One of the most exciting moments in life can be the purchase of a new home or property. It’s the chance to start a new life in a place to call your own. Or perhaps you have inherited a home from a loved one and are ready to put it in your name.
To take possession of a property, a Transfer of Title must happen first. This is a formal legal exchange of ownership of a home from one person to another.
In Ontario, this must be completed by a lawyer to ensure you are protected from future claims on the home and that all financial and legal obligations are laid out.
What Is A Title Transfer?
A transfer of title happens when ownership of a home is switched from one person to another or when a person is added to the list of owners on a home.
Why Do You Need A Title Transfer
A transfer of title is an important step in the transition of ownership of a home. You need this to declare the legal ownership of a home, to avoid any title claims in the future. There are several instances when a Transfer of Title is required.
- Purchasing A Home – You are taking on the ownership of a home you recently purchased
- Adding A Spouse – You are adding your spouse as an owner of the home. Transferring of title between spouses or former spouses is subject to land transfer tax.
- Transferring To A Child – You are ‘gifting’ the home to a child who will now be listed as the owner of the home.
A transfer of title may also be sought if the personal situations within the home are altered, forcing a change in ownership. This may occur if the owner wants to refinance their home or there has been a separation (personally or professionally) between the owners.
How Do You Transfer Ownership of A House In Ontario
The process of transferring the title of a home in Ontario is fairly easy. You will require the services of a lawyer who specialized in real estate law.
To begin the process you will need:
- A Title Transfer Form
- Proof of ownership
- A tax bill
- Proof from a bank that you are taking on the financial obligations of the home.
Types of Title Ownership
Several homeownership scenarios must be taken into consideration before transferring the title.
- Life Estate Ownership – Ownership of the home remains in the new owner’s name until their death when it will revert to the original owner or pass to another person as laid out in the Transfer of Title.
- Freehold Ownership – Full ownership of the property and the ability to sell the home at any time in the future.
- Leasehold Ownership – Generally applied to condos, townhouses, or other communal settings where you are purchasing a unit within a multi-ownership setting. This type of ownership limits what you can do to a structure and there is often the opportunity to get out of the agreement at a later date.
Other Things You Should Know
A transfer of title comes with many legal scenarios that must be taken into consideration before the final transfer. Transferring between family members comes with many of the same financial requirements as transferring between strangers.
Gifting Vs Inheritance
Ontario has several rules about how the land can be transferred between families. Though there are no gift tax requirements, the exchange of capital property comes with the requirement to pay capital tax based on the fair market value of the property.
In the case of inheritance, there is no tax but the income generated from the inheritance, such as the sale of the property would be taxed.
Joint Tenancy Vs Tenant In Common
If the property is held by two or more people then it is considered a joint tenancy where the ownership is 50/50 or tenant in common where there may be different levels of ownership in the property.
Upon the death of either partner, under a joint tenancy, the property passes to the remaining owner. If it is a tenant in common arrangement, then the ownership would pass to the deceased beneficiary.
The Cost of Transferring Title
When transferring the title of a property, it is important to budget for additional costs beyond the initial purchase. Home purchases are subject to a land transfer tax which can often leave homeowners caught off guard as the deal closes. Land transfer tax is determined based on the amount paid for the land and any remaining mortgage or debt assumed by the buyer.
- Amounts up to and including $55,000: 0.5%
- Amounts exceeding $55,000, up to and including $250,000: 1.0%
- Amounts exceeding $250,000, up to and including $400,000:1.5%
- Amounts exceeding $400,000: 2.0%
- Amounts exceeding $2,000,000, where the land contains one or two single-family residences: 2.5%.
In the GTA, homeowners can expect to pay an additional fee charged by their municipality.
Exemptions Between Spouses
Though the transfer of title between spouses is subject to land transfer tax, there are certain exemptions as laid out by the Ministry of Finance (Regulation 696 R.S.O. 1990).
- The only consideration given is the assumption of any encumbrance registered on the land, such as a mortgage.
- The transfer complies with a written agreement of separation, according to which the parties agree to live separate and apart.
- The transfer is according to a court order or judgment.
Though the transfer of title on a property is the last step in an exciting journey, it is important to have the right legal counsel to ensure that all the necessary legal issues are handled accurately and professionally.
The team at Seif Law Firm specializes in helping you make your property purchases easy with straight-forward, one-on-one support through the entire process.