In Ontario, the closing day of a real estate transaction is the final and most crucial stage in the home-buying or selling process. This is when ownership officially changes hands, the buyer gets the keys to the property, and the deal is considered complete. Whether you're purchasing your first home or selling an investment property, understanding what happens on closing day in Ontario is key to ensuring that everything goes smoothly.

In this article, we’ll take a closer look at what happens on closing day in Ontario, from the steps involved to the costs you need to prepare for, so you can be fully prepared for this pivotal moment in your real estate journey.

What Is Closing Day in Real Estate?

In the context of Ontario real estate, closing day refers to the final date in the home-buying or selling process when all financial transactions are settled, documents are signed, and ownership of the property is officially transferred. On this day, the buyer provides the remaining balance of the home’s purchase price (through their lender or from personal funds), and the seller transfers the property title to the buyer.

This is also the day when the buyer receives the keys and is able to take possession of the property, while the seller receives payment for the home (minus any remaining debts or liens). In Ontario, closing day is typically set out in the Agreement of Purchase and Sale, and it’s usually 30, 60, or 90 days after both parties have signed the agreement, depending on the terms negotiated.

What Happens on Closing Day in Ontario?

In Ontario, the events of closing day are generally the same as in other provinces but can vary slightly based on local practices, the specifics of the transaction, and whether or not the parties are using lawyers to handle the closing. Here’s what you can expect:

1. The Final Walkthrough

Although not mandatory, most buyers in Ontario will choose to conduct a final walkthrough of the property before closing. This is typically done a day or two before the official closing day. The purpose of the walkthrough is to ensure that the property is in the condition agreed upon in the sale contract, including the removal of the seller's belongings, completion of any required repairs, and checking that no new damage has occurred.

In Ontario, sellers are generally expected to leave the property in good condition, and the final walkthrough ensures that these obligations have been met. If there are any significant issues, the buyer may choose to delay closing or negotiate a resolution.

2. Signing the Closing Documents

Once the buyer is satisfied with the property’s condition, the next step is to sign the closing documents. In Ontario, the buyer and seller typically sign their closing documents separately, but both parties will meet with their respective lawyers or representatives to finalize everything.

The closing documents will include:

The Deed of Sale: This legal document transfers ownership of the property from the seller to the buyer.

Mortgage Documents: If the buyer is using a mortgage to finance the property, they will sign loan-related documents that detail the terms of the mortgage, including the loan amount, interest rate, and repayment schedule.

Statement of Adjustments: This document outlines any pre-paid costs such as property taxes, utility bills, and condominium fees. It adjusts the final amount the buyer or seller owes, taking into account costs that have been prepaid by either party.

In Ontario, lawyers are often involved in the closing process to ensure that all documents are properly executed and that the transaction complies with local laws and regulations. In some cases, buyers and sellers may opt to handle the closing through a notary public or a title company, but lawyers remain the most common choice.

3. Transfer of Funds

On closing day, the buyer’s lender will transfer the mortgage funds directly to the seller’s lawyer or the designated closing agent. In addition, the buyer will pay any remaining balance of the purchase price (i.e., the down payment and closing costs) via a certified cheque or wire transfer.

In Ontario, it’s common for the buyer to be responsible for a range of closing costs in addition to the down payment, including legal fees, title insurance, land transfer tax, and other miscellaneous fees. These costs must be paid in full before the deal can proceed.

4. Payment of Closing Costs

Closing costs in Ontario typically include:

Land Transfer Tax: This is one of the largest closing costs a buyer will incur. The amount varies based on the purchase price of the home and the location. Ontario residents receive a rebate, but non-residents and buyers of more expensive properties should be aware of this significant cost.

Title Insurance: To protect against issues with the title of the property (e.g., liens, boundary disputes), buyers in Ontario often purchase title insurance. This ensures that the buyer’s ownership is free and clear of any encumbrances.

Legal Fees: Legal representation is required in Ontario for most real estate transactions, and buyers typically pay legal fees for reviewing and preparing documents, registering the title, and disbursing the funds.

Home Inspection, Appraisal, and Insurance: If the buyer had to pay for a home inspection or appraisal, these costs are typically paid before or during closing.

Other Administrative Costs: Recording fees, administrative fees, and any additional service costs may also be required.

Sellers may also be responsible for closing costs, including real estate commission fees, mortgage discharge fees (if there is an outstanding mortgage), and any outstanding property taxes or utilities.

5. Transfer of Title

Once the funds have been transferred, the buyer's lawyer will register the transaction with the Land Registry Office. The registration of the title confirms that the buyer is now the legal owner of the property. This process is crucial to officially record the change of ownership.

In Ontario, registration with the Ontario Land Registry is done electronically, but lawyers still play a key role in making sure the transfer is carried out properly. Once the registration is complete, the seller no longer holds legal ownership of the property.

6. Handover of Keys and Possession

On closing day, after the transfer of funds and registration of the title, the buyer will receive the keys to the property. The buyer now has full possession of the property and can move in or start renovations as desired.

In Ontario, possession typically occurs on the closing day, but the contract may specify a later possession date, especially if the seller is staying in the home after the sale. For example, some sellers may need a few extra days to move out, and this is negotiated and outlined in the Agreement of Purchase and Sale.

7. Completion of the Sale and Payment to the Seller

Once everything is signed, funds are transferred, and the title is officially recorded, the seller will receive payment for the property (minus any outstanding debts, fees, or commissions). The seller’s lawyer will handle the payment, which is generally sent by certified cheque or wire transfer.

The seller will also pay off any remaining mortgage balances or liens on the property during closing. In some cases, the seller may have to settle outstanding property taxes or utility bills.

8. Post-Closing Activities

After closing day, both parties should retain copies of all closing documents, including the signed purchase agreement, the deed of sale, and the statement of adjustments. These will serve as proof of the transaction and can be useful for tax purposes or future legal needs.

In Ontario, the buyer’s lawyer will typically handle the submission of documents to the municipal land registry system and ensure that the buyer receives an official property deed.

Common Closing Costs for Buyers in Ontario

When preparing for closing day, it’s important to factor in the various closing costs associated with purchasing a property in Ontario. Here are some of the most common:

Land Transfer Tax: This can be a significant expense, as Ontario’s land transfer tax is calculated based on the purchase price of the home. First-time homebuyers are eligible for a rebate, but it’s still a major cost for most buyers.

Legal Fees: These typically range from $1,000 to $2,000 depending on the complexity of the transaction and the lawyer’s fees.

Title Insurance: Depending on the price of the property, title insurance usually costs between $200 and $500.

Home Inspection and Appraisal Fees: Home inspections can cost anywhere from $300 to $600, while appraisals can cost $300 to $500.

Closing Adjustments: You may be responsible for paying property taxes or utilities that the seller has prepaid. These costs will be adjusted on closing day.

Home Insurance: If you’re obtaining a mortgage, your lender will typically require home insurance, which may cost anywhere from $500 to $1,000 annually.

How to Prepare for Closing Day in Ontario

Here are a few tips to ensure you’re fully prepared for closing day in Ontario:

Review the Closing Statement: Your lawyer will provide you with a detailed breakdown of all the costs you’ll be responsible for. Be sure to review this statement carefully to ensure everything is accurate.

Secure the Funds: Ensure that your down payment and closing costs are available. You’ll need to bring these funds to the closing table in the form of a certified cheque or wire transfer.

Coordinate with Your Lawyer: Keep in close contact with your lawyer throughout the closing process to make sure that all documents are in order and that everything is on track.

Conduct a Final Walkthrough: Don’t skip this crucial step. Conducting a final walkthrough will give you peace of mind that the property is in the agreed-upon condition.

Prepare for Possession: Start making arrangements for your move-in. If you’re taking possession on the same day as closing, you’ll need to have your moving plans ready.

What Happens if You Miss Closing Day in Ontario?

For Buyers

Failure to provide funds: If you don’t have the necessary funds (e.g., down payment or mortgage funds), the seller may terminate the contract.

Loss of deposit: The seller may keep your deposit as compensation for the breach of contract.

Resale at a lower price: The seller may relist the property, potentially at a lower price.

For Sellers

Failure to vacate the property: If you don’t move out by the closing date, you may be in breach of the contract.

Compensation to the buyer: You may have to compensate the buyer for any inconvenience or costs due to the delay.

Legal action: In some cases, the buyer may take legal action or seek damages.

What to Do If You're About to Miss Closing Day

Communicate early: Let the other party know if there’s a chance you might miss the closing date.

Seek professional help: Consult with legal or real estate professionals to avoid complications or disputes.

Delays can sometimes be negotiated, but it’s important to address them promptly and carefully.

Everything You Need to Know About Closing Day in Ontario

Closing day is the moment when a real estate deal officially comes to an end, and ownership of the property is transferred from the seller to the buyer. In Ontario, this process involves signing documents, transferring funds, paying closing costs, and registering the property with the Land Registry Office. By understanding what happens on closing day and preparing in advance, you can ensure that this final step goes smoothly and you can start enjoying your new home without any issues.