For many people, their homes will be the single biggest investment of their lives and their largest source of equity. As such, no decision regarding ownership of said equity should ever be taken lightly. As any experienced real estate lawyer in Toronto will tell you, you should consider the risks carefully before adding another name to your property title.
Remember that by adding a person to your property title, you are legally granting them a bundle of rights including control, enjoyment, possession, exclusion, and disposition of the property that were formerly exclusive to you. This is a major decision and requires careful thought and planning.
The best real estate lawyer in Toronto will advise you of all the risks that adding someone to your property title entails. These risks are no small matters either, and if ignored, can lead to significant consequences.
Here are some risks to consider.
When you add someone to the title, there’s no taking it back. It’s ultimately irrelevant if you retain the majority ownership—the person you’ve added cannot be removed unless they provide their consent.
And with their ownership, this individual has the ability to take out a loan on the property, tear it down, or even sell their share. In the worst-case scenarios, you’ll be left with no recourse.
Even with a minority share the new person on the deed can potentially force a sale of the property. If you want to refinance or sell the property, you’ll have to consult with the individual you’ve added to get permission. This can result in costly legal battles that can be drawn out for years.
By adding someone to the property title, you’re effectively relinquishing a significant portion of control over the property.
Taxes must be Considered
While most people reasonably conceptualize this as “adding” someone to title, what the government thinks is that a portion of the property is being transferred. That is, it will see understand you are giving up her share of your property. This could attract land transfer taxes. It could also attract capital gains taxes and a deemed disposition from Canada Revenue Agency. You should move carefully and consider all tax consequences before you transfer title. As the transferor you may be subject to federal income taxes and there may be provincial land transfer tax on the transfer even when there is no money exchanging hands.
A Lender May Attempt to “Hold” Your Title
Never agree to transfer title to your property temporarily. If you’re looking to take out a loan on your property and a broker or lender asks you to sign a grant deed they can “hold” while they look for financing, this is a scam.
If you sign the deed, there is nothing preventing the new “owner” from selling your property, taking out a loan, or performing any number of duplicitous actions. This false lender may even refuse to transfer the property back. In other words, it’s a very, very bad deal.
Always have a lawyer who specializes in title transfers in Toronto take a look at any deed modifications/transfers in order to head off the worst-case scenarios.
Work with trusted lenders and make deals using escrow in order to avoid fraud and theft.
Your Lender May Demand Payment
While on the face of it you’re permitted to add people to a deed on a home, with an outstanding mortgage, many mortgage lenders incorporate a due-on-sale clause, giving them the ability to call in the loan if the deed is transferred or the home is sold. If you deed your home or property to someone, you’ve technically transferred part ownership, which in turn, could trigger the due-on-sale clause.
One good way to avoid this situation is by getting permission from the mortgage lender before you add a person to the deed. Again, any good real estate lawyer in Toronto will be able to facilitate this arrangement and avoid any surprises from lenders.
You Expose Yourself to Additional Liability
Whenever you add another individual to the property, you’ve now exposed yourself to additional liability that this other part-owner may incur.
In other words, if the other person on the title incurs a tax lien, runs into trouble with creditors, or goes through a divorce, for example, then their portion of the property may be claimed by the CRA, creditors, the ex-spouse, etc.
This can lead to the entity owed placing a lien on your property in an attempt to force a sale in order to collect the debt.
Again, with a new individual added to the title, you’ve now ceded a large portion of control over the property and opened yourself up to external threats that you may not be able to control or resolve.
Work with a Top Real Estate Lawyer in Toronto
You’ve worked hard to own your home or property. You likely care about it and love it; you shouldn’t ever have to worry about it being stolen out from under you due to legal oversights.
That’s why, at Zinati Kay – Real Estate Lawyers, we are here to support you.
We have over 50 years of experience helping home buyers and sellers in the Greater Toronto Area. In fact, we’ve closed over 21,000 real estate transactions!
When it comes to closing lawyers in Toronto, Zinati Kay – Real Estate Lawyers are proficient at drafting agreements, conducting title searches, filing sale completions, and helping with mortgage refinancing, to name just a few of our areas of expertise.