agreements

COVID-19 Tips: Part 1

Don

Businessman Holding Model House In Palm Of Hand

 

BRIDGE FINANCING

With the current climate of social distancing, many financial institutions and banks have closed several branches, and reduced hours of operation. For example, the few Scotiabank branches operating have reduced their hours from 10:00 a.m. to 2:00 p.m., Monday through Friday. Banks are also reducing staff and limiting the number of clients allowed in their branches, creating longer wait times. Keeping all of this in mind, it is our strong recommendation that if you have a client who is purchasing and selling, you strongly encourage them to bridge finance, and not close both of their properties on the same day. Bridge financing eases the stress and tension on clients when trying to close two transactions on the same day. Unfortunately, banks have severely limited the ability for a seamless buy and sell on the same day, and depending on the financial institution, the channels in which mortgage funds, etc. need to pass through are also limited. Therefore, separating a client’s purchase and sale with time and bridge financing is key to ensuring a smooth purchase and sale.

MULTI-RESIDENTIAL TRANSACTIONS

With many municipal offices closed or working with a limited team remotely, obtaining building and zoning compliance letters for multi-residential purchases have become difficult, if not impossible during this time. Therefore, we cannot confirm whether a property is legally zoned as a specific type of dwelling. A great tip we recommend is to seek the report and documentation from the seller when they purchased the property! At the time of closing, the seller should have received their own compliance letter from the municipality via their lawyer, confirming the legal use of the property. This is a great tool for realtors representing a seller of a multi-residential property to confirm its current use, and for buyers during the time of municipal office closures.

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 Donald J. Travers, Solicitor with Paquette Travers

Toll-Free:1-877-744-2281    www.paquettetravers.com

Property Tax Assessments – Who Pays?

Don 0 Comments

Property-Tax-Assessment

We recently were contacted by an agent advising us of confusion about new properties sold without tax assessments.  The example used was a new property sold within a year of being purchased, where there is no assessment and therefore no property taxes have been paid.

The question was “What should the realtors and Sellers and new Buyers know about who pays and how is the money collected?”

The answer is the Seller is responsible for the taxes up to the closing date, and this will have to be adjusted after closing when the bill is received.  The taxes run with the land and the new owner, the Buyer, will receive the tax bill and will pass it on to their lawyer.  The lawyer should have as part of the closing, received an undertaking from the Seller’s lawyer, to hold back sufficient funds from the sale proceeds to cover the Seller’s share.  The lawyer should have worked out an estimate of what those taxes are.  The lawyers will then do the tax adjustment, pay the Seller’s share to the Buyer so they can pay the City, and the balance left over will be refunded to the Seller.

Knowledge is Power, which results in more business!  If you have any questions or concerns, please feel free to contact us at your convenience.

Referrals are the lifeblood of our business.  If your clients, family or friends are in the process of buying, selling or refinancing Real Estate, our greatest compliment would be a recommendation from you.  We are never too busy for your referrals!

Watch for more Travers Tidbits to follow each month!

 

Well and Water Warranties

Don 0 Comments

warranty

It is extremely important when buying a rural property that the appropriate warranties are granted from the Seller to the Buyer.  The following clause best sums it up:

I/We _______________________, the Sellers in the transaction, hereby warrant to the Buyers with respect to the domestic water supply and domestic water supply system, that:

  • The water supply is capable of supplying an adequate flow (a minimum five (5) gallons per minute);
  • The water provided is potable on a year-round basis;
  • The Seller is not aware of any contamination or impurities in the water;
  • The Buyer will have a reasonable opportunity to enter on the property for purposes of obtaining water samples;
  • The normal water tests will show either a “0-0” reading or an acceptable reading as defined by the Ministry;
  • There are no unsafe contaminants to a level deemed unacceptable under the “Drinking Water Objectives”;
  • The water is completely clear, clean and free of any displeasing colour or smell;
  • The pump, holding, pressure and distribution systems all perform adequately, have been properly maintained and repaired and will be in good operating condition on closing;
  • The well is situated entirely within the limits of the subject property;
  • The well services only the subject premises and is not a communal well; and
  • The well is a dug or drilled well, not from a water source such as a river, spring lake, stream or other surface water.

Knowledge is Power, which results in more business!  If you have any questions or concerns, please feel free to contact us at your convenience.

Referrals are the lifeblood of our business.  If your clients, family or friends are in the process of buying, selling or refinancing Real Estate, our greatest compliment would be a recommendation from you.  We are never too busy for your referrals!

Watch for more Travers Tidbits to follow each month!

Grow Ops … and The Usage of “To the Best of My Knowledge and Belief”

Don 0 Comments

indoor-grow

The above term is often used in the Agreement of Purchase and Sale; but what is the effect of it on representations and warranties?

In the Court of Appeal case of “Beatty v. Wei” found that despite a Seller’s representation during the time they had owned a property, that the property had not been used as a grow op, the effective date of the truth of the representation made to “the best of the Seller’s knowledge and belief” was at the time that the representation was made. Without the language in the clause that the representation continued until closing, the representation did not continue, and, in this case, it was discovered that the property had in fact been used as a grow op at some time prior, but that fact was unknown by the Seller and the Seller was not liable.  The emphasis to be placed on representation is the knowledge of the Seller when the representation was given and not on whether the property had been used as a grow op.

The representation given was limited to the Seller’s knowledge at the time given and was not absolute.

If the Buyer wants the representation to apply up to the date of closing, the Agreement of Purchase and Sale should be written to include this timeframe. Since the clause did not reflect “up to the date of closing”, the representation only applied to the date of execution of the Agreement of Purchase and Sale.

We all rely on “to the best of my knowledge and belief” in our agreements, so it is important to realize that without language that makes the knowledge apply to the date of closing, the effectiveness of the representation is limited to the date it is given.  Even if the Buyer finds out prior to closing that there was a grow op, the Buyer does not have the right to terminate the Agreement of Purchase and Sale.

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.

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

Watch for more Travers Tidbits to follow each month!

What Is a Zombie Deed / Transfer?

Don 0 Comments

houseforsale

It has nothing to do with Halloween!  A Zombie deed is a transfer which is registered after the death of the owner of the property. In the past if an owner was dying, lawyers would get the deed signed before the closing date of a sale, and hold it until the closing day and register it then. If the owner passed away before closing, the transaction could still close on time without the need for Probate. These deeds were held to be valid in the case of Winarksi v. Sproul The Winarski case lead to the practitioners seeing the Zombie deed as a way of avoiding the provincial taxation or the value of the property. There were certain requirements for the deed to be valid , including that it would be binding after death and it was delivered to an Ontario Lawyer unconditionally and irrevocable. The registry office will now no longer permit the registration of Zombie Deeds, if discovered.

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!

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

Cheri 0 Comments

Sold

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

Don 0 Comments

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

Don 0 Comments

condos

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