is not specifically addressed in the Agreement, it is important that you raise that with your lawyer as soon as possible, as they can assist in drafting additional terms or amendments to address these concerns. For example, the precise location of boundaries or the exact size of a lot may be of sufficient importance that the Agreement should have a survey condition added, or you may have plans to change the use of the property where a condition to the Agreement should be added to first make sure you are satisfied those plans comply with current zoning.
When you buy a home, you are buying both the house and the land it is on. You are therefore buying not only a place to live, but a collection of rights and responsibilities. One of the jobs of the real estate lawyer is to make sure that you are aware of these rights and responsibilities, and to answer any questions you may have about them. For example, a property may be subject to restrictive covenants (rules that all property owners in a community must follow), or be subject to utility easements (allowing power, water or gas lines to pass over part of the property) or rights of way (allowing people and/or vehicles to pass over part of the property for certain purposes, or giving you, as the owner of a property, the right to pass over someone else’s property to go somewhere like a lake or beach).
Another job of the real estate lawyer is to make sure you are getting what you are paying for. That is, they will do searches to ensure that you are receiving clear title to the property, making sure there are no outstanding taxes levied against the property, no outstanding judgments against the current owner, or unreleased mortgages or other security interests in favour of third parties that form a claim on the property.
It is important to remember that your real estate lawyer is not a surveyor. Their opinion on the title of a property is always subject to what an up-to-date survey may reveal. A survey can show the position of structures on the property, the size and layout of the property on the ground, and activities on the land that have been taking place for a long time but are not documented in the land registry that may result in rights/claims by others against the property.
In the absence of an up-to-date survey, such risks can be mitigated through the use of title insurance, which your real estate lawyer can assist you in arranging. Like any insurance policy, there are limitations and exclusions from coverage. Any claim is evaluated based on the particular circumstances. Sometimes money simply cannot resolve an issue to a buyer’s satisfaction, whereas a survey may alert a buyer to the problem prior to closing. It should be noted that while title insurance is voluntary for a buyer, many mortgage companies require title insurance coverage for their interests and the buyer will incur the cost of that policy, so many buyers obtain coverage for themselves at the same time.
The Money and How you Get It
When buying a home, money is important. For the lender that loans this money, their security is important (to them). As such, your real estate lawyer will work with your lender to prepare your lender’s mortgage and make sure that this is recorded on title to your property to ensure the lender has a first claim on the house and property until the mortgage is paid in full.
It is customary for your real estate lawyer to act for your lender to protect its interests in the transaction. However, your real estate lawyer will need your consent to do so.
Representing your lender affects the lawyer/client relationship with you as the home buyer as follows:
1. The usual lawyer/client privileges will not apply to the matter. No information that your lawyer receives from the home buyer or the lender related to the financing can be treated as confidential between the home buyer and the lender.
2. Should any contentious legal issue arise between the home buyer and the lender that cannot be resolved, the lawyer will be obliged to withdraw from the matter and both the home buyer and the lender will need to seek independent legal counsel.
Your real estate lawyer will ask you to sign a letter consenting to them representing you on these conditions. Most lenders for a residential purchase confirm in their mortgage instructions to the real estate lawyer that they agree to the lawyer acting for the home buyer (borrower) and them (the lender) under these terms.
While most home buyers choose to have their real estate lawyer proceed under these conditions, it is always the client’s choice to have independent legal representation from their lender. However, if this option is taken, the client will be responsible for paying the cost for the second lawyer to act for the lender.
Insurance
Buying a home is a major investment, so protecting that home through insurance is always advisable.
If you are getting a mortgage, your lender will require you to have insurance on the home. The reason for this is quite simple; your lender wants to be sure if the worst happens and the home is destroyed, there is a means by which the mortgage can be repaid or the home restored so that the security for their loan is protected.
Your real estate lawyer will require you to provide proof that insurance is in place prior to releasing your lender’s money. As such, you should make arrangements for insurance and provide that confirmation of coverage to your real estate lawyer prior to your closing date.
Identification
You will need to present identification to your real estate lawyer as part of any purchase. This is a requirement of your lender, and also the lawyer’s regulatory body. Both want to protect against fraud, forgery, etc.
You will need at least one piece of unexpired, Canadian/provincial government issued photo identification (e.g. driver’s license, Canadian passport or similar government issued photo identification). If you do not possess any of these pieces of photo identification, you should notify your real estate lawyer as soon as possible to determine what other types of photographic identification may be acceptable.
A second piece of the above, or another form of identification (such as a bank card or major credit card with your name on it) will often be required by a lender, so it is best to have two pieces available. Note that in Nova Scotia, the Provincial Health Card is not acceptable as a piece of identification.
Sometimes identification reflects a nickname instead of a legal name. It is important that you ensure that your name on the identification is exactly the same as the name that is provided to your lender, and if applicable, the name that you want to appear on the deed for your property. A difference in the names can delay a transaction. If there is a difference, please contact your real estate lawyer immediately to discuss it.
Conclusion
This post gives you a general overview of the real estate lawyer’s role in the home buying process.
The process can be quite intimidating, as it is often a major life event and involves a significant amount of money (which is often borrowed).
Just remember, buying a home involves a team of people helping you, including your Realtor®, your real estate lawyer, mortgage broker, home inspector and insurance broker. They will work with you to provide information and suggestions, and help you identify risks and how to manage them.
As a home buyer, your job is to keep in communication with your team, ask questions if you are unsure of something, and obtain or provide information when requested to help the team help you reach your goal!
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Disclaimer:
This post is provided for informational purposes only, and should not be construed as legal advice on any matter. It may not reflect the most current legal developments and is subject to revision without notice. All liability in respect to actions taken or not taken based on any or all of the content of this post are hereby disclaimed. Do not act upon this information without first seeking legal counsel.
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Bio:
David R. Melvin is a lawyer practicing with his partners at Weldon McInnis, a law firm located in downtown Dartmouth, Nova Scotia. Servicing the greater Halifax Regional Municipality and the Province of Nova Scotia, our practice includes real estate, corporate and commercial matters, wills, powers of attorney and personal care directives, as well as probate and administration matters. His client base includes small and medium sized businesses, financial institutions, individuals and families.
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Websites:
www.weldonmcinnis.ca/team/david-melvin/
https://www.linkedin.com/in/melvindavid/
