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TYPICAL COSTS IN A REAL ESTATE TRANSACTION
If you are planning to buy a property in Ontario, you should be aware of the costs and fees you may have to pay in addition to the purchase price. It is important to be mindful of these costs, as they need to be accounted for when deciding on a budget for a property. Below are examples of common costs that are involved in a real estate transaction.
LAND TRANSFER TAX (LTT)
LTT is payable to the province of Ontario and may be payable to the municipality. For example, Toronto charges residential LTT which follows the same formula as Ontario’s residential LTT. It is important to note that commercial and residential land transfer tax rates differ. See Figure 1. for the Ontario residential LTT rates and Figure 2. for the Ontario commercial LTT rates. In Ontario and certain municipalities, first-time home buyers may receive a provincial and municipal rebate on their LTT. As of April 2023, the maximum provincial LTT rebate for first-time home buyers is $4,000.00, while the maximum municipal LTT rebate for first-time home buyers in Toronto for residential properties is $4,475.00.
Figure 1.
| Ontario Residential Land Transfer Tax Rate | |
| Purchase Price of the Home | Tax Rate |
| $0.00 – 55,000.00 | 0.5% |
| $55,000.01 – $250,000.00 | 1.0% |
| $250,000.01 – $400,000.00 | 1.5% |
| $400,000.01 – $2,000,000.00 | 2.0% |
| $2,000,000.01+ | 2.5% |
Figure 2.
| Ontario Commercial Land Transfer Tax Rate | |
| Purchase Price of the Home | Tax Rate |
| $0.00 – 55,000.00 | 0.5% |
| $55,000.01 – $250,000.00 | 1.0% |
| $250,000.01+ | 1.5% |
TITLE INSURANCE
Title insurance may cover title issues pertaining to fraud, unknown defects, and unmarketability of the title. Title insurance cost is contingent on the purchase price of the property and the value of the mortgage. It is important to note that there are many other variables that may impact the price of title insurance you pay. For example, there are various additional endorsements and coverages that will increase the price you pay for title insurance. Similarly, obtaining title insurance for a private lender will always cost more than title insurance for an institutional lender. If you require a quote for title insurance, contact us, and we can acquire a quote for you.
REGISTRATION OF TRANSFER AND MORTGAGE
When purchasing real estate in Ontario, the name of the new owner must be registered on the title of the property. Similarly, the lender wants to register its interest on the title of the property. Such registrations in legal terms are often referred to as instruments. The cost for the registration of an instrument in Ontario as of February 2023 is $82.00. This price is periodically increased by the Government of Ontario.
LEGAL FEES
Another cost in a real estate transaction is the lawyer fees for representing you in a transaction. Typically, the law firm may charge a flat fee for specific services depending on the complexity of the transaction and the experience of the lawyer. Be sure to confirm a lawyer’s fees in writing prior to retaining them and ask for situations where additional legal fees may apply.
LEGAL DISBURSEMENTS
Disbursements are costs that a law firm incurs while working on a client’s matter. Common examples of disbursements in a real estate transaction include real estate search costs, software fees, government registration fees, banking fees, and postage/ courier fees. While some of these fees are subject to HST, certain disbursements may be exempt from taxes.
If you are looking for a quote on a real estate transaction, contact us and we will respond as soon as possible with a detailed quote for your matter.
Contact us if you need legal assistance with a real estate transaction. Our real estate law team has the experience and knowledge to assist you throughout every step of the transaction.
Disclaimer: The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please Contact us.
About the Author:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.
