ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

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[BUYING AND SELLING REAL ESTATE IN CANADA - ONTARIO]

further development. Careful consideration must be given to the Planning Act in any conveyance as a violation can be fatal in that that no interest in land is created or passed. S. 50 of the Planning Act pertains to the subdivision of land and prohibits an owner from the sale, transfer, or mortgage of a property if they also retain an interest in the abutting lands, unless certain exemptions to the basic prohibition are met. A buyer's lawyer must search the chain of title and adjoining properties to ensure the owner does not own abutting lands. An important amendment was introduced with S.50(22) of the Planning Act in that there was an inclusion in the transfer document of optional statements by the seller and their solicitor and by the buyer's solicitor regarding compliance with the Planning Act . If these statements are completed on the transfer, any prior contraventions of the subdivision control provisions of the Planning Act , which otherwise would have voided the interest in land, are deemed to be no longer and never to have had this effect; in essence the violation is "cured." The requirement for Planning Act statements ought to be included as a required term in the agreement of purchase and sale as otherwise the statements are not compulsory. VIII. CONSTRUCTION LIENS Construction Liens are governed by the Construction Act . When work is performed or materials are supplied to the property, the party doing so, which can include contractors and sub-contractors can place a construction lien on title against the property if they are not paid. A construction lien acts as an encumbrance to the title, giving aggrieved parties a right to be paid and a right to sue under the Construction Act . The buyer of the property may be liable to pay if the lien is not removed from title upon transfer.

IX. HOME WARRANTIES PLAN (ONHW) ACT Defects in newly build homes are subject to the Ontario New Home Warranties Plan Act. THE ONTARIO NEW The Act was implemented to protects new home buyers from defective and faulty construction by the builder. All builders and all new homes have to be registered under the Act . Tarion, a crown corporation, is responsible for implementing the Act and indemnifying new buyers in case of loss. X. HST The Harmonized Sales Tax (" HST ") is a 13% tax on the sale of all goods and services across Ontario, with certain exemptions. HST does not apply to used housing (i.e., any residential home where the buyer is not purchasing a new build.) However, HST is payable for the purchase of new homes and substantially renovated homes, where 90% or more of the interior has been renovated and was inhabited for less than one year. HST applies to most commercial transactions, subject to some exceptions. The purchase agreement stipulates whether HST is included in the purchase price or not. If the buyer is an HST registrant, the buyer may self-assess, claim input tax credits, and remit any HST owing to the Canada Revenue Agency (" CRA ") directly. The seller will require an indemnity from the buyer on closing to protect the seller from the buyer's failure to remit the tax. The seller should confirm the buyer's HST registration number with CRA prior to closing. XI. RESIDENCY STATUS OF THE SELLER Residential property that is designated as a primary residence of seller who is not a non- resident of Canada is usually exempt from income taxes with CRA.

ILN Real Estate Group – Buying and Selling Real Estate Series

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