Typically, when a client calls a real estate law firm for a quote, the lawyer will provide their flat rate for the service (or their hourly rate and an estimate of the amount of time required), and note that the final cost will also require payment of HST and “disbursements.” Many people may not be familiar with the term “disbursements” and may focus their attention on the quoted fee, which may give the client a false impression of the entire cost of completing the transaction.
Disbursements refer to the costs and expenses that a lawyer incurs on behalf of a client in a real estate transaction. The lawyer is not making a profit on the disbursements; rather, the lawyer is simply passing on the costs of these services to the client. It is important for the client to understand that disbursements can and do add up, and in some instances may even equal or surpass the quoted fee when added all together.
Disbursements are an important part of the real estate transaction process, as they help to ensure that the property transfer is properly registered, that important searches are conducted, and that all necessary documents are in order. It is important for clients to understand the disbursements associated with their transaction, and to budget accordingly.
Common disbursements
Title search fees
The lawyer will need to conduct a title search via Teraview to ensure that the property title is clear and there are no outstanding issues that could affect the transaction. The lawyer will need to pay a fee for this service.
Teraview is an online system used by lawyers and other real estate professionals in Ontario to register and manage land registry records. Teraview is owned by Teranet, a private corporation. Lawyers are required to pay a fee to use Teraview because it is a private service that is not provided for free by the government. The fees are used to cover the costs of maintaining and updating the system, as well as to provide support and training to users.
Registration costs
A lawyer is required to pay two fees every time they register a title transfer, record a new mortgage, or register any other document on title: a statutory fee and an ELRSA fee. These fees are charged by the government and Teranet, respectively, for providing the services necessary to complete the registration.
The statutory fee is a fee charged by the government for registering the property title in the buyer's name. This fee is set by the government and is the same for every property, subject to regular increases.
The ELRSA fee, also known as the Electronic Land Registration System Administration fee, or E-reg fee, is a fee charged by Teranet for maintaining and updating the electronic land registry system. Years ago, lawyers could register title transfers by waiting in line at the Land Registry Office and having the transaction recorded physically in a book. Registering a title transfer electronically was something of a luxury, for which Teranet charged an additional fee. Nowadays, title transfers and other title documents must be registered electronically, so the ELRSA fee is now required on every registration.
Execution search fees
Filing an execution against a client's name is a legal process by which a creditor can seize the client's property in order to satisfy a debt. This can include a real estate property, if the client owns one.
A real estate lawyer is required to search for executions against a client's name as part of the due diligence process in a real estate transaction. This is because an execution against the client's name could affect their ability to sell or transfer the property, and could potentially lead to complications or delays in the transaction.
If the lawyer discovers an execution against the client's name, they will need to work with the client to address the issue and ensure that it does not affect the transaction. This may involve negotiating with the creditor, obtaining a release of the execution, or taking other legal action.
Transaction levy surcharge
A transaction levy surcharge is a fee that is charged by the Law Society of Ontario to help fund programs and services that benefit the legal profession and the public. The fee is charged on certain legal services, including real estate transactions, except in purchase transactions where the buyer has obtained a title insurance policy, in which case the levy is waived.
Tax certificate
A tax certificate provides information about the property's tax status, including the amount of property taxes that are owed, and whether there are any tax arrears owing on the property which will need to be paid from the sale proceeds. The City or County administering property tax collection will charge a lawyer a fee for providing the tax certificate, which varies from tax office to tax office.
Courier and postage fees
The lawyer may need to pay for courier services to deliver documents to the buyer or other parties involved in the transaction, and may also incur postage costs for mailing documents.
In Summary
Disbursements can be a confusing aspect of the real estate process, but they are an important part of ensuring that the transaction is completed smoothly. At Doormat, we understand the ins and outs of disbursements and are here to help both buyers and sellers understand their obligations. Whether you are a first-time homebuyer or an experienced real estate investor, our team is here to provide the guidance and support you need. Contact us today to learn more about how we can assist with your real estate transaction.
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