Ontario Land Transfer Tax Refund Rule Change

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When buying a property, there are two types of warranties for chattels and fixtures. The difference can be significant. Find out more at www.derchansky.com/2016/10/12/warranties/ #realestate #toronto #home #house #purchase #condo #lawyer

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Are there Restrictions on Title to your Property? We recently came across a strange restriction on title to a property being purchased by our clients. Registered in 1978 without an expiry date, the restriction required any construction on the property to be approved by the original builder (from 1978!). If that builder did not approve the construction, the builder had the right to purchase the property back from any owner, at any time, for the original price of the property ($25,000.00). Its enforceability aside, we were concerned about this restriction. With enough searching, we tracked down the original builder and had it remove the restriction from title. This was a significant restriction that could have caused our clients a lot of legal trouble in the future. It was what we in our office call a "Material Restriction". Derchansky Legal classifies restrictions internally into broad two categories: 1. Material Restrictions: these restrictions have a significant impact on title, the legal nature of the property or its use and marketability. For example, restrictions related to the sale or mortgaging of a property can stop a purchaser from acquiring title or transferring title at a later date. Restrictions granting any party a right to purchase the property, or a portion of the property, are also concerning because they lay the groundwork for potential legal headaches in the future. 2. General Restrictions: these restrictions do not have a significant impact on title, the legal nature of the property or its use and marketability. For example, restrictions on clothes lines in a backyard, prohibitions on large advertising billboards or satellite dishes, or alterations to grading may inconvenience an owner, but they generally do not have a significant or material affect on that owner's title or use of a property. The categorization of a restriction can be straightforward or it can be tricky. A restriction prohibiting the transfer of ownership without municipal permission affects all purchasers. But a purchaser who envisions a future backyard with a large deck, pool and gazebo may be more impacted by a building restriction than a purchaser who wants an empty backyard for his or her dog. When our office comes across a restriction, we review it in detail with our clients to make sure that they understand the limitations placed on their use of a property. Purchasers should always be aware of exactly what it is they are purchasing and whether there are any prohibitions that might impact their anticipated plans, use and enjoyment of the property, as well as its marketability. The above post is for information purposes only and is not to be taken as legal advice about any specific deal or set of circumstances. A lawyer should always be consulted to review the facts of each particular deal before making a conclusive recommendation.

Work to be Done on Property before Closing In recent months, Derchansky Legal has seen an increase in the number of transactions where sellers agree to repair certain chattels, fix certain fixtures and do certain work on a property before closing. If you are purchasing a property where the seller has agreed to do work, there are some issues you should consider. When a seller agrees to do certain work on a property, there are implications for both a purchaser and its mortgage lender. Lenders are sometimes concerned if a list of repairs is too long or the work is too onerous. Such a list might impact a purchaser’s ability to repay the mortgage (if the work is not done by the seller on closing and must be done by the purchaser afterwards) or it might give rise to potential construction liens and claims (if the work is done but not paid for). The following are some general considerations when there is work to be done on the property by a seller (caution: each deal is unique and should be referred to a lawyer for optimization): 1. A clear description of the work and quality required should be put in writing. Does an item need to repaired in a professional manner or installed brand new? Should the work be done to the satisfaction of the purchaser or the seller? 2. The work should be done by the proper professionals, unless it is of a very minor nature that an average person can do. There is a difference between repairing a flooded basement and filling in TV wall mount holes; between retrofitting a fireplace and replacing cabinet door handles. 3. Depending on the work, any services and repairs done by professionals should be guaranteed or warranted for 1 or more years and this guarantee or warranty should be transferrable, and transferred on closing, to the purchaser. 4. The seller should provide all invoices received from any tradespeople and the invoices must clearly state the total cost for the work done and materials provided. 5. The seller should provide proof of payment for the full amount of any invoices before closing and should authorize the purchaser to contact the tradespeople to confirm that payment was received. A purchaser must not inherit any unpaid invoices and should not be left guessing as to whether any invoices are paid (for fear of any construction liens). 6. If #3 and #4 are not provided, an appropriate holdback of money should be in place with the purchaser’s lawyer for a period of 45 days after closing to ensure that the work is done and paid for in full. The more clearly defined the situation in the Agreement of Purchase and Sale, the less chance there is of last minute surprises to the clients and their mortgage lenders. The above post is for information purposes only and is not to be taken as legal advice about any specific deal or set of circumstances. A lawyer should always be consulted to review the facts of each particular deal before making a conclusive recommendation.

Ontario tried a speculation tax on property, and the market 'collapsed overnight'

Could a "speculation tax" be on its way?

Is Your Delay Really "Unavoidable"? In a recent post I described the strikes that were happening in the construction industry and how the #Tarion scheme dealt with such “unavoidable delays”. These strikes now appear to have ended. As the dust settles, the pre-construction industry is preparing to deal with the aftermath of the delays. Unfortunately, given the climate created by the strikes, we at Derchansky Legal have seen attempts by some builders to use the term “unavoidable delay” either inappropriately or in a misleading manner. Some of our clients have been receiving letters advising them of delays that are “unavoidable”, thus attempting to deny them their right to delayed closing compensation. Here are two examples we have seen in the past few weeks where builders described delays as “unavoidable”: 1. One builder notified our client that her condominium unit would not be ready for occupancy due to flooding. The notification letter advised that the flooding was caused by the faulty installation of certain plumbing pipes in the unit above the one being purchased. 2. Another builder notified our client that his home would not be ready on time as the builder’s contractors had failed to hire the proper amount of staff and order the proper amount of materials. Tarion provides another example where a builder failed to have heating inside a building for its workers during a particularly cold winter: http://blog.tarion.com/close-date-extensions/. Ultimately, it is either Tarion or higher authorities who determine whether a delay is truly outside of a builder’s control and is “unavoidable”. Delayed closing compensation is never guaranteed, no matter how entitled a purchaser believes it is to such payment. However, if you receive notifications of delays caused by situations that do not appear to be outside of the builder’s control, it is always advisable to contact your real estate lawyer for advice. This is especially important to do if a builder requests that you sign any document that may waive your rights to delayed closing compensation or other remedies.

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Staying up all night trying to figure out your Agreement of Purchase and Sale? Contact Derchansky Legal - we can help! http://www.derchansky.com/contact/

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A recent strike by certain tradespeople in Ontario has caused significant delays in the construction of new / pre-construction properties, which delayed both occupancy and final closings across the GTA. Generally speaking, Tarion (the organization that regulates new home builders in Ontario) outlines the mechanics of how a builder must go about delaying an occupancy or final closing date. Tarion also clearly defines how long a delay can last before a purchaser is given the right to terminate the Agreement of Purchase and Sale. If the mechanism in place to properly delay a closing date is not followed, or if a delay lasts beyond a permitted time, purchasers are entitled to delayed closing compensation. Falling outside of this scheme for delays and compensation is an event called an “unavoidable delay”. Tarion defines an unavoidable delay as an extraordinary circumstance where a Closing Date (Interim or Final) may need to be delayed through no fault of the builder or purchaser. An unavoidable delay can be a fire, an explosion, an “act of God”, civil insurrection, an act of war or terrorism, a pandemic or a strike. When an unavoidable delay occurs, a builder is allowed to extend all closing deadlines by a period of time that is equal to the length of the unavoidable delay. During this time, a builder is not required to pay delayed closing compensation to purchasers. However, a builder must do the following: (1) advise the purchaser at the outset of the delay, (2) provide an estimate of how long the unavoidable delay will last, and (3) provide written notice as soon as the delay has ended. Tarion has, in the past, identified unavoidable delays caused by strikes to be particularly troublesome. Although strikes are included in the spectrum of unavoidable delays, in practice, strikes have carryover or multiplier effects that can cause delays that are longer than the strike itself. For example, a strike of workers in one trade can prevent other trades from being able to begin or complete their work. Is the subsequent delay considered an “unavoidable delay”? A lawyer should always be consulted when a notice of unavoidable delay is received. The above post is for information purposes only and is not to be taken as legal advice about any specific deal or set of circumstances. A lawyer should always be consulted to review the facts of each particular deal before making a conclusive recommendation.

INDEPENDENT LEGAL ADVICE In a standard residential home purchase transaction involving an institutional mortgage, one lawyer usually acts for both the lender and borrower/purchaser. In most transactions, one lawyer is sufficient so long as all parties agree. In some situations, however, institutional lenders require people not receiving a direct benefit from a mortgage to obtain independent legal advice (an “ILA“). Some examples can include: • A wife required an ILA for consenting to a mortgage of a matrimonial home where only the husband was to be registered on title. • A brother required an ILA for co-signing a mortgage of an investment property purchased by his brother. • Parents required an ILA for guaranteeing a mortgage on a matrimonial home purchased by their son. • A husband required an ILA for a mortgage of a matrimonial home where he and his wife were to be registered on title, but the husband was self-employed (in this case, the husband received a direct benefit from the mortgage). Why are lenders requiring these ILAs? Are lenders scared that people who sign contracts with them will one day decide to renege on their obligations and claim that they did not know what they were signing? Several court decisions confirm that this might be possible: co-signors, guarantors and even borrowers themselves have recently gone to court and claimed that their real estate lawyer “did not explain” the proper terms of the loan. In some instances the courts agreed and cancelled the loan. Lenders are understandably worried. An ILA is not only necessary when required by an institutional lender. Real estate lawyers themselves may also require someone to obtain an ILA. A real estate lawyer acts for his/her client and the interests of that client are the lawyer’s main concern. Whenever there is a possibility that the interests of the client and someone else may conflict (both now or in the future), a lawyer may require someone to obtain an ILA. Some instances where an ILA may be required: • The removal of someone from title of a property where that person holds a significant percentage of ownership and there is a mortgage registered on title. • The addition of someone to title of a property when that person has considerable debts. • The transfer of property from parents to one child when those parents have several children, especially from different marriages. • Most private mortgage loans. An ILA is not always required; in fact, most deals close without them. Although an ILA presents a home buyer with an additional expense and requires additional work from both the home buyer and its lawyer, an ILA provides everyone involved in a transaction with peace of mind and may reduce the likelihood of any future conflict or litigation. Remember, the above information is for information purposes only and is not to be taken as legal advice about any specific deal or set of circumstances. A lawyer should always be consulted to review the facts of each particular deal before making a conclusive recommendation.

When two or more buyers sign an Agreement of Purchase and Sale, it is not uncommon for one of the buyers to be omitted from title on closing, even though his or her name appears in the Agreement. This can occur for numerous reasons: people change their minds, changing financial situations do not permit them to close a deal or a mortgage lender will agree to lend mortgage funds with only one of the original buyers as the “borrower”. When a mortgage lender provides a buyer’s real estate lawyer with mortgage documentation showing only one of two buyers as the “borrower”, this is how title to the property will have to be taken. Lenders will not permit the registered owner of a property and the mortgage borrower to be different people, as this affects the lender’s ability to enforce its security in the mortgaged property. Therefore, if A and B are buyers in an Agreement and mortgage documentation is received showing only A as borrower, title must go to A alone on closing. When this change occurs in the context of a home purchase transaction, there are generally two ways to make the needed change. First, a formal amendment may be signed by all parties changing the buyers. Second, the original buyers need only execute a Title Direction with their real estate lawyer, which will be provided to the seller’s lawyer on closing. Such a Title Direction indicates the original buyers’ intention and instructions to take ownership of the property in the name of only one of them. Many mortgage lenders require a signed amendment in order to proceed with mortgage financing. While this is possible, it is the lengthier of the two methods of accomplishing the same goal. In addition to taking a longer time, a seller may be suspicious as to why one buyer is being removed from the Agreement. At Derchansky Legal, we have seen our clients finding it beneficial to remove a buyer from an Agreement of Purchase and Sale for a variety of reasons. When the time comes to do so, it is important to understand why this is being done, so that your client’s real estate lawyer can figure out how to do it most effectively. Remember, the above information is for information purposes only and is not to be taken as legal advice about any specific deal or set of circumstances. A lawyer should always be consulted to review the facts of each particular deal before making a conclusive recommendation.