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In Ontario (aside from sole ownership) there are four basic ways for two or more individuals to own real estate. Each person involved in ownership in the transaction should obtain his or her own independent legal advice as to method of ownership and potential liability as an owner.
Joint Tenancy means that, should a purchaser become deceased, the remaining purchaser(s) on title will inherit the deceased’s interest in the property. Where one of the “joint tenants” dies, the surviving joint tenant(s) automatically becomes the owner(s) of the property no matter what a will might state. This is the manner of holding title most commonly used by spouses.
Tenancy in Common means that should a purchaser become deceased, that deceased person’s interest in the real estate will be transferred according to that person’s will or, if no will exists, according to the Law of Ontario (if the real estate is in Ontario).
The purchaser is responsible for arranging house insurance for the full guaranteed replacement value of the property prior to closing to be effective on the closing day with the insurance policy setting out the mortgage lender as a loss payee under the policy. Our office will not be able to close the purchase of a non condominium should a written insurance binder not be received by fax from the insurance company confirming prior to closing. Please ask your insurance agent to forward an insurance binder letter to our law office confirming that the coverage arranged is for guaranteed replacement cost and showing the name and address of the mortgage company. Note: A binder letter must be received by our office by fax or by mail before a house purchase (NON CONDOMINIUM) can be completed!
Although the condo corporation maintains insurance for the entire condominium project, it will be necessary for the purchaser to arrange insurance coverage for the condo unit’s contents and liability effective as of the closing date (or effective as of the occupancy date if buying a new condo from a builder). Ask your insurance broker to provide a condominium unit owner’s policy and not a tenant’s policy. NOTE: The condo corporation’s insurance will typically only cover whatever was originally provided by the builder and not upgrades or improvements installed at a later date. ALSO, confirm that your condo unit insurance will pay for any deductible owed by the unit owner under the condo corporation’s insurance policy.
DO NOT CANCEL YOUR PROPERTY INSURANCE until the transaction has in fact closed. Do NOT (in anticipation of a closing date) inform your insurance broker to cancel an insurance policy to become effective on the proposed date of closing; should there be any last minute delay in closing, you do not want a situation to arise where you are continuing as legal owner of a property with cancelled fire insurance. NOTE: A special insurance binder must be arranged with your insurance agent for a property that will be vacant for more than 30 days.
It is important to consider insuring the life or lives of the main breadwinner(s) so that the mortgage could be paid off from the proceeds of life insurance in the event of an untimely death. Temporarily, one might consider placing such insurance through the mortgage lender; however, the mortgage lenders’ insurance can be terminated by the buyer as soon as an alternative insurance provider is arranged. The mortgage lender is not the best provider of such life insurance for several reasons:
