Family Law Issues in Real Estate:Part 1 of 3

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One of the most misunderstood aspects of family law issues in real estate is “What is a Common Law relationship.” A Common Law Relationship is legally defined as two people living together for three years, or a relationship which has a child from it. Many people will refer to themselves as common law without meeting these criteria.

It is important to note that even if the parties meet the legal definition of common law, this does not mean that they have any interest in the other persons property. A legal common law relationship can impose support obligations on each other. However, parties must legally be married, before any party acquires any interest in real property. Thus from an agent’s point of view in common law circumstances, the consent of the common law is never required to list or sell the property. This applies even in the case of the matrimonial. Only if both parties are on title-would both have to sign, which would be obvious in any circumstance.

Knowledge is Power, which results in more business!

If you have any questions or concerns, please feel free to contact us at your convenience. If you have any suggestions for future topics please let us know.

Prepared by Don Travers, Solicitor with Paquette & Travers

Contact toll free: 1-877-744-2281

Online: www.paquettetravers.com

Here Today, Gone Tomorrow – The Risk of No Conditions!

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In this very hot market, we are seeing most deals without any conditions, and in particular, no financing condition.  However, this is not necessarily a blessing for the Seller. Sales not being completed because of the Buyer cannot get financing.  The Seller believes they have a firm Agreement of Purchase and Sale act upon that information to buy a new home. Unfortunately, the Seller finds out when they get close to the closing, that the Buyer cannot close because the price paid for the house is not justified by the bank’s appraisal.  The Seller is left in the inevitable position of not being able to complete their purchase.

To make matters worse, there was a multiple offer, and unfortunately the seller selected the perceived best offer, which turned out to be the wrong offer.  The offer had only the minimal deposit, so the seller does not have much to fall back on for their damages.

In order for Agents acting for the sellers to protect their clients, the Agents should be making sure that the accepted Agreement of Purchase and Sale have larger deposits.  If buyers can not come up with a larger deposit, they probably cannot make up any shortfall in the bank financing either.

If you sold your home in 2016, you will have to report it to the Canadian Revenue Agency in your tax form that deals with Capital Gains, even though any gains remain tax free if you have lived in the house as long as you owned it. The basic information related to the transaction must be filled out on the income tax form including the year of purchase, the proceeds of the sale, and the description of the property.  The penalty for not reporting the sale of a home and not having your tax return amended if necessary is up to $8000. This change in reporting will make it easier for the CRA to catch taxpayers who try to claim the principle residence exemption on more than one property for the same period.

Knowledge is Power, which results in more business!

If you have any questions or concerns, please feel free to contact us at your convenience.  If you have any suggestions for future topics please let us know.

Prepared by Don Travers, Solicitor with Paquette & Travers

Contact toll free: 1-877-744-2281    Online: www.paquettetravers.com

Watch for more Travers Tidbits to follow each month!

Buyer Beware! How to Avoid Being Trapped by Misrepresentation

house in mousetrap. Isolated 3D image

Remedies for Misrepresentation before Closing

Rescission (termination) is available where a material misrepresentation in the Agreement of Purchase and Sale was an inducement to the Purchaser to enter into the Agreement is established. This misrepresentation must be material and must have served as an inducement to enter into the Agreement of Purchase and Sale.

A representation which amounts to a statement of opinion, probability, expectation or exaggeration goes for nothing and although the statement may not be true, a Purchaser is not justified in placing reliance on it. Such statements have no legal significance and would not enable the Purchaser to terminate the Agreement.

Representation can be classified as an innocent misrepresentation, a negligent misrepresentation, or a fraudulent misrepresentation. A Purchaser is entitled to terminate the Agreement if the representation is material and in the Agreement, whether it is innocent, negligent, or a fraudulent misrepresentation. A misrepresentation is fraudulent when the Seller makes a false statement of fact knowing it is false, or recklessly, without caring whether it is true or false, intends to induce the Purchaser to enter into the Agreement and the Purchaser relies on it.

The “entire Agreement clause,” paragraph 26 in the standard form, will protect the Seller from an innocent misrepresentation made outside the Agreement. However, that clause will not protect a Seller for a fraudulent misrepresentation made by the Seller or the real estate agent outside the contract.

Whether the clause excludes negligent misrepresentation made by a Seller or agent and not included in the Agreement is unclear. In the case of Hayward v Mellick, a statement by the Seller’s agent described a farm contacting 65 workable acreage when in fact it was only 51. The Court of Appeal said that a negligent misrepresentation not included in the Agreement could not be relied upon by the Purchaser because it was excluded by the entire Agreement clause. However, in a subsequent case, Bear v Townsgate 1 United, casts doubt on whether the clause excludes pre-Agreement negligent misrepresentations.

Faced with a decision to close or not close, the lawyer must depend on how a court classifies the misrepresentation made by the Seller. Unfortunately, the distinctions between each class of misrepresentation is often tenuous.

If the statement in the Agreement is labelled a warranty and that statement is not true, even if discovered before closing, it does not give the Purchaser the right to terminate the Agreement. It only gives the Purchaser the right to sue for damages after closing.

If the misrepresentation is an innocent misrepresentation, and the Purchaser decides to close, the Purchaser must be made aware that they will not be able to sue for damages after closing.

Unfortunately, there is not always certainty in the law.

Knowledge is Power, which results in more business!

If you have any questions or concerns, please feel free to contact us at your convenience.  If you have any suggestions for future topics please let us know.

Prepared by Don Travers, Solicitor with Paquette & Travers Professional Corporation

Contact toll free: 1-877-744-2281                                                             Online:www.paquettetravers.com

Watch for more Travers Tidbits to follow!

 

The Hidden Details Behind New Condo Agreements

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Things to remember: Pre-closing Agreements of an Assignment of Purchase for New Condos

When the agreement is assigned, consent is almost always required and charged for by the Builder. Need to determine the cost of consent and who pays it.

  1. Does the Purchase price for the assignment cover (i) The Assignment fee (ii) The Deposit and the extras already paid by the Assignor.
  2. Who will pay the H.S.T on the Assignment and what amount is it on, if payable; just the assignment fee or the assessment fee as well as the deposits.
  3. It is key to remember that the property must never have been occupied prior to closing to get the HST rebate on closing.
  4. The Assignee needs confirmation, that the Builder will credit him/her the HST rebate on closing.

The Key to many of these HST questions is what was the intention of the Purchaser/Assignor at the time of entering into the Purchase Agreement.

  1. If the Purchaser/Assignor’s intention was to resell/assign the agreement the Purchase Agreement will be a Builder under Tarion, and will have to register as much.
  2. The intention also determines if HST is payable on the Assignment. If his/her intention was to resell, HST is payble on the Assignment.
  3. The good thing from the Assignee’s point of view is that regardless of what the purchase agreement states, the Assignee can claim the HST rebate if he/she otherwise qualifies for the rebate.
  4. Unfortunately the OREA forms of Assignment Agreement for condos does not deal with the fundamental questions of intention of the HST. The phrase “included in” does not address the issue of “HST exempt/HST taxable”.

Prepared by : Donald J. Travers of Paquette Travers & Deutschmann

Toll Free: 1-877-744-2281 Email: Don@PaquetteTravers.com

Stigmatized Properties and Agents’ Obligations

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Stigmatized Properties and Latent Defects

Def’n: a choice or pleasing bit of anything, as news, information or gossip.

Agents sometimes run into problems when taking a listing because the Seller is aware of a defect and does not want the Agent to disclose the defect. The problem is that the obligations of Sellers are not the same as the Agent. The Agents have a broader duty of disclosure than do the Sellers. Agents, under the regulations pursuant to your Code of Ethics are obliged to disclose material facts relating to the property. RECO has addressed stigmatized properties. ‘Stigma’ is not defined, but RECO provided examples, as follows:

  1. The property was used in the ongoing commission of crime. (eg. Drug dealing, chop shop, brothel)
  2. A murder or suicide occurred at the property.
  3. The property was previously owned by a notorious individual. (eg. Organized crime, known murderer.)
  4. There are reports that the property is haunted.
  5. A former grow-op which has been remediated according to the local health or building authority.

Sellers have only two duties when it comes to disclosure:

  1. To disclose a latent defect that renders the premises unfit for habitation; and
  2. To disclose a latent defect that renders the premises dangerous in themselves.

The courts have held that Sellers do not have to disclose a death, suicide or murder in the house.  A grow-op, haunted house, or murderer’s house, such as Paul Bernardo’s house (although now demolished), would not require disclosure by the Seller, but certainly by the Agent. In the past the principle followed by the courts was “buyer beware.” The problem with ‘stigmatization’ by definition, it is ephemeral (in the eyes of the Buyers), and their subjective personal preferences.

Agents face a difficult decision in this situation; whether to take the listing or not. If the listing is taken the Agent can face a disciplinary hearing before RECO, if there is non-disclosure of the defect. If the Agent discloses the defect, he or she could face a law suit by their client for breach of their fiduciary duty to the client. In the RECO v Rybitsky, the failure by the Agent to disclose a previous grow-op that had been remediated, led to a fine of $11,000.00 for breach of the Code of Ethics.

Where this gets tricky is where it is a matter of degree, such as insect or mice infestation. How bad are the bugs and mice? Have efforts to clean up failed? Does it create a contingency health hazard? Agents could lose the deal but disclosure is preferable to a disciplinary hearing.

Prepared by : Donald J. Travers of Paquette Travers & Deutschmann

Toll Free: 1-877-744-2281 Email: Don@PaquetteTravers.com

The Importance of Communicating the Realtor Commissions Process

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These days agents are having clients sign Buyer Agency Agreements, usually providing for the payment of commissions at 2.5 %. Unfortunately many of the transactions involved for sale by owner deals, or deals with discounters, do not provide for the Buyer’s agent to get the 2.5%.  As such, the Buyer will be responsible for any shortfall in the commission that the agent receives as a result of these types of arrangements.

However we are not expecting commission statements on purchases. On a sale, if we do not have a commission statement, we would naturally call to get one.  On purchases, we would not, so it is imperative to not only fax or email the statement, but to also follow up to ensure it has been received by us. It is preferable to email us but please always follow-up to ensure we have the required commission statement by phone.

It is advisable to inform the Buyers of the likely situation that commission might be payable, so they are not overwhelmed or surprised during their signing process with our offices.  If and when a clear line of communication is addressed between all parties (Buyers, Agents and the Law Firm), the ability to obtain and remit commission to the brokerages is far easier.

A Buyer’s hesitancy to assist Agents throughout the transaction is due to the fact that they could be paying commission which was not contemplated in the situation.  As a result to avoid any miscommunication or delay, it would be prudent to explain all possible scenarios to the clients in light of the Buyers and Sellers communicating directly.

Prepared by : Donald J. Travers of Paquette Travers & Deutschmann

Toll Free: 1-877-744-2281 Email: Don@PaquetteTravers.com

Important Points for Agents to Consider in Preparing an Offer

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  1. Always include specific use of the property in paragraph 8 (the “use” provision) of the Agreement of Purchase and Sale. For example, do not just write “multi-unit residential” if the property is sold as a six-plex.
  2. Oil tanks are of environmental concern. Insurance companies may not offer coverage in certain circumstances.
  3. If a survey is to be supplied, always aim to schedule it on a date shortly after the condition is waived (not on closing). Further, beware that when it is stated “in his possession”, there could be an argument that if the vendor does not have a survey, the vendor does not have to supply one.
  4. Explain to the purchasers that they probably will not get the keys in the morning of the closing date. It averages between noon and 5pm.  You may want to discuss bridge financing so that the purchasers who are selling can perhaps close earlier and eliminate the stress of moving in on the same day.
  5. If the water heater and water softener are rentals or rent-to-own and the contract is to be assumed by the purchaser, this should be set forth in the Agreement of Purchase and Sale and always get a copy of the contracts.
  6. When acting for the purchaser, ask the vendor to warrant that “there have been no leaks from the roof or the basement as at the date of closing” and that the “plumbing, electrical, heating and air conditioning systems, chattels and fixtures will be in good working order as at that date of closing only”.
  7. Always state that “the purchaser has the right to a pre-closing inspection”. This signals to the vendor that the purchaser will return to the house prior to closing, so it would be wise to keep the house reasonably clean.
  8. When acting for the purchaser, try to make the requisition date (search of title) in paragraph 8 as close to the closing as possible. Perhaps a week to ten (10) days before closing.
  9. State in the offer that “the keys to all exterior doors and remotes for the automatic garage door opener will be supplied to the purchaser on closing”.
  10. Specify any chattels or fixtures to be included in the purchase price.  For example, do not just write “satellite dish included”, but rather, “satellite dish and accessories included”.  The same would apply to central vacuum system.
  11. It is always a good idea to either take pictures of the house and chattels during inspections or visits (or at least note the make and model number of the existing chattels) to avoid “the switch” or problems if “a switch” is falsely claimed.
  12. A hidden defect clause should always be added to all Agreement of Purchase and Sale. It is so easy to do and will save a lot of headaches for the buyer.

PLEASE NOTE: These clauses are recommendations only and are not perfect.  They indicate a need for careful drafting depending upon the circumstances.  Each party should consult their respective solicitor.

Prepared by : Donald J. Travers of Paquette Travers & Deutschmann

Toll Free: 1-877-744-2281 Email: Don@PaquetteTravers.com

5 Reasons to Fall In Love with Paquette Travers & Deutschmann!

February is the month of love, so we thought we’d give you the 5 top reasons to fall for our people and services.  Drumroll please…

  1. We Guarantee Our Fee.  If you are not satisfied with our service, we will refund our legal fee.

  2. 45 Years Experience with Don Travers and Rinus Pais combined.  We’ll leave it to you to guess their ages!

  3. Exceptional Aftercare.   We provide all the follow up correspondence to realtors, lawyers, banking institutions and more.

  4. Five Locations To Serve You Best – Cambridge, Milton, Guelph, Kitchener, Waterloo.  We’re everywhere in the Tri-Cities and beyond.

  5. No Charge for Reviewing Agreement of Purchase and Sales or Status Certificates.

So why not give us a call today or drop us an email to set up a consultation to chat.  We’re looking forward to meeting you!  Email: info@paquettetravers.com or Call us at 1-877-744-2281.

New Tarion Regulations For Home “Flippers”

Few realtors realize, that a Buyer of a new home from a builder who wants to resell the home without ever moving into the home, must register with Tarion.

Realtors for both the Sellers and Buyers of new homes being flipped must be aware that Tarion has introduced a letter agreement that sellers must provide to the ultimate Buyer with a disclosure page. The Disclosure page requires Sellers to state that the sale is effectively a resale. The Seller must also state the original warranty start date; the status of the remaining warranty coverage; and, contact information to permit the Buyer to check on the status of any claims.

Realtors can obtain the agreement from Tarion and use it as a schedule to the Agreement of Purchase and Sale.

The Re-Seller/Flipper must file an application with Tarion. These applications will be processed in a “fast track” manner. The home will remain enrolled under the original Seller/Builder.

Even though Re-Sellers are responsible for making the application to Tarion, Seller’s Realtors need to ensure clients are made aware of these requirements to protect themselves from liability.

When I spoke recently at a real estate office, I was amazed to note that not many agents were aware of the Tarion requirements on a flip.  If you are interested in obtaining more information on these regulations, we would be happy to send you the Tarion document.  To request your copy, please email us at info@paquettetravers.com.

What You Need to Know About Common Element Condominiums

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We have experienced problems recently with agents not properly preparing Agreement of Purchase and Sales when it comes to Common Element Condominiums.  The Agreement does not mention the condominium corporation at all.  Some refer to monthly fees without stating what they are for, some agents do not think that they need to refer to the review of the Status Certificate and make the transaction conditional on lawyer review.  All of the above can prove fatal to the transactions and to the agent.

We have had purchasers refuse to close transactions because it was not disclosed that they were buying into a condominium corporation.  The monthly fee can be very small, as little as $15.00 a month, but if not disclosed as a condominium, the purchaser can walk because even though the fee is small, there is always the potential liability of Condo Corporation which is unknown.

We had a number of closings delayed because the purchaser refused to close unless the seller paid the condo fees for 5 years because of the failure to disclose there was a condo corporation fee. Therefore, it is imperative that there be full disclosure of the status of the property and any condo fees, to ensure that agents are not having to reach into their own pockets.  The deal only closed when the agents agreed to pay the condo fees for the next 5 years.

Purchaser’s agents must provide for the review of the status certificate on these condos as well.  Failure to do so could result in the purchaser being saddled with unpaid condo fees, pending special assessments, or possible lawsuit costs pending against the corporation.  The agent would be negligent for not making the offer conditional on review by the Purchaser’s lawyer – obviously a lawyer not obtaining the Status Certificate would also be negligent.

So be sure you get all the facts on the property you are selling and buying, because many properties are now being developed as these Common Element Condominiums (POTL) and sellers do not always appreciate what they are selling. The sellers naturally blame their agents when these problems arise.

Knowledge is Power, which results in more business!

If you have any questions or concerns, please feel free to contact us at your convenience.  If you have any suggestions for future topics please let us know.

Prepared by Don Travers, Solicitor with Paquette Travers & Deutschmann

Contact toll free: 1-877-744-2281                                                      Online: www.paquettetravers.com