Essential real estate terms you should know in Ontario include the Agreement of Purchase and Sale, deposit, mortgage term, title, status certificate and statement of adjustments. Real estate means land and the things permanently attached to it, such as a house, garage or building. This Ontario glossary explains the terms buyers, sellers and investors are most likely to encounter before making an offer, arranging financing or closing a transaction.
The same word can have a different practical meaning depending on the contract and the property. Read the signed documents carefully, and have a lawyer for your purchase review important terms before a condition is waived or a deadline passes.
The 7 characteristics of real estate and the big 5
The seven commonly taught characteristics of real estate describe why land is different from many other investments: it is immobile, indestructible, unique, scarce, improved, a long-term investment and affected by area preference. These are teaching concepts, not legal tests that decide who owns a property or whether a transaction can close.
The three physical characteristics are immobility, because land cannot be moved; indestructibility, because land itself generally remains even if a building is damaged; and uniqueness, because no two parcels have precisely the same location and features. The four economic characteristics are scarcity, improvements, permanence of investment and area preference, meaning that value can be influenced by neighbourhood, access, services and demand.
“The big 5 in real estate” has no single legal meaning in Ontario. Educators, brokerages and investors use the phrase differently, so ask what the speaker means rather than assuming it identifies a legal rule, required document or investment formula.
Offer terms: the documents that make a deal
An offer proposes terms for buying or selling property, while a counteroffer rejects or changes an earlier offer and proposes new terms. Once an offer is accepted in the required way before its irrevocable deadline, it can become a binding Agreement of Purchase and Sale.
The Agreement of Purchase and Sale, often called the APS, is the contract that sets the purchase price, deposit, closing date, included items, conditions and other obligations. The irrevocable date is the time until which an offer remains open for acceptance. A verbal discussion is not a substitute for reviewing the actual written APS and schedules.
- Deposit: Money delivered under the APS to show commitment to the transaction. In Ontario, it is commonly held in the listing brokerage’s trust account or a lawyer’s trust account, according to the agreement and applicable arrangements. It is usually credited toward the buyer’s payment on closing, but the APS controls what happens if the transaction does not close.
- Down payment: The portion of the purchase price the buyer pays from their own funds rather than borrowing under the mortgage. The deposit may form part of the down payment, but they are not the same concept.
- Condition: A contractual requirement that must be satisfied or waived by a stated deadline. Financing, home inspection, status certificate review and sale-of-property conditions are common examples.
- Conditional offer: An accepted offer that remains subject to one or more conditions.
- Firm offer: An offer with no outstanding conditions, or an offer that became firm after conditions were fulfilled or waived.
For example, a buyer offering $850,000 for a freehold house might agree to deliver a $40,000 deposit within 24 hours of acceptance and include a five-business-day financing condition. If the lender does not provide acceptable financing within that time, the buyer must follow the exact notice and deadline language in the APS. A buyer should not assume that a deposit is automatically returned simply because financing, inspection or another concern arises.
Financing terms: mortgage, term, amortization and approval
A mortgage is a loan secured against real property. The borrower repays principal, the amount borrowed, plus interest, the lender’s charge for lending the money.
A mortgage term is the period covered by the mortgage contract, interest-rate arrangement and other lender terms. An amortization period is the longer planned period over which regular payments are calculated to repay the mortgage in full. A fixed mortgage rate is normally fixed for the mortgage term, not necessarily for the entire amortization period; the rate and terms may change when the mortgage is renewed.
- Fixed-rate mortgage: A mortgage with an interest rate set for the agreed term.
- Variable-rate mortgage: A mortgage whose rate can change with the lender’s prime rate or the contract’s stated method. This is the Canadian terminology most often used instead of the U.S. phrase “adjustable-rate mortgage” or ARM.
- Pre-approval: A preliminary lender assessment of borrowing capacity, usually subject to conditions, verification and the property meeting lender requirements.
- Mortgage commitment: A lender’s written approval setting out the approved loan and conditions that still must be met.
- Appraisal: A lender-ordered or lender-accepted assessment of a property’s value for lending purposes. It is not a home inspection and is not a guarantee that the buyer paid market value.
- Loan-to-value ratio: The mortgage amount divided by the property value used by the lender.
- GDS and TDS: Gross debt service and total debt service ratios, which lenders use to assess housing costs and overall debt relative to income.
Mortgage loan insurance protects the lender in certain higher-ratio mortgage arrangements; it does not protect the buyer from missing payments. Canada Mortgage and Housing Corporation (CMHC) is one provider of mortgage loan insurance in Canada. A lender can require insurance and can impose conditions beyond a buyer’s own budget calculations.
For example, a buyer purchasing a $700,000 condominium with a $140,000 down payment would seek a $560,000 mortgage before considering closing adjustments and other costs. Even with a 20% down payment, approval can depend on income, other debt, credit, appraisal results, the condo’s details and the lender’s commitment conditions.
Title and closing terms your lawyer handles
Title is the legal ownership interest registered or otherwise recognized in relation to a property. Before closing, the real estate lawyer examines title records and addresses issues that must be dealt with under the APS or lender requirements.
- Transfer/deed: The document used to transfer ownership. In Ontario, the transfer is generally registered electronically in the land registration system.
- Parcel: The legally described piece of land shown in land registry records.
- Easement: A right allowing someone to use part of another person’s land for a defined purpose, such as access or utility services.
- Encroachment: A structure or feature that extends onto neighbouring land or over a boundary.
- Lien or encumbrance: A registered claim, charge, restriction or interest that can affect title. A mortgage is one common registered charge.
- Survey: A plan showing boundaries and visible improvements at a point in time. An older survey may not show later changes.
- Title insurance: Insurance that can protect an owner and/or lender against certain covered title risks, subject to the policy’s exclusions, limits and conditions.
- Statement of adjustments: The closing statement that allocates items such as property taxes, condominium common expenses or rental payments between buyer and seller as of closing.
The closing date is the date the transaction is scheduled to complete. The lawyers exchange closing documents and funds, deal with required registrations, and arrange release of funds and keys once closing is completed. Buyers and sellers must also provide identification and information required for the lawyer’s client-identification and verification obligations under FINTRAC rules.
Condo, freehold and leasehold terms
A condominium corporation manages the condominium property under the Condominium Act, 1998 and its governing documents. Buying a condo means buying a unit and, usually, an interest in common elements; it is not the same as buying a freehold house.
- Unit: The privately owned portion identified in the condominium description.
- Common elements: Shared areas or components, such as hallways, elevators, roofs, parking areas or amenities, depending on the condominium documents.
- Common expenses: Amounts owners contribute toward the corporation’s expenses.
- Declaration, by-laws and rules: Documents that set out ownership interests, governance and restrictions on use, leasing, pets, renovations and other matters.
- Special assessment: An additional amount a condominium corporation may require owners to pay for a specified expense or shortfall.
- Status Certificate: A document containing prescribed condominium information, including financial and legal information about the corporation and information about the unit, subject to the document package provided.
A lawyer reviews the Status Certificate and attached documents to identify issues such as arrears, planned assessments, litigation disclosures, reserve fund information and restrictions that may affect the buyer’s intended use. A freehold owner generally owns the land and building, subject to registered interests and applicable law. A leasehold interest gives rights to occupy or own an interest in a property for a lease term while another party owns the underlying land.
Co-ownership terms
Joint tenancy is a form of co-ownership that generally includes a right of survivorship, so a deceased owner’s interest may pass to the surviving joint owner or owners. Tenancy in common allows co-owners to hold separate shares, which may be unequal and can generally pass through an owner’s estate.
The wording on title does not resolve every estate, family-law, tax or contribution issue between owners. Read more about tenants in common before deciding how title should be held.
Inspection, condition and disclosure terms
A home inspection is a buyer’s due-diligence review of visible property conditions by a qualified inspector. It can help identify concerns, but it is not a guarantee that every defect will be found or that future problems will not arise.
A material latent defect is generally a serious defect that is not discoverable through ordinary inspection and may make a property dangerous or unfit for habitation. A representation is a statement of fact made to induce a party to enter a contract, while a warranty is a contractual promise about a fact, condition or future obligation.
Ontario does not impose a general standardized seller-disclosure form requirement for every resale home. Buyers should use appropriate conditions, ask focused questions, obtain documents, inspect where practical and ensure that important representations are written into the APS rather than relying on informal discussions.
Market and agent terms
A listing brokerage is the brokerage representing or assisting the seller under its agreement, while a listing representative is the individual registrant working through that brokerage. Buyer representation describes the relationship in which a brokerage represents or assists a buyer under the applicable agreement and disclosure arrangements.
The Multiple Listing Service (MLS) is a listing and cooperation system used by participating real estate professionals. A buyer’s market generally has relatively more available properties or less buyer competition, while a seller’s market generally has stronger demand relative to available supply.
Multiple offers occur when more than one buyer makes an offer on the same property. A backup offer is an offer intended to take effect if a prior accepted agreement ends, subject to its wording. Closing is the legal completion of the transaction; possession is when the buyer is entitled to occupy the property, which is often but not always the same date.
Offer strategy, deposit amount, closing date and conditions should be considered before signing. A buyer who is new to the process may also find our guides on first time buying home and first time home buying Canada useful.
Investor terms: cash flow, NOI and risk checks
Cash-flow positive means rental income exceeds the ownership and operating expenses included in the calculation over the period measured. The result changes depending on whether the investor includes mortgage payments, vacancy, repairs, capital replacements, income tax and one-time acquisition costs.
Net operating income, or NOI, is generally income from the property minus operating expenses, before financing costs and certain other items depending on the analysis. A cap rate is commonly calculated by dividing NOI by the property value or purchase price. Appreciation is an increase in value, while equity is the owner’s value in the property after subtracting secured debt. Refinancing replaces or changes existing mortgage financing, subject to lender approval and costs.
For example, an investor considering a duplex for $950,000 might estimate annual rent of $54,000 and annual operating expenses of $16,000 before mortgage payments. That produces estimated NOI of $38,000 and an estimated cap rate of 4% when $38,000 is divided by $950,000. The investor should still test vacancy, repairs, utility responsibility, financing payments, tenant issues and future capital work before deciding whether the property is cash-flow positive.
Every investor should verify permitted use, existing leases, expenses, financing assumptions, title, insurance needs and any condominium leasing restrictions before committing. For a vacant lot or development-oriented purchase, further land diligence is particularly important.
Ontario real estate glossary FAQ
Which phrase best defines real estate? Real estate is land together with permanent improvements and interests connected to that land. The phrase can refer to the physical property, ownership rights in it or the business of buying, selling and managing property, depending on context.
What does every real estate investor need to know? An investor needs to know what is being purchased, what use is permitted, who occupies it, what it costs to operate, how it will be financed and what legal or title risks may affect it. Projected rent alone does not establish value, legality or cash flow.
What does cash-flow positive mean? It means the income exceeds the expenses included in the calculation for the stated period. Ask which expenses were included before relying on the claim.
What is an adjustable-rate mortgage (ARM) in Canada? Canadian lenders more commonly refer to fixed-rate and variable-rate mortgages. A variable-rate mortgage may change as specified in the mortgage contract, while a fixed-rate mortgage normally holds its stated rate for its term.
Before waiving a condition or signing an APS, obtain advice on the actual contract, property and financing rather than relying on a glossary definition alone.
Next steps before you sign or close
Before signing or closing, act early and keep every deadline visible. A buyer or seller can reduce avoidable delay by sending documents promptly and asking questions before money must be delivered.
- Send the signed APS, schedules, amendments and deposit information to your lawyer promptly.
- Record every condition deadline and give any notice exactly as the APS requires.
- Provide mortgage commitment details, lender contact information and proof of property insurance when requested.
- For a condo, obtain and review the Status Certificate package before waiving a status-certificate condition.
- Review the lawyer’s reporting documents, statement of adjustments and funds required before closing.
- Budget for applicable land transfer tax and closing adjustments; see our guide to land transfer tax for Toronto buyers.
Whether the transaction involves a home, condo, refinance or investment property, a transactions lawyer can explain the documents and closing steps. Property owners in the Bradford area may also work with our real estate lawyers bradford.
Speak with a Toronto real estate lawyer
Getting legal advice early can help you understand the Agreement of Purchase and Sale, title documents, financing conditions and closing adjustments before a deadline affects your options.
Call 416-321-8766 or request a quote to discuss your matter with Zinati Kay.