The Mortgage Instructions Toolkit provides practical guidance for lawyers responding to lender requests in residential real estate transactions. This page addresses the request for funds from the financial institution.  

The situation

A Requisition for Funds form may ask you to “certify” items when you file an Interim Report and request that the financial institution forward funds for a home purchase. For example, you may be asked to certify that all property tax and utility bills have been paid in full, that the financial institution has a valid first charge, and that title is “good and marketable”. You may also be asked to certify this information is accurate for the date on which the funds will be made available.

This is problematic because, for example:

• Utility bills are the responsibility of the current home owner. A purchaser cannot be responsible for these utility bills, and you are not in a position to certify that these bills have been paid. As well, in some municipalities, water bills, for example, may only be issued quarterly and an exact interim bill may not be available.
• The vendor’s mortgage, if there is one, will remain registered on title ahead of the new lender until the transaction is complete and the vendor’s mortgage has been discharged. You cannot, therefore, certify that the borrower’s financial institution has a “valid first charge” when you are requesting funds.
• The financial institution’s clause regarding “good and marketable” title may list elements that you are not in a position to certify, for example, with respect to zoning, building compliance issues, encroachments, and easements.

Sample lender instructions

The undersigned hereby certifies that when the advance is made:

1. All tax and utility bills issued up to the Interest Adjustment Date will have been paid in full
2. When the monies are disbursed the Mortgagor will have a good and marketable title, free and clear of all judgments, executions, charges and other liens except for the above Mortgage and you will have a valid first charge against the property mortgaged
3. Unless otherwise recorded below, all registered restrictions, building/zoning bylaws and statutes or regulations of any provincial or other competent authority will have been complied with and there are no easements, encroachments, encumbrances or other qualifications (including taxes) EXCEPT as noted below. You were informed of these matters prior to this report and these were accepted by you. They are neither detrimental to your security not to the marketability of title.

Practice guidance

No Title insurance

• Amend the form to eliminate or edit any statements that are outside your professional capacity to certify.
• Give information about the documents which you have reviewed, who provided them, their date, and the information in them. Do not attest to the accuracy of the information.
• Choose your words carefully. Do not “certify” information and inadvertently give a guarantee, representation, or warranty of something that you cannot guarantee, represent, or warrant. Do not give an opinion on something beyond your area of expertise. If certifying, add any qualifications which the interest is or will be subject to, for example, payment and discharge of the existing first mortgage.

Title insurance

• Ensure that gap coverage is in place to cover the period between the transfer of funds and the closing of the sale.