Completion, also known as settlement or closing is the last phase of the process of carrying out a transaction on real estate. The date for completion is agreed on during the negotiation process, and refers to when the title of the property is transferred to the new owner. It is the date that the property under transaction officially belongs to the buyer and the seller releases all claims to it. This is one of the items normally agreed by both buyer and seller in the process of making an offer.
It is expected that, during completion, the seller receives a cheque or bank transfer for the earnings on the sale. Transactions on real property are considered as completed after the respective solicitors have met at the land registry, or at the land titles office to exchange all required completed documentation. After the deed or transfer has been accepted to be registered, then the transaction is completed. The keys to the property and money are exchanged.
The completion date is the date the transaction is closed and the title to the land will be transferred to the buyer from the seller. Funds are also transferred on the completion date as well. Possession date on the other hand is the date the buyer can officially move into the property after receiving the keys. Usually, the possession date is the day after completion in order to allow some time to ensure the transaction is officially closed.
In most cases, possession is around noon, so taking possession on the same day as completion could pose some major problems in cases when the transaction is still uncompleted by noon. The adjustment date refers to the date agreed on by the parties involved to carry out certain necessary adjustments to costs to be shared. Such costs could include strata fees, utility bills and property taxes.
The time required to move out and clean the property should be taken into consideration by the seller when making decisions about the completion and possession dates. In a case where the seller plans to make a new purchase, there should be enough time to move from the current home into the new one. The move therefore needs to be appropriately timed to make sure that access to the new home is guaranteed in time depending on the time agreed to vacate the existing property.
Most times, the buyer has until 5pm except otherwise stated in the contract. The sale proceeds therefore need to be readily available so avoid situations where the keys remain with the seller, leaving the buyer hanging outside with a moving truck in the driveway at noon.
For sellers, closing costs are more straightforward than for buyers. Any existing mortgages will have to be paid off by the seller in order to provide a free and clear title to the buyer. Depending on the time of the transaction, the buyer will need to be paid an amount for the estimated property taxes necessary. Utility accounts and strata fees may require come adjustment, but these are usually amounts received from the buyer for reimbursements of amounts already paid by the seller.
Legal fees for the seller are usually less too, depending on whether it is a cash deal, or the transaction requires mortgage to discharge. There are also marginal increases in costs if multiple mortgages need to be paid out, or if the sale price is above a certain amount. The seller may also need to adjust for rents and damage payments as well, where the sale property is a rental.
An undertaking is required by the buyer’s lawyer for the seller (and lawyer) to pay out and completely discharge all existing mortgage or charge on the title which is not taken on by the buyer. Therefore, the seller’s lawyer is responsible for contacting the mortgage lender for a precise statement of how much money needs to be paid out, and to provide a valid proof of discharge of the mortgage.
All relevant and required documentation concerning the mortgage payment must be available with the seller’s lawyer in order to be able to provide the undertaking. This is usually reviewed by the client before completion. Important information such as lender name, mortgage account or reference number, the branch where the loan was taken and the useful contact details available will be provided by the seller in the process of paying out mortgage on completion.
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