By April L. Hubert and Jonathan E. Cass
(This article has been updated from its original publication.)
Introduction
Whether you are considering using our services or the services of another firm, this page should help answer frequently asked questions regarding the cost of a real estate purchase, sale, or refinance, to better assist you in choosing a real estate lawyer. We encourage every client (or potential client) to ask questions regarding how much it costs to buy, sell, or refinance a home. It's a lawyer's job to help you figure that out. We also recommend you read the Ontario Bar Association's "Working With A Lawyer When You Buy A Home" and the Financial Services Commission of Ontario "Understanding Title Insurance."
Disclaimer: This article is not a substitute for legal advice. No action in regard to your particular matter should be taken until you have first sought full legal or professional advice from a lawyer fully retained to act on your behalf.
Why do I need a lawyer?
It is the law, in Ontario, that a licensed lawyer transfer ownership of your home. This law was passed to better protect the public from fraudsters and bad purchase and sale agreements.
What is the cost of buying, selling or refinancing a home?
Every property is different and so is every real estate transaction: the buyer, seller, and financing are different, the exact physical boundaries and structure are different—everything is different. It is this unique set of circumstances that require a similar but unique set of documents and legal analyses, every time, and for every property. Put another way, a home is not a "one-size-fits-all" item and neither is the legal work associated with it. For example, a property may have an easement (a right for someone else to use the land) or a septic tank and well (instead of municipal services). Despite this uniqueness among properties, real estate lawyers traditionally charge a standard fee to make it simpler for their clients, and to stay competitive with local lawyers who provide a similar level of service. This fee is only part of the cost of buying, selling, or refinancing a home.
Clarifying legal Costs
The total cost of a real estate transaction consists of three separate categories: the legal fee, the disbursements, and the expenses. What you pay the lawyer (the legal fee) is only one part of the total cost. It is the job of a real estate lawyer to help you determine what the total cost of your transaction will be, including, for example, the price of the home, legal fees, disbursements, and other expenses. Lawyers are required by their governing body (The Law Society of Ontario) to be upfront about costs. Despite the requirement to be upfront about costs, some lawyers still advertise low fees and then tack on additional charges for things other lawyers simply include.
A potentially helpful analogy for real estate legal fees is this: a lawyer advertising a much lower price than their competitors is like a car dealer selling the same car as the other dealers, but for less. The lower price gets you “in the door,” but then the dealer asks, “Are you going to need tires?” And then maybe, “How about seats? Are you going to need those?” Of course, the answer will be “yes” to those questions. Before you know it, the price of the car is the same as the other dealers, if not more. While it is true that every real estate transaction is different and costs can vary depending on the specific property, the lawyer, on the other hand—just like the car dealer who knows that tires and seats always come with cars—knows that clients typically have a mortgage and need money held “in trust” in the law firm’s bank account, and that should not, like tires and seats, be an “extra” fee. We encourage anyone in the process of choosing a lawyer to ask what the total cost should be before retaining a lawyer to act for you. You will likely find that fees are generally the same among lawyers. The largest difference in legal fees among lawyers in the same geographical area will likely only be a few hundred dollars. We recommend choosing a lawyer with a good reputation who also takes the time to educate you on the process.
Below, we break down some of the costs for you into the their separate categories.
1.
THE LEGAL FEE
The legal fee covers the time the lawyer (and any assistants at the firm) spend on your transaction.
This can include...
analysis of the offer
discussions with you (the client) about what you need to do
collecting your information
drawing up the documents
liaising with lenders, lawyers, and other parties
advising about pending issues as they arise
checking all the numbers
communicating with you as the deal progresses
answering any questions you may have
meeting with you to sign the final documents
and more
2.
DISBURSEMENTS
A disbursement is money the lawyer spends on your behalf. These are also referred to as "third-party costs." A good analogy for this is, “you've bought the car and now you have to pay for the insurance and registration.”
These costs normally include...
government taxes (such as Land Transfer Tax)
a search of title (the ownership) and registration of title (the new ownership) on the government database
title insurance (if applicable)
banking fees for certified funds or wire transmissions
3.
EXPENSES
Expenses are additional costs relating to the property.
These can include...
default insurance (if applicable)
municipal change of ownership fee
adjustments for remaining fuel oil and propane (if applicable)
moving costs
property inspections
environmental reports
land surveys
tax adjustments between the new and former property owner
utility connection charges
lender fees
lender deductions for insurance fees or pre-paid taxes
additional costs listed in Tarion™ Schedule B (on new builds)
WHY DO SOME LAWYERS CHARGE A BIGGER OR SMALLER FEE?
Many things can affect a lawyer's fee: the years of experience acquired by the lawyer (more experienced lawyers can cost more); the skill level of any support staff involved in the transaction; the location of the lawyer (Toronto lawyers tend to charge bigger fees, due to higher overhead); and what services the lawyer includes in the fee.
Again, it is important to note that some lawyers may quote a low fee on their website or over the phone, but charge additional lawyer’s fees, later on, sometimes listing them as disbursements. Put another way, not every lawyer includes the same services in their fee quotation, and some lawyers can be deceptive. For example, some lawyers can charge additional fees for...
transfer of title or “conveyancing”
changes to mortgage documents
holding money in trust
direct deposits to clients
and other services that other lawyers simply include
We encourage you to ask if there are additional lawyer's fees, separate from disbursements and expenses. That is an important conversation to have. For example, you can ask, “Aside from disbursements and expenses, is that the only lawyer’s fee?” As of September 2017, the rules governing Ontario lawyers have changed to prevent advertising fees that are not all inclusive—so Ontario lawyers should no longer advertise fees that do not include all fees for legal services, disbursements, third party charges, and other amounts. As mentioned above, even after the change in rules, some lawyers still quote fees that appear to be all inclusive when they are in fact not. In general, you should find that most lawyers who appear to charge a low fee actually charge about the same or more than other lawyers in their community. If you are uncertain about a lawyer's fee, we are happy to help you compare, whether you choose our services or not. Long lawyer-client relationships being our goal, we are upfront about legal fees.
HOW SHOULD I CHOOSE A REAL ESTATE LAWYER?
Some clients prefer a lawyer who works alone (a sole practitioner) who can process their transaction relatively inexpensively. Other clients prefer a lawyer who employs more accessible and highly skilled assistants (extra sets of eyes and ears) who collect and organize client information for lawyer review—which can also reduce costs by lowering lawyer time on administrative tasks like data entry. Either of the above examples can do a good job for a good price. Rather than basing your choice on price alone (i.e., what services you receive for what cost) we recommend choosing a real estate lawyer who...
speaks to you personally or calls you back quickly (when you first call about your purchase, sale, or refinance)
is upfront about fees
has experience processing transactions like yours
teaches you about the legal process
has a good reputation for practising real estate law in your community
and has not been subject to any disciplinary orders or prosecutions by the Law Society (published orders can be found here)
Further questions?
Whether you plan on using our services or that of another firm, if you have more questions about fees or about the purchase, sale, or refinancing of your property, please do not hesitate to contact us.