As of July 1, 2015, Albertans will have an extra expense to consider when preparing to buy or refinance a home. The Alberta Government released its latest budget on March 26 which, among other items, increased the fees the Land Titles Office charges for its services. REALTORS® will do their buying clients a disservice if Land Titles fees are not part of the initial discussion. Here are some talking points you may want to raise with your clients:
- Rates for registering instruments have risen by up to 3.5 – 6.1 times depending on the value of the property and/or mortgage. It will now cost $75.00 plus $6.00 for every $5,000 of purchase price to register a transfer. Mortgages will use the same calculation based on the value of the mortgage. According to CREB®, the average home price as of March 14, 2015 is now $484,877. If one assumes a mortgage with 80% loan to value, that home would result in registration costs of $274 today. On July 1, the same transaction will result in registration costs of $1197.33 or a 4.36 multiple increase.
- Beware of the risk of telling your clients they will save fees by closing on June 30. Even if you have a closing before July 1 the new fees may apply! Is the increase based on the date of actual registration or the date the Document Registration Request (DRR) is submitted? This is a matter to be clarified by the Land Titles Office (LTO). Instruments are sent to LTO with a DRR. The DRR allows the registrant to save a place in the queue and track intervening registrations. Currently, documents submitted April 13 will not be registered until April 20. So, for closings on June 30, registration may not occur until July 7, after the fee increase takes place! In the worst case scenario, registrations have been delayed by 2-3 weeks in peak use periods. If this is not clarified, lawyers representing buyers will start collecting the additional fees for deals closing as early as the second week in June.
- Fees for most other Land Titles services have also risen. Important for REALTORS®, title searches will increase by 50% to $15 per search. Sellers’ lawyers are now collecting those fees for Certified Copies of Titles as it can take 3-6 months to obtain a mortgage discharge.
- Alberta still enjoys the lowest land titles registration costs of any jurisdiction in Canada. According to the Law Society of Alberta, a $600,000 home purchase with a $400,000 mortgage would cost over $7,000 to register in BC and over $8,500 in Ontario (plus the cost of a title insurance policy for both the buyer and the lender). Registration costs in Alberta for the same property will be $1,350 after the increase.
- Without any other increase, total buyers’ legal costs, including registration, for the average home will increase from approximately $1,500 to $2,500.
It is important to speak to your buyer clients early about preparing and budgeting for land titles costs. If they understand what is required then there will be no sticker shock when they meet with counsel to sign legal documents.