Welcome
to The Legal Corner!
By
Terry Pochmurski
Search
of Title
Probably
the most important step in a real estate transaction is the search
of title to property that is conducted by the lawyer for the purchaser.
Searching title gives the lawyer the necessary information to submit
requisitions, to give an opinion on title and to properly advise
and inform the client.
Requisitions are requests made by the purchaser to the vendor which
deal with any objections to title that the purchaser may have. If
these objections are not made to the vendor, serious legal consequences
may arise. Most agreements of purchase and sale provide that if
objections to title are not made by a certain date, then the purchaser
is deemed to have accepted title. For example, if a title search
reveals the existence of a lien registered against the property
and the purchaser of the property does not requistion the removal
of the lien by the time set out in the agreement of purchase and
sale, then the purchaser will have to take the property subject
to the lien or not close the transaction and risk a lawsuit by the
vendor for breach of contract.
A purchaser’s lawyer must be able to provide an opinion on title
to the purchaser and also to the mortgagee where the purchaser is
financing at least part of the transaction with a mortgage and the
purchaser’s lawyer is also acting for the mortgagee. Both the purchaser
and mortgagee must be satisfied that clear title is being provided
to them, or where certain interests remain registered against the
property, that these interests do not detrimentally affect the purchaser’s
and mortgagee’s interests in the property. In the case of a mortgagee,
it wants to be the first mortgage registered on title. In the case
of the purchaser, he or she wants to be assured that there are no
other claims against the property that could decrease or eliminate
his or her ownership interest in the property. For example, if the
vendor is the estate of a deceased individual, the purchaser wants
to be assured that this transaction is being carried out in the
proper manner by the estate. The purchaser’s solicitor will have
to ensure that all proper steps have been taken to allow the estate
to sell the property to the purchaser.
Finally, there will be some interests that are registered against
property that cannot be removed from title, either because the agreement
of purchase and sale requires that the purchaser accept title subject
to these interests or because the party whose interest is registered
on title to the property will not consent to the interest being
deleted from title. An example of the former is easements in favour
of utility companies which allow them to enter on to land and maintain,
repair or service their utilities. An example of the latter is an
agreement registered on title which prohibits the property owner
from, say, objecting to the use of nearby property as an industrial
factory of some sort. It is important for the lawyer conducting
the search to inform the purchaser of these interests and advise
the purchaser of the effects, if any, of these interests. Even if
these interests cannot be removed from title to the property, the
purchaser should at least be aware of any restrictions to the use
of the property and any rights or interests of other parties in
the property.
In sum, the purchaser’s lawyer should always review and discuss
the title search results with the purchaser so that the purchaser
understands what needs to be done to obtain clear title to the property
and so that the purchaser understands which interests the property
may still be subject to upon the closing of the transaction.
Please note that this article is educational in nature. Please consult
your solicitor if you have questions or concerns regarding surveys.
Terry
Pochmurski, B.A., LL.B.
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