So you have just bought a new property and you are ready to take possession. Before you do, among the legalities that need to be completed is what is known as a “title transfer”. This is the official document through which a seller transfers ownership of a property to the buyer. In Ontario, title transfers can only be completed by a lawyer. This ensures the change of ownership is documented accurately, and keeps you, the buyer, from being burdened with the details and complexities of the title transfer process.
This video explains what property title is and why it is important to have title insurance for homeowners.
What the “title” of property means.
The “title” of a property refers to the person who has legal ownership and the right to use the property. The title of a property can be held by one or more persons, such as co-investors, spouses, partnerships or corporations.
Why you need a title transfer.
When buying real estate, at the closing of the transaction, a title transfer is completed to legally transfer ownership from the seller to the buyer. Other scenarios where a title transfer may also be required include: when a person wants to refinance their property; if there has been a separation between the parties who own the property; and/or if a property owner wants to add a spouse or other family member to title or remove a name from title.
Types of title ownership.
A “freehold ownership” means you own the property – land and structure – as well as the right to live there as long as payments are made with an agreed lender. An example of this is a detached home which has been mortgaged. A freehold ownership appreciates over time, providing the title holder complete control when it is time to sell.
A “leasehold ownership” means you have a right of use and occupation but you do not actually own the land. You purchase the physical structure while leasing the land from another party. This type of title is commonly applied to condos, townhouses, and similar properties. In some cases, the landlord may be the government or a First Nations group. Leasehold ownership agreements are typically 99 years in length. When the lease ends, a landlord has the option to renew or not.
A “life estate ownership” means you have legal ownership and use of a property for the rest of your life. This ownership only ends when the owner dies. At that time, title to the property under a life estate ownership reverts to the original owner or can pass to another person as stipulated. This is the least common type of title ownership.
Other things you should know about title transfers.
If title is held by two or more people, each person is considered either a “joint tenant” or “tenant in common”.
When one dies under a ‘“joint tenancy”, ownership of the property passes to the surviving joint tenant(s) registered on title. Only the last surviving joint tenant on title is permitted to leave the property to someone in their Will. By contrast, if one dies under a “tenancy in common”, the property held by the deceased passes to the beneficiary of their estate.
Another key difference between joint tenancy and tenancy in common is that all joint tenants must own equal percentages of the property; whereas tenants in common may have different ownership percentages based on what the owners agree is appropriate.
It is important to be aware of these differences when considering and completing title transfers.