What Happens on Closing?

By Lorne Shuman

Whether you have bought a resale or a new home, you need to understand what happens on the day that your deal closes-or the closing day.  Many important things occur on closing.  First, you become the legal owner of the property.  Second, you receive the keys to the property.  Third, you become responsible for the many financial obligations that owning a home imposes. This column will examine these issues in more detail and give you a better understanding of what happens on closing day.  If you have bought a brand new condominium, the closing process is slightly different and some of these comments may not apply.

After many months of waiting, you are about to close your house deal.  Things happen quickly and you need to be prepared.  If you have bought a brand new house, your builder has notified you and your lawyer of the closing date.  Your lawyer will advise you to notify the gas, hydro, building and tax departments of the change of ownership.  You will need to arrange for movers as well as setting up accounts for cable and telephone. You will also need to insure the property.

Your lawyer will call you to set up an appointment to sign all the necessary papers and advise you of the required funds to close the deal. Included in this number will be legal fees and disbursements, the title insurance premium, Land Transfer Tax (you may qualify for an exemption if certain criteria are met) as well as adjustments between you and the vendor.  The legal fees and disbursements should not be a surprise.  Land Transfer Tax and closing adjustments are costs that that your lawyer should have warned you about and estimated for you when you signed the Agreement of Purchase and Sale. 

Adjustments are variable and often depend on the closing day.  Here is how they work:  If your deal is closing in February and the vendor of the property has already paid for the entire year of property taxes, there will need to be an adjustment in the vendor’s favour.  Essentially, you need to compensate the vendor for the fact that it has fully paid your realty taxes-something that you would be paying for in any event.  As such, there will be an adjustment in favour of the vendor.  Your lawyer will prepare and explain to you how the adjustments were arrived at.  The opposite analysis applies and the Vendor will need to make an adjustment in your favour if it has not paid the realty taxes.  On a newly built home, the adjustments are usually more complex.

If you have bought a newly built home, you will need to do a careful inspection of the property prior to closing.  Depending on the terms of your contract, this may not be the case for a resale home.  In any event, you need to be aware of the fact that you will not receive the keys to the property until the deal is closed.  Closing occurs when the lawyers have exchange documents, keys and funds and the documents have been registered.  Registration normally occurs later in the day.  Keys are released after closing.  If you have bought a new home, the keys are often released at the site office.  If you have bought a resale home, your lawyer will advise you as to how and when you may pick up the keys.

Closing day is the culmination of many months of preparation.  Working with an experienced real estate agent and real estate lawyer will ensure a smooth closing.