Avoid Post Closing Headaches for a Small Price

You bought a home on condition that you arrange a mortgage and are satisfied with a home inspection. The conditions are removed and the Agreement is now firm and binding.

Yet the agreement has additional built-in conditions that have been traditionally addressed by your lawyer, among them that there are no objections to title, registered restrictions, charges, outstanding work orders or deficiency notices. Any such issues can have an effect on both buyer and seller.

Regarding charges, your lawyer verifies water and property taxes and whether any arrears exist.

For work orders and deficiency notices, lawyers have traditionally sent a “Letter of Requisition” that’s distributed to all municipal departments to confirm zoning and usage and whether there are any outstanding work orders and deficiencies.

 With the advent of Title Insurance lawyers have been told that municipal letters of requisition are not necessary. Title Insurance covers such issues, saving buyer closing costs.

 Tax Arrears: Since the start of this practice we’ve gotten calls after closing from upset buyers who received a bill for tax arrears not paid by the previous owner. Their lawyer tells them to contact the Title Insurer. Though initially resistant, the insurer finally did compensate one buyer. For another, the insurer paid a portion of the tax arrears, leaving the buyer with the remainder.

 Work Orders: One buyer purchased a Condo. The lawyer did not check with the municipality for work orders. After closing the buyer discovered a work order on the property for foundation and electrical problems. The Condo Corporation assessed each unit over $10,000. The buyer contacted Title Insurance, was denied coverage for some 7 months and though he finally received compensation still had to pay $1,000 to satisfy the total cost. 

 Zoning and Usage: One lawyer received an accepted agreement of purchase and sale for a property once used as a convenience store and apartment. As the Agreement and appraisal stated that the property was commercial, he did not verify the zoning.

After closing, the new owner was denied the ability to reopen a convenience store as the property was designated for residential use. The lawyer advised remedy from his Title Insurer. Again, the exercise was upsetting as it took a long time before the Insurer rectified the problem and agreed to some compensation.

 Now isn’t it a worthwhile exercise, for the few dollars it costs, to have the buyer’s lawyer verify the zoning, check for tax arrears and file a requisition letter to the municipality for any deficiencies and work orders. After all, isn’t it better to discover any potential problems before closing rather than after? One would think so.

 Our Advice: Direct your lawyer to verify potential municipal issues prior to closing and avoid post closing headaches. 

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