When a homeowner is arranging a mortgage, the bank, or any other lender, will require a lawyer to complete the transaction. This means that a lender will require the borrower(s) to name his or her lawyer so that the lender sends the necessary mortgage documents to the lawyer. These are referred to as the “mortgage instructions”. They are instructions because the lender becomes the client of the lawyer. Thus, the lawyer acts for the borrowers and the lender.
Lawyer’s Work
At its simplest terms, a lawyer must register a mortgage on the subject property owned by the borrowers.
A lawyer’s work begins the moment mortgage instructions are sent to the lawyer. These vary depending on the lender, but the important information included in the instructions the borrower’s names, the property to be mortgaged, and the details of the mortgage, such as the interest rate, amount of payments, and so on.
The primary duty of the lawyer to the lender is to secure a valid mortgage. To do this, certain requirements or special conditions are expected of the lawyer, such as reviewing a status certificate for condo, obtaining up-to-date tax balance, and conduct certain searches against the names of the borrowers.
All, if not the vast majority of, mortgage transactions are now completed with the purchase title insurance; this is a replacement for a “lawyer’s opinion” and essentially does not require a lawyer to conduct certain “off-title searches”. As such, a lender’s policy is ordered by the lawyer on behalf of the lender.
Borrower’s Work
The borrower has to supply information to the lawyer to complete the registration of the mortgage.
Sometimes, if there’s an existing mortgage on the property, and the borrower is arranging a new mortgage to replace the existing one, the borrower will provide to the lawyer the account number for the existing mortgage.
The lawyer will then request a “payout” or “discharge statement” from the existing lender. This request simply states that the existing mortgage will be paid out by a certain date, and that a statement setting the amount required to discharge the existing mortgage is required.
Depending on the requirements from the lender, the borrower will supply additional information to the lawyer, sometimes by way of an affidavit or a declaration.
Registration of (New) Mortgage
Once the lawyer has provided to the lender what it requires, funds are advanced to the lawyer on a “closing date”. The lawyer registers the mortgage on the subject property on this date.
If an existing mortgage is to discharged, the necessary funds are sent to the existing lender. Sometimes the lender requires from the lawyer other debts of borrowers to be paid out, and accounts closed.
*Please note that the above does not capture the true extent of the process; it’s best that you seek the input of a law office for further information.
Bassam Lazar is primarily a real estate lawyer in London Ontario, offering services in London, Windsor, Kitchener and surrounding areas.