Under the standard REPC, you must deliver a title free and clear of all financial encumbrances. Accordingly, after receiving the sale proceeds from the buyer, we will payout any mortgages on title as well as any other loans which are secured by an encumbrance on title (unless of course there is an agreement to the contrary in the REPC).
Financial encumbrances include items such as a line of credit secured by a mortgage, a Promissory Note charging land, a financial Caveat, a Builder’s Lien, a Lien for condominium fees, a Writ filed a judgment creditor, a Lien for unpaid support and maintenance, or an unpaid property tax Caveat.
Our responsibility is to contact the creditor directly. We must verify the amount owing and the method required to payout. On closing, we will often update the amount owing and then provide payment to the creditor. Our job is not finished until the creditor provides us with a discharge of their encumbrances and we have registered them at Land Titles. Under our standard billing practice, we charge a fee for each encumbrance that we must discharge from Title.
To ensure efficient payout of the encumbrances, please provide us with your account number or mortgage reference number. In some cases, lenders register very similar names on title, but require payout requests to be sent to different offices. Your specific mortgage account information will assist us in ensuring timely payout of the debt and reduce the possibility of a delayed payment or application of the payment to the incorrect account.
Your lender will typically provide a payout statement current to the completion date. Depending on the terms of your loan, the payout statement may contain pre-payment penalties which can be significant. We recommend contacting your lender before listing the property for sale to determine what, if any, pre-payment penalty will be applied to your mortgage payout statement. To obtain a discharge of your mortgage, we are obligated to deliver the amount stated on the payout statement. We do not negotiate the payout amount on your behalf. If you take issue with the amount of money set out on your payout statement, you will have to address this issue with your lender directly.
In many newer subdivisions, a homeowner’s association registers an encumbrance against the title to every lot in the neighborhood. These encumbrances protect the ability of the homeowners association to charge an annual fee. This fee is generally used for the maintenance or development of certain improvements on common areas in the community. Some homeowners associations are active and diligent in issuing invoices and collecting payment from homeowners. Others may have active operations, but may be less diligent about following up and collecting outstanding payments.
If you have a homeowners association encumbrance on your title, you will be responsible for all homeowners association payments up to the completion date. We will contact the homeowners association to determine whether there is an amount outstanding on your account. We are required to ensure that any amounts owing are paid up to the completion date. If the homeowners association has been less than diligent in collecting dues, there could be a sizeable payment owing. If you have a homeowners association encumbrance on your title, enquire with the homeowners association to ensure your payments are up to date, particularly if you have not received invoices recently or at all.
If you have paid the association fees for the year, please provide us with evidence of that payment. We can then recover from the buyer their pro rata share of the annual fee.
Commissions payable to the realtor for all their services are typically calculated on a percentage basis, although other arrangements are possible.
Typically, when a deposit is paid by a potential buyer, that money is held in the trust account of the realtor’s brokerage. Every brokerage must have a trust account that is subject to strict monitoring and regulation for the protection of all concerned. Any deposit is held in that trust account until the deal has closed. Once the seller’s lawyer receives the cash-to-close, they notify the realtor. It is only when the realtor receives this notification from the lawyer that the deposit can then be released to pay their real estate commissions. If the deposit is not enough to cover the commission in full, then we, as lawyers for the seller, will send the remainder of the commission to the brokerage out of the sale proceeds.
In those cases where the deposit exceeds the commission, the brokerage will send the excess funds to the lawyer sometime prior to closing. They will still hold the remainder of the deposit in their trust account and will only release it in payment of their commissions, upon notification from the seller’s lawyer that the cash-to-close has been received.