How To Avoid Legal Risks That Come With Real Estate Investment
Real estate investment can be a profitable endeavor but there are important legal details you’ll want to understand before you commit. Whether you’re buying your first property or adding to a growing portfolio, working with a real estate lawyer helps protect your money and avoid unexpected issues.
Before You Move Forward With Your Real Estate Investment, Get Legal Advice
Signing any contract or agreement is risky without legal representation so, before you sign anything, it’s smart to speak with a real estate lawyer. They can help you understand local bylaws and rules about zoning, property rights, and the specific legal requirements in your area.
Make sure to do your due diligence, thoroughly checking everything about the property, before you buy. This is where a real estate lawyer can make a big difference by helping spot red flags you might miss.They will look into the property’s history, legal ownership, any unpaid taxes or liens, and potential changes to zoning rules.
Different Ways to Invest And Why You Need Legal Guidance
Whether you’re buying a home to live in, renting it out, flipping it, or buying pre-construction, every investment path comes with its own legal challenges.
Buying Pre-Construction. Buying a new home or condo before it’s built, whether as your primary residence or a rental, can be profitable, especially if the area is expected to grow in value. However, If the market dips by the time you close the deal, the property could be worth less than you agreed to pay. Once you’ve signed the agreement, it’s legally binding, so make sure to do your research on the location first.
New builds often come with delays. Every agreement includes a section (called the Tarion Addendum) that outlines how these delays are handled. If you get a delay notice, a real estate lawyer can help you understand your rights and options.
Buying to Rent. If you’re planning to rent out your property, you need to understand Ontario’s rental laws. The Residential Tenancies Act heavily protects tenant rights, which can make things tricky if problems arise. It’s important to screen your tenants carefully and set rent prices that cover your costs, as raising rent or evicting tenants is not easy.
Short-Term Rental. Renting out on platforms like Airbnb or VRBO can seem like a good income strategy, but in cities like Barrie and Toronto, short-term rentals are tightly regulated—or even restricted. Some condo buildings don’t allow short-term rentals at all, so check the status certificate before you buy.
Flipping Properties. Flipping—buying and reselling a property for profit—can work well in the right market. But if you sell a newly built home without living in it first, you could be on the hook for warranty obligations under Ontario’s New Home Warranties Plan Act. It’s best to talk to a real estate lawyer before flipping to avoid breaking the rules.
In all cases, legal advice helps you understand your obligations and avoid expensive mistakes.
Why You Need a Real Estate Lawyer When You’re Investing In Real Estate
Before you buy a property, it’s important to work with a real estate lawyer who will do the due diligence. Here are some of the things that your lawyer will check
Legal Ownership of the Property
One of the first things your lawyer will do is make sure the property checks out legally. This means looking into who actually owns the property, whether it follows local zoning rules, and if there are any issues like unpaid taxes or liens. Skipping this step could lead to major headaches later—like finding out someone else has a claim to the property or that you can’t legally use the land the way you planned.
Contracts Are the Core of Every Deal
Real estate deals rely heavily on contracts. Whether it’s a purchase agreement, a lease, or a partnership deal, the terms in these documents matter. A poorly written contract can lead to legal disputes or financial loss. A lawyer ensures your agreements are clear, enforceable, and in line with the law—especially if you’re renting out the property and need to follow local landlord-tenant rules.
Zoning and Land Use Can Affect Your Plans
If you’re buying a property to fix up or redevelop, you’ll also need to understand zoning laws. These rules dictate how the property can be used—residential, commercial, or otherwise. If your plans don’t align, you might need to apply for a zoning change, which can be costly and time-consuming. Lawyers with experience in real estate can guide you through the approval process and help you avoid delays.
Don’t Overlook the Tax Side of Investing
Taxes are another big factor. Selling a property may trigger capital gains tax, but there are ways to lower what you owe. Property taxes and rental income taxes also affect your bottom line. Knowing the rules—and the deductions available—can help you plan better and boost your profits. A lawyer can work with your accountant to make sure you’re prepared.
Legal Disputes Can Still Happen So Having A Legal Advocate Makes Sense
Even when things go smoothly, disputes can still happen. You could end up dealing with a contractor disagreement, a non-paying tenant, or property damage. Legal support is key for resolving issues quickly, whether through negotiation or, if needed, court action.
Ready to Move Forward With Your Real Estate Investment? Our Experienced Real Estate Lawyers Are Here To Support You
Real estate is a solid investment—but only when you understand the risks and protect yourself with the right legal support. At Hukam Law, we have extensive experience in helping buyers, sellers, and investors throughout Barrie, Simcoe County, Brampton, and the GTA.
📞 Call us at 705-915-0884 or email info@hukamlaw.ca to book a consultation. We’re here to make sure your investment is secure from start to finish.
***The information provided in this blog is for general informational purposes only and should not be construed as legal advice. If you have legal questions, we strongly advise you to contact us.