[Jennifer Park] Practical Tips from a Practicing Real Estate Lawyer

Lessons Learned in Law and More: Practical Tips from a Practicing Real Estate Lawyer

As we all know: some lessons in life are not taught in classrooms or textbooks. They are learned through hard-knocks and real-life practice instead. Hello! My name is Min Ju Jennifer Park. I am a practicing lawyer and Partner at Realty Care Law LLP. Although my practice is not limited to real estate law, I will be drawing on my experiences with real estate transactions to share some practical tips that buyers and sellers (and other interested parties) may find useful. 

Home Inspections & Caveat Emptor

The doctrine of caveat emptor (meaning “buyer beware” in Latin) states that the onus lies with the Buyer of real estate to investigate the state of the property prior to purchasing it. Patent defects (flaws plainly visible to the eye) should be brought to the attention of the Seller prior to signing the Agreement of Purchase and Sale, or prior to the expiry of the inspection condition. 

An inspection condition affords the Buyer a certain number of days to complete an inspection of the home (by a certified home inspector) to discover as many defects as possible. The Buyer must use the conditional period to investigate the defects and then determine whether or not to proceed with the transaction based on the findings. 

A certified home inspector will be helpful in discovering as many patent defects as possible. Once the findings are compiled, the Buyer has a few options:

1. Exercise the inspection condition to back out of the Agreement of Purchase and Sale;
2. Negotiate the purchase price; or
3. Impose repair/replacement obligations on the Seller. 

Inspection conditions are often used as a bargaining tool in negotiations between Buyers and Sellers. A Buyer’s agent may propose that an inspection condition be omitted from an Offer, to make the Offer more attractive to the Seller. However, a Buyer who chooses to proceed without a professional inspection should certainly be prepared to leave room in their budget for defects discovered after closing. 

Tarion Warranty: Deposit Protection

Purchasers of new homes in Ontario are provided certain protection under the Tarion Warranty Program. The Tarion Warranty is mandatory for all new homes built in Ontario. Tarion provides protective measures such as:

1. Deposit protection;
2. Delayed occupancy/closing compensation; and
3. Construction defect warranty.

Beginning April 1, 2026 homeowners must register their Agreement of Purchase and Sale (APS) within 45 days of signing. Registering the APS notifies Tarion about its existence and guarantees that the maximum deposit protection coverage is provided. In order to allow Buyers with a transitional period, Buyers who miss the 45-day registration deadline can still register before January 1, 2027, to enjoy the maximum deposit protection.

Those who fail to register their APS within the 45-day period after January 1, 2027, will have to rely on access to a separate fund that is capped at $15 million annually.

Home Equity Line of Credit

I recall many instances where I asked a Seller client: “Do you have any mortgages taken out against the home you are selling?” They would reply: “No, I’ve paid off my mortgage and just have a line of credit.” These clients are surprised to hear that their line of credit is actually called a Home Equity Line of Credit (HELOC), and it is registered against the home like a mortgage. Usually, this does not cause a big concern for a sale closing, since the Buyer’s lawyer searches the Ontario land records about 2 weeks before closing to flag registered mortgages for the Seller’s lawyer to pay out from the sale proceeds. 

However, HELOCs can become problematic in two ways:

1. Even if you do not draw any money from the HELOC, you often pay administrative fees to delete the HELOC from the land records (usually in the $300-$500 range). Homeowners are often displeased when the line of credit product that was “sold” by their Bank as hassle-free and cost-free leads to extra administrative and legal fees before closing; and 
2. Sellers who are selling to buy sometimes obtain last minute HELOCs to finance their purchase transaction instead of obtaining a bridge loan. However, if this information is not relayed to your lawyer, the lawyer will have to scramble at the last moment to obtain a payout statement from the Lender. Lenders typically require 2 weeks’ notice to issue a payout statement. If the payout statement cannot be delivered to the Buyer on closing, the closing date will need to be delayed. The Seller will have to compensate the Buyer for any moving costs, storage fees, accommodation costs, and legal costs that arise as a result of the delay. 

Blanket Appraisal Programs

It is an unpleasant but undeniable truth that many Buyers are struggling with finding financing options for their pre-construction units. One major problem is the property appraisal. Banks and lending institutions will typically appraise conservatively (low), and given the current market trends and projections, many Buyers are learning that their units are appraised at a valuation that is lower than the purchase price. This leads to Buyers being forced to invest more cash into the closing than originally planned. 

For those Buyers with upcoming closings, I would urge you to contact the sales centre or customer care centre and ask about a Blanket Appraisal Program. When a Bank or lending institution agrees to participate in a Blanket Appraisal Program, they agree to rely on the unit’s original purchase price as the property’s value, as opposed to the actual current market value. 

Although this type of lending practice may draw scrutiny from regulators and raise questions regarding sustainability, it is an invaluable option for Buyers who do not have the lump sum cash on hand to cover the appraisal shortfall.