A title transfer is the process in which a person is added or removed from the ownership of a property or title by the owner. A title transfer needs to be completed by a lawyer as the process is not as simple as it appears to be. This column will explain what a title transfer is and provide some guidelines on the how a title transfer is done as well as some important issues to consider before deciding to complete a title transfer.
There are many valid reasons why an individual would want to complete a title transfer. Some of the more common reasons are separation/divorce, the necessity to add someone to title in order to obtain a mortgage, to obtain ownership of a property following the death of one owner or for tax reasons.
In Ontario, a title transfer must be registered by a real estate lawyer. The lawyer will first do a title search to confirm who is the registered owner of the property. The lawyer will then prepare the necessary legal paperwork to complete the title transfer including the transfer, various declarations and acknowledgements. Once the documents are signed, the lawyer will then register the transfer so that the ownership is changed as per the client’s instructions.
Below are some points to consider before proceeding with a title transfer:
- If you own a property and there is a mortgage/line of credit on the property, you may not be able to transfer title without the consent of your lender. Doing so may contravene the terms of your mortgage and could result in the lender demanding full payment of the mortgage along with other penalties;
- Depending on the nature of the title transfer, two (2) lawyers may be required to complete the title transfer. If the parties are related, a lawyer may be able to act for both the transferor as well as the transferee, however, there are situations where it would be advisable for the parties to have their own separate legal representation;
- In some cases, Land Transfer Tax will be payable for the title transfer. There are some exemptions to Land Transfer Tax. For example, transfers between spouses will be exempt from Land Transfer Tax. A gift of property may also be exempt from Land Transfer Tax.
- Completing a title transfer to add a party to the ownership could have a number of inadvertent consequences that need to be carefully considered. For instance, adding a new owner to the title could have adverse tax or capital gains implications. In addition, adding a new owner could result in future problems if the new owner is sued or if the new owner gets divorced or separated.
- Adding a new owner will result in the existing owner possibly losing control over the property. For instance, if you own a property in your name only and you add your children to the ownership, you cannot later sell or mortgage the property without the consent of your children. This could create problems in the future in the event a dispute or breakdown in the relationship between family members.
- In some cases, an elderly owner may consider transferring his or her property to his or her children jointly to avoid the necessity of probate upon the death of the elderly owner. While this would appear to make sense from an estate planning perspective, there are many pitfalls in this type of title transfer. Legal advice should be obtained so that the owner is made aware of the risks of this course of action.
While a title transfer would appear to be a straight-forward process, as this column illustrates, this is not always the case. Legal advice should be obtained before making any decisions.