Title Search is a necessary step in every real estate transaction in Ontario. Normally performed by a real estate lawyer, title search reveals an enormous amount of information about a property and its owner. Keep reading this post to learn about the significance of conducting a title search when buying a property in Ontario.
WHAT IS TITLE?
Before we can learn about title searching, we need to understand what “title” to a property is. Legal title refers to the right of ownership and possession of a property. The legal title gives the owner the right to transfer, mortgage, lease, or sell the property.
In Ontario, there are 2 systems which are used for storing title records – Land Registry and Land Titles system. There are many differences between the two, but in short, Land Titles is the modernized version of Land Registry and most of the properties in Ontario have been converted to Land Titles.
All records relating to property title are stored at one of the 53 Land Registry Offices (LROs). Each office stores records relating to their designated geographic area. The properties in those areas could be affected by things like Municipal Agreements and By-Laws relative only to those areas.
DO YOU NEED TO HIRE A LAWYER TO CONDUCT A TITLE SEARCH?
The answer to that question is it depends (any lawyer’s favourite answer!). Anyone can access title records in Ontario by using a government regulated site, Onland.
Although you can pull these records yourself, you may need help of a trained professional to read them. It will be tough to read through and understand which instruments are important and could affect you as a potential owner. In addition, the general public cannot register any documents in the registries. You will need a licensed and authorized professional, a lawyer or a conveyancer, to register any documents for you.
WHAT IS A TITLE SEARCH?
Now that we know what title is and where to find it, let’s finally talk about title searching.
Simply put, a title search is a process of examining public records to confirm the legal ownership of a property and to identify any liens or encumbrances on the title.
What is a lien, you may ask? A lien is a lender’s claim for repayment that is registered against property. What about an encumbrance? An encumbrance is any burden, interest, right, or claim that adversely affects a real property’s use and value but does not necessarily prohibit the ability to transfer title.
All this information can be found on a document called the Parcel Register. Parcel Registers that can be obtained by anyone through Onland are the same ones we, as lawyers, pull directly from LROs. Here is what the sample of the document looks like:
The following information will be outlined on the Parcel Register:
- Property Identification Number (PIN)
- Legal Description
- Owners & their interests (Joint Tenants and Tenants in Common)
- Types of parcels in Land Titles (Land Titles Absolute, Land Titles Conversion Qualified, Land Titles Absolute Plus)
- All Registered Instruments (even if they were deleted)
- And more
Deleted instruments are encumbrances that previously affected land but were discharged. Reviewing deleted interests on title is important as they can help understand the chain of title ownership and help determine if there are any red flags with the property. For example, were there any recent title transfers or mortgage discharges? How long did the seller own the property for? Being able to “read” title is a skill that your lawyer learns through years of experience and practice. Something that you would not think twice about may be important information for your lawyer.
Keep in mind that there are also many unregistered interests that could affect a property.
TITLE SEARCHING AND REAL ESTATE PURCHASE AGREEMENTS
Most real estate resale transactions are completed with a help of a realtor, who will in turn use a standard Agreement of Purchase and Sale by the Ontario Real Estate Association (OREA). The standard agreement outlines the terms and conditions of the purchase. According to the agreement, a title search must be performed before the closing date.
The definition of “good title” to be provided by the seller is also outlined in the agreement, along with any permitted encumbrances.
OREA Form APS provides for a standard list of permitted encumbrances which are allowed to stay on title of the property you’re purchasing. This list is slightly different for freehold properties and condominiums. Below you will find images of 2 paragraphs of OREA Agreements, Paragraph 11 for Condominium resales and Paragraph 10 for Freehold properties.
For pre-construction agreements, the deadline for a title search is individual for each agreement. The permitted registrations are also outlined in the agreement. Because of the nature of the transaction, most instruments and encumbrances are registered on title a few weeks before the closing date. This creates for a more unique situation for your lawyer who is required to make sure that you are getting what you have bargained for in your Agreement of Purchase and Sale.
Why Title Search?
A title search is an essential part of the property purchasing process in Ontario. It helps buyers understand what they are purchasing and any potential issues that may arise. Whether you’re purchasing an existing property or a pre-construction property, it’s important to conduct a thorough title search. I hope this post has been helpful in explaining the importance of title searching when purchasing property in Ontario.
