Tools & Information
Terms & Definitions
Agreement of Purchase and Sale. This is the offer-to-purchase document that makes up the core of a real estate transaction. It itemizes the property being sold, when it is to be sold, at what price, and the terms and conditions to the sale and purchase of the property.
Amortization. The period, in years, that it takes to pay back your mortgage. For example, a mortgage with an amortization period of 25 years means it will take 25 years to pay down.
Appraised Value/Appraisal. An estimate of the value of a home or property. The appraisal is performed by a certified appraiser on behalf of a lender (such as a bank) to ensure that the value of the property matches (or exceeds) the funds being loaned.
Arrears. When an account is said to be in arrears, it is overdue. For example, your lawyer may discover that the seller's tax bill on a property is in arrears.
Building Location Survey. A plan that plots the location of a house and structure on a lot. It is required by most lenders, and is useful in detecting physical defects and understanding lot lines, lot size and shape.
CMHC Insured Mortgage. CMHC stands for the Central Mortgage and Housing Corporation, a not-for profit organization that provides mortgage insurance to lenders. High-ratio mortgages – that is, mortgages with a value greater than 75% of the appraised value of the property – must be insured by the CMHC at your cost. The CMHC web site provides a wealth of information.
Conditions. These are the circumstances or requirements that must be met for a transaction to take place according to the Agreement of Purchase and Sale. For example, a buyer may insert a condition in the agreement that states that the offer is conditional upon the buyer securing financing.
Conditional Sale. A sale in which a buyer or seller is not bound by the agreement until all conditions are met.
Condominium. A form of property ownership wherein the owner has exclusive title to a unit within a project or building, in addition to a share of ownership in the common elements of the building or property. Common elements may include land, clubhouses, garbage removal and upkeep services, road maintenance, swimming pools, and so on. Condominium fees are paid by each unit owner, in addition the mortgage payment, in order to maintain the common elements.
Condominium Act. A law of the province of Ontario, most recently updated in 1998, that governs how a condominium corporation is structured, governed and shall act on behalf of its condo association members. The Act can be read in its entirety.
Conventional Mortgage. A mortgage loan that does not exceed 75% of the property's appraised value. You have a conventional mortgage if your down payment is 25% or more of the home's purchase price.
Covenant(s). A covenant is an agreement, pledge or condition that may be included as part of an agreement. For example, a builder may include a covenant that states that storage sheds cannot exceed a dimension of 10 feet by 12 feet.
Disbursement. A payment. For example, a bank disbursement to pay for a mortgage. It may also include photocopies, courier charges and the like. Guertin Lawyers include disbursements in their no-surprise pricing.
Easement. A right of way that grants access to persons other than the owner on a property. For example, a utility company may have a right of way onto your property in order to maintain its power lines.
Estoppel certificate. A legal document provided by condominium corporations that attests to the physical and financial status of the corporation and a particular unit within it. After a tenant gathers and prepares the necessary information into this Estoppel Certificate, they are "stopped" from taking back or retracting the information contained within. As your real estate lawyers, we will request and review and Estoppel Certificate as a condition of purchase of a new condominium.
High Ratio Mortgage. A mortgage that exceeds 75% of the home's appraised value. You have a high-ratio mortgage if your down payment is less than 25% of the home's purchase price. A high-ratio mortgage must be insured by the Canadian Mortgage and Housing Corporation.
Home Inspection. A technical inspection of a property by a certified home inspector (such as an engineer). The purpose of the inspection is to assess the state of the property and the building structure and advise you of existing or anticipated problems with the property that may affect your decision to purchase it.
LSUC Transaction Levy. A levy imposed upon lawyers by the Law Society of Upper Canada (LSUC) as a means of insuring the lawyer against liability in certain transactions. The levy is waived for many title-insured residential real estate transactions.
Land Transfer Tax. A tax imposed by the provincial government and paid by the purchaser of a property on closing. The land transfer tax applies whenever a property is transferred from one owner to another. It is based on the selling price of the house. The Cost Calculator we provide automatically calculates what your land transfer tax will be.
- An Open Mortgage can be paid off before it matures. An open mortgage generally allows a full or partial payment of the principal at any time, without penalty.
- A Closed Mortgage cannot be paid before it matures. It features fixed payment and duration schedules. If you terminate the mortgage at any time prior to the actual end if the term, you may be penalized.
Mortgagee/Mortgagor. The borrower of money is the mortgagor. The lender of money is the mortgagee.
New Condominium Act of 1998. The latest update of the Condominium Act, this law governs the legal obligations and operations of all condominium corporations. Among other updates, the Act of 1998 requires that all condominiums have a Reserve Fund Study performed by May, 2004, and every five years thereafter.
Ontario New Home Warranty Program. A not-for-profit organization that manages the New Home Warranty Act that regulates builders and vendors of new homes in terms of warranties and workmanship. The ONHWP web site provides comprehensive and easy-to-use website provides information that all purchasers of new homes should know.
Power of Attorney. A legal document that allows you to designate your lawyer or a third party to sign and authorize documents on your behalf should you be unavailable. This may be useful during the period leading up to and including closing day, as well as in the long-term to ensure that your affairs can be taken care of by a person you trust in the case of your leaving the country or becoming disabled.
Principal. The amount borrowed (i.e. what you owe) on a mortgage. Your mortgage interest is paid based on this principal amount.
Registry Office/Land Registry Office. The office where all formal closing transactions take place, are logged and archived.
Resale. The purchase of an existing, previously owned home. A resale transaction is substantially more involved than the purchase of a new home, as a resale home carries a history of ownership that must be reviewed by your lawyer.
Reserve Fund. A common fund into which all owners of units in a condominium property pay a regular fee for the maintenance of common elements.
Second Mortgage. A supplementary mortgage. Second mortgages are sometimes used to make up for a shortfall between the total mortgage requirements and what the first mortgage will cover. They are usually of a shorter term and a higher interest rate than standard mortgages.
Status Certificate. See Estoppel Certificate, above.
Tax Adjustment. An adjustment in the tax account for your property. In most transactions you will see some form of tax adjustment to account for any overpayments or arrears that may exist in the tax account at closing. For example, a seller may have paid taxes for the three months following closing. In that case, a tax adjustment equivalent to three months' would be provided to the seller by the buyer upon closing.
Tenant Protection Act. A law that governs the relationship between a landlord and a tenant, as well as a landlord's responsibilities to tenants and their leases. Even when purchasing a rental property that is new to you, you are bound by this law, which covers leases, rental costs, and more. For text of the full Act, click here.
Title. A legal document that identifies a property and the owner of that property.
Title Insurance. A no-fault insurance policy that protects you against any current or future claims to the title of your property. Title insurance, along with your lawyer's Search of Title, is designed to protect you from risks such as someone else making a claim to title of your property.Vendor Take-Back Mortgage. A mortgage wherein the seller provides a part or all of the mortgage financing to the buyer. For example, a parent may sell a property to one of his/her children, as well as financing that child's mortgage on the property.