Real Estate Legal Fees: A Full Breakdown

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When it comes to buying or selling a property, legal fees are a major part of the closing costs. They cover your legal representation and legal services as you execute on the Agreement of Purchase and Sale.

These services include general legal advice, review of legal documents, mortgage preparation, title searches, drafting, and compliance with all legal aspects.

A real estate lawyer plays a crucial role in safeguarding the interests of buyers or sellers, throughout these financial transactions by providing legal guidance, mitigating risks, and facilitating smooth transactions.

In this article, we're going to breakdown all the components of real estate lawyer fees in residential transactions so you have a full understanding of the legal process when looking to hire your legal services.

"Legal Fees" Overview

Legal fees in real estate transactions are typically composed of two (2) parts: the actual "legal fee" and the "disbursements".

The legal fee (if noted separately) is what the lawyer is charging for handling your file. This is what the lawyer is paid for representing you as the buyer or seller in the transaction.

Disbursements, on the other hand, is a general term that represents the additional expenses your lawyer covers on your behalf to facilitate the transaction.

Take a closer look at an invoice for a real estate transaction from any real estate law firm and you'll find a breakdown of various line items, each with its own associated fee.

The Legal Fee

Here, we're going to focus on the just the Legal fees - the amount you're actually paying the lawyer to represent your interests and handle legal issues.

A lawyer's legal fee can charged in two (2) ways:

Fixed Rate Fee
A "fixed rate fee" means that no matter the amount of time actually spent working on the file the billed fees will remain at the quoted rate.

Hourly Fee
An "hourly fee" or "hourly rate" will only reflect the time the legal professional physically works on a file. These types of fees will be tracked and rounded (typically) to the nearest tenth of an hour for billing purposes.

Remember, whether hourly or flat rate, real estate law firms charge HST on their fees.

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Disbursements

Disbursements refer to additional charges that real estate law firms pay on behalf of their client during the course of a real estate transaction. These can include:

Title Search Fees

• The title search component is a disbursement that will be seen on all purchase and refinance transactions.
• These are the search costs that the lawyer will incur when examining the title of the subject property, all instruments registered to title, and the examination of adjoining lands.
• Title searches are necessary to reveal vital information about the properties such as existing liens, mortgages, easements, title defects, and determine the legal ownership structure.

Software Transaction Charge

• The software transaction charge component is a disbursement connected to the specific legal software the lawyer will use to manage the real estate transaction.
• This charge will appear on purchase, sale, and refinance files. The software allows for efficient document management, due diligence checks, and accuracy.
• The amount depends on which software the lawyer chooses. Most competitive softwares in Ontario are $50-$100 per file. However, there is one company that charges substantially more at $250+ per file.

Law Society Transaction Levy

• In Ontario, lawyers are required to pay a levy for each real estate transaction they handle. The current cost, is approximately $65.

Banking Fees

• These include charges for processing bank drafts, wire transfers, and other transactions.
• These can range anywhere from $25-$100, depending on the number of payouts required.

Tax Certificates

• A tax certificate confirms the status of property taxes for the property. These are used to ensure there are no outstanding property taxes at the time of closing.
• The cost of obtaining a tax certificate depends on the municipality - the average cost in Ontario is around $70.00.

Admin Fee

• This term is often used in reference to additional disbursements for general office expenses such as photocopies, storage, printing, etc. These may be noted simply as admin fees instead of broken down further.

Off-Title Searches

• For multi-residential or commercial real estate transactions, there are often additional costs associated with off-title searches required by Lenders or Title Insurance companies.
• These searches can include zoning verification certificates, building department compliance certificates, fire certificates, and environmental compliance certificates.
• These searches, like the tax certificates, are municipality dependant but they can total up to several hundred dollars.

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Additional Closing Costs

In addition to the legal fees and disbursements, there are a few other payments necessary to complete a real estate transaction:

Land Transfer Tax

In Ontario, purchasers are responsible for Land Transfer Tax (LTT). The amount of tax is calculated based on the property purchase price and the rate is graduated, meaning it increases as the purchase price goes up.

• Eligible first-time home buyers can receive Land Transfer Tax Rebates up to a capped amount of $4,000.00.

Municipal Land Transfer Tax

• When purchasing property in Toronto, buyers are subject to an additional tax called the Municipal Land Transfer Tax. The calculations for MLTT are the same as the Ontario Land Transfer Tax, the cost increases the higher the purchase price is. Essentially, Toronto purchasers will pay double the land transfer tax.
• Eligible first-time home buyers can receive Land Transfer Tax Rebates up to a capped amount of $4,000.00. This rebate can be used together with the LTT rebate above, potentially providing significant savings for qualifying buyers in Toronto.

To calculate LTT (and MLTT), you can find various calculators online that will give you an exact number.

Title Insurance

• Title insurance protects purchasers and lenders from title defects, liens, or other legal issues that may arise post-closing that couldn't be reasonably discovered during the pre-closing and closing process of real estate transactions.
• Costs are company dependant and the fees are based on the type of property, the value, the insurer, and the type of coverage.
• The 3 most widely used title insurance companies are:
  1. Stewart Title Guaranty Company
  2. FCT (First Canadian Title)
  3. Chicago Title Insurance Company

Execution Certificates

• Execution Certificates or "Writ Searches" are conducted to check for registered claims against any involved parties to the transaction due to unpaid debts.
• Typically performed both with the title search and again on the day of closing to ensure there are no potential financial or legal complications with respect to any party.

Conveyancing "Registration Fees" Charges

• These are fees paid to the provincial government for registering any document to title of property, the most common being the Transfer (Deed) to the property and the Charge/Mortgage.
• Typically, these are paid by the purchasers/borrowers on purchase and refinance files. As of today, it costs $83.11 per registration in Ontario.

Status Certificate

• A disbursement for a condo status certificate would only appear on condominium purchases/refinances, and depending on the logistics of the status certificate review. If your lawyer was the one that ordered the status certificate, the cost of obtaining one is around $100.00 plus any delivery fees set by the Condominium Corporation.

Real Estate Commission

• Real Estate Commission references the fees that are owed to both the buying and selling real estate agents for their services, typically paid by the Seller.
• The commission statement will come from the agents office and it will outline the agreed-upon commission rate together with any additional fees or expenses incurred during the transaction process.

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Summary

Real estate lawyer fees cover a range of legal services, including legal advice, contract review and ensuring compliance. These fees can be billed hourly or at a fixed rate. Disbursements, such as title searches and software charges, are expenses paid by the lawyer on behalf of the client and may be subject to HST.

Other costs to consider include land transfer taxes, title insurance, execution certificates, conveyancing fees, status certificates, and real estate agent commissions. Understanding the typical closing costs is crucial for planning and budgeting in real estate transactions.

It's essential for clients to thoroughly discuss the scope of legal services covered by the different types of real estate lawyer fee structures and inquire about any potential exclusions or limitations to ensure transparency and avoid surprises.

Always opt for experienced professionals, such as real estate agents, mortgage brokers, and hire an experienced real estate lawyer, to ensure sound legal advice, peace of mind, and a smooth transaction.

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If you have questions about real estate legal fees or any other real estate legal matter, we're here to help. As real estate law specialists, our mission is to provide the clarity and direction you need to protect your property rights.

Contact us today to schedule a free consultation.

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