When does a real estate deal close?
The standard real estate contract used in Ontario says that the deal can be completed no later than 6 pm on the day of closing. But when does a deal really close?
On Friday November 30, 2007, lawyer Michael Gatien attended at the Registry Office in Cornwall to register a deed on behalf of the buyer and as the agent for the seller’s lawyer. He had wired the purchase funds to the seller’s lawyer’s trust account just after 4 pm on the date of closing. He received the final go ahead from the seller’s lawyer to register the deed at 4:53 pm. When he tried to register the deed at the Registry office, he just missed the 5 pm government deadline by one minute. The government computer registration system does not accept any registration after 5 pm. The seller then tried to cancel, claiming that because the deed was not registered in time, the deal was over. The buyer’s lawyer took the position that since all steps had been taken to close the deal, the registration of the deed could take place on Monday December 3, 2007, once the Registry office opened. Ontario Justice D.G. Price decided in March 2009, that the seller could not refuse to close the deal.
Normally, real estate deals close when the money has been delivered from the buyer lawyer to the seller lawyer and title has been transferred to the buyer. Funds are usually sent by wire transfer. Then the seller lawyer releases the deed for transfer on the government computer registry system. Then the buyer lawyer completes the computer registration.
Why does the standard agreement say that deals can be completed by 6 pm if the computers close down at 5 pm?
In order for the computer registration process to operate efficiently, buyer and seller lawyers sign an agreement that says that all the money will be held in escrow until the deed gets registered. In many cases, buyers are waiting for their own sale deal in order to close to get the money to close their purchase. The result is often that there is not enough time to get the money wired into the seller’s trust account and complete the electronic registration before 5 pm. This is especially true at the end of the month, when many deals are closing on the same day.
As a result, in many cases, the deal closes after 5 pm “in escrow.” The lawyers agree that even though the deed is not registered, the buyers can enter into the home, the seller lawyer will hold the money overnight in their trust account and the deed will be registered the next morning. This escrow agreement is typically completed before 6 pm.
Friday closings at the end of any month are busy days at real estate lawyer offices across the GTA, with hundreds of deals closing. In many cases, the deeds are not registered in time and the escrow agreement is completed.
I am proud to be associated now with Real Property Transaction Centres, who administer all of my real estate closings. Due to their efficient systems, we are able to close deals in a timely manner. This includes detailed follow-up with all lenders to make sure all mortgage conditions have been satisfied, making sure the client sign-up process is convenient for the client and keeping the real estate agent fully informed about all aspects of the deal, so that they can assist to make sure the closing experience is a happy one.
One way buyer agents can assist in this process is to get more involved in the key delivery process at closing. It is typically inconvenient for buyers to have to come to either our office or the seller’s lawyer office to pick up keys after closing. If you are a buyer agent, why not make arrangements in advance with the listing agent to pick up the key, and then deliver it to your client when the deal closes. That is just another example of excellent customer service that generates referrals.
Mark Weisleder is a Toronto real estate lawyer.