What Happens on Closing Day in Ontario

Closing day makes people nervous, mostly because so much of it happens out of sight. You have packed the house, booked the movers, and then you spend the morning waiting for a phone call. Here is exactly what is happening behind the scenes, in the order it happens, so you know what to expect. This covers both sides of the deal, buying and selling.

You will not be at the lawyer's office

This is the first thing to understand. In Ontario the work on closing day happens between the two lawyers and your lender, not in a room with you in it. Your signing appointment happens before closing day, usually a few days ahead. Closing day itself is money moving and documents registering, and your real estate lawyer calls you once it is done.

The order things happen in

Each step depends on the one before it, which is why a late start early in the day pushes everything back.

When do you actually get the keys

Usually in the afternoon, on average between two and five. Buyers often expect keys at nine in the morning and it almost never works that way, because the funds have to move and the registration has to complete first. A smooth closing can register late in the morning, but the afternoon is more typical. Book your movers with that in mind and try to avoid scheduling anything that assumes you are in the house by lunchtime.

There is also a hard stop to know about. The electronic land registration system does not register transfers after five in the afternoon. If the money arrives too late in the day to register, the lawyers can sometimes close in escrow, which means the funds and keys change hands and the registration happens the following morning, usually with the protection of title insurance in the meantime.

What you need to do before the day arrives

• Attend your signing appointment, which is usually a few days before closing. You will sign the mortgage and the transfer documents and provide identification.
• Send your lawyer the closing funds by certified cheque, bank draft, or wire, in the exact amount shown on the statement of adjustments. Personal cheques are not accepted.
• Arrange home insurance effective on the closing date. Your lender will not advance the mortgage without confirmation of insurance.
• Do your final walk through of the property, and tell your lawyer straight away if something is wrong.
• Set up the utilities in your name for the closing date.

What the statement of adjustments does

This is the document that sets out the final number your lawyer needs to send to the other lawyer in order to close. It starts with the purchase price, subtracts your deposit, and then adjusts for anything the seller prepaid that covers time after you own the home. Common adjustments include property taxes, condominium common expenses, and prepaid utilities such as fuel left in a tank. If you have questions about a line on it, ask before closing day.

Closing day if you are the seller

Selling runs on the same clock, but your day looks different. You are waiting on money rather than keys, and almost all of the activity happens in your lawyer's office rather than yours.

Your lawyer receives the purchase money from the buyer's lawyer, confirms everything is in order, and the transfer is registered. Once that is done the sale is complete and your lawyer moves on to paying out what is owing and releasing the balance to you.

What you need to have done by that point is straightforward. The property has to be empty and in the condition the agreement requires, the keys need to be available for release, and anything your lawyer asked you to sign should already have been signed at your appointment a few days earlier.

When does the seller get their money

In most cases the same day, usually in the afternoon once the funds have arrived and the transfer has registered. If the buyer's money lands late in the day, or you are closing on a Friday or before a holiday, it can move to the next business day. Your lawyer sends the net proceeds by wire, direct deposit, or bank draft, whichever you arrange in advance.

What you receive is what is left after everything owing has been paid out of the sale price. That normally includes the following.

• The payout of your existing mortgage, including interest to the closing date and any prepayment charge or lender discharge fee.
• Any other charges registered against the title, such as a home equity line of credit.
• The real estate commission.
• Your legal fees and disbursements.
• Any adjustments owing to the buyer, for example property taxes you have not yet paid for the period they will own the home.

Why part of your money may be held back

This is the part that surprises sellers most, and it is worth knowing before closing day rather than after. When your mortgage is paid out, the lender still has to register a formal discharge to remove the mortgage from the title. That registration is what leaves the title clean, and it does not happen instantly.

Because of that, it is common practice for a lawyer to hold back an amount from your proceeds until the discharge is registered. Lenders often take several weeks to a few months to complete it, and that timing sits with the lender rather than with your lawyer. Once the discharge appears on title, the holdback is released to you.

If you would rather avoid the holdback and you are able to pay the mortgage out before closing, raise it with your lawyer early, since it changes how the funds flow on the day.

What can cause a delay

• The lender funds late, which is the single most common cause and pushes back everything after it.
• Closing funds arrive late or in a form that cannot be accepted.
• A last minute title issue turns up, such as an outstanding lien or a discharge that has not come through on the seller's mortgage.
• The property is not in the condition the agreement requires at the walk through.
• A mortgage payout statement arrives late from the seller's lender.
• Paperwork is missing from one side, which the lawyers then have to chase.

Most delays are a matter of hours rather than days, and the lawyers work through them in the background. A delay past the closing date is more serious, since it can put a party in breach of the agreement, which is exactly the situation your lawyer is working to avoid.

Related reading. How Much Are Real Estate Closing Costs in Oakville

Frequently asked questions

This article provides general information about Ontario law and is not legal advice. For advice about your own situation, please contact James Deep Law.