Purchasing Your Ontario Cottage

By Taylor McCaffrey LLP on 2016/02/12

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We at Taylor McCaffrey LLP are here to help you realize your dream of cottage ownership. Hailing originally from Northwestern Ontario, our partners Kevin Nenka and Norm Snyder are licensed with both the Ontario and Manitoba Law Societies and have years of real estate conveyancing experience to help you along the way.

While not all cottages are alike, the following information is intended to give you a summary of the general and typical steps involved in your cottage purchase and the costs involved.

1. Title Searches & Due Diligence

One of the first things that will be required is for us to do title, writ, and tax searches for the property which, depending on the nature of the property, may involve other additional searches as well, such as searching abutting lands to confirm Planning Act compliance (re: subdivision), and getting copies of plans, easements, and/or encumbrances. Where applicable, we will also review survey plans, work orders and septic field permits. The cost of these searches are determined by the Province of Ontario (and any municipality, if applicable) and will vary from transaction to transaction but are an important requirement (and mandatory if you are obtaining mortgage financing) to ensure that there won’t be any hidden surprises with your cottage.

2. Land Transfer Tax and Registration Costs

Like Manitoba, Ontario also has a land transfer tax that is immediately payable by the purchaser to the Province upon registration of the transfer of land. The amount of land transfer tax varies depending upon the price of the cottage and increases substantially for cottages valued over $450,000. If you getting a mortgage to acquire the cottage, there will also be the registration costs of the mortgage security.

3. Title Insurance

It is rare for a seller to have building location certificate (i.e. a survey) available, so as a result, we will be unable to advise you on the location of the cottage and whether there are any encroachments affecting the property. In lieu of this, you may purchase a title insurance policy to insure you against a number of defects that may have otherwise been identified had you obtained a new building location certificate. In most instances, if you are seeking mortgage financing for your purchase, title insurance will be a mandatory requirement of your lender. The cost of title insurance increases with the value of the property but most properties typically range between $200 and $400.

4. Fire Insurance

Lenders will always require that your property be insured, usually for full replacement value (or at least the value of the mortgage), with any payouts to be made first to the lender (this is referred to as the lender being “first loss payee”). While there is no legal requirement to have insurance on a property (to cover fire and other damage as well as third party liability) if you do not have a mortgage, we highly recommend that you have coverage, so it should be a closing expense to be budgeted for. As a result, it is prudent to discuss the logistics and costs of placing insurance on the cottage with an insurance broker prior to removing all conditions in your offer. For example, if the cottage has a wood stove or fireplace, there are certain certifications on those items that a seller should provide to you so you can obtain insurance.

5. Closing Adjustments

The most common adjustment on closing will be on account of the real property taxes (taxes are based on the calendar year, January 1 to December 31, but payments are often made by installments due in the spring and fall). There could, however, be other adjustments for other items such roads board access/maintenance fees, parking permits, docking slip fees, and propane/fuel charges which may not necessarily be adjusted based on a calendar year.

6. Legal Fees & Disbursements

The amount of our legal fees will depend upon a variety of factors which are all primarily related to the actual amount of work that we are required to perform on your behalf. Those factors include whether there is mortgage financing, whether other ancillary agreements are required as part of the deal, the amount of due diligence required, whether or not we prepared or reviewed the offer, and whether we were involved in negotiating changes to an offer or resolving disputes that might arise. HST will apply to our legal fees and disbursements as well. We can assure you that we will endeavor to be as cost effective and efficient as possible. Our staff are experienced in handling Ontario real estate transactions. They are invaluable to us, and they will be in contact with you throughout the process to help ensure that everything goes smoothly and your concerns and questions are addressed.

7. Closing & Keys

You will typically meet with us anywhere from 2 to 7 days before your possession date to sign your closing and mortgage documents (if applicable). At that time you will need to bring with you certain items as may be applicable; a certified cheque or bank draft for your closing costs (note: we will provide you with a breakdown of those figures in advance, and we can also accommodate wire transfers or direct deposits), a void cheque for pre-authorized mortgage payments, and two pieces of identification (one of which must be a government-certified photo ID). We will have to meet in person with all parties who are going to take ownership of the cottage as well as any other borrowers or guarantors to sign the applicable documents.

Please contact Kevin or Norm for more information about purchasing a cottage in Ontario.

DISCLAIMER: This article is presented for informational purposes only.  The views expressed are solely the author(s)’ and should not be attributed to any other party, including Taylor McCaffrey LLP.  While care is taken to ensure accuracy, before relying upon the information in this article you should seek and be guided by legal advice based on your specific circumstances.  The information in this article does not constitute legal advice or solicitation and does not create a solicitor-client relationship.  Any unsolicited information sent to the author(s) cannot be considered to be solicitor-client privileged.

If you would like legal advice, kindly contact the author(s) directly or the firm's Managing Partner Norm Snyder at nksnyder@tmlawyers.com, or 204.988.0302.