Need To Know

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

COVID-19

Don

covid 19 real estate

At this point in time, we are not sure what the COVID-19 is going to do to the volume of real estate deals. Right now, we are busy; however, with many people wisely following the government orders to stay at home, self-distance and so much of the economy has shut down, we expect to see a market slowdown as a result of the Pandemic.

Unfortunately, many people bought firm just a month ago, because that was the days of no conditions. Now Buyers find themselves in the predicament of not being able to sell their existing home in a COVID-19 market, without the ability to show their homes. New Buyers are obviously very nervous to commit to purchasing homes in these uncertain times.

So, what happens if people do not complete these purchases because they cannot sell their existing home?

Well, there is no general principle of law to my knowledge that would apply to a Pandemic. In this situation, what would govern would be a matter of contract, and the terms of the Agreement of Purchase and Sale would govern the situation. Unless Time is of the Essence is waived, the Buyer would be in breach of the Agreement of Purchase and Sale and would have to close, since no law suspends private contract time periods.

Then there is the question of whether Force Majeure would give the Buyer an out of the contract. Unfortunately, Force Majeure is a matter of contract and is not found in residential Agreements of Purchase and Sale, so would not be applicable to residential deals. It also does not appear to apply to a Pandemic, since no mention is made of it when it has been part of a contract.

The third option would be a claim that the Agreement of Purchase and Sale is frustrated because it can not be performed through no fault of the Buyer. This would be an equitable remedy. However, delay or drop in value, or economic loss, or failure to sell would not be considered conditions which would enable a claim for frustration of the Agreement of Purchase and Sale.

The courts we expect will not take kindly to parties that take advantage of legal technicalities in these trying COVID-19 times. It is important that we all act responsibly and fairly. However, the Pandemic, is not going to get buyers out of their Agreements 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.

Prepared by Donald J. Travers, Solicitor with Paquette Travers

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

Family Law Issues in Real Estate (Part 1)

Don 0 Comments

two-hands-grapsing-a-model-house

A common problem in Family Law situations is when the client sells a matrimonial home and plans to use their share of the proceeds to buy another home. This “Dream Client” can become a nightmare if the agent is not careful. It is not uncommon for spouses to assume they will receive half (1/2) the equity of the house upon the sale. It is important for agents to ensure their client has a separation agreement in place, dealing with the proceeds of the sale of the house, or at least an irrevocable direction to the lawyer acting on the sale for what is required to complete the new purchase, before the spouse commits to a firm agreement of purchase and sale on a new house.

Spouses can get very vindictive, and on a sale, will often insist the proceeds of the sale be held in trust by their real estate lawyer until all Family Law issues are resolved. If the proper caution is not taken as mentioned above, the spouse’s purchase can be thwarted and the purchasing spouse can be exposed to damages for failure to close.

Always make your client aware of this, and do not let them firm up without clarification of who gets what of the sale proceeds. Spouses can never count on their spouse continuing goodwill.

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 each month!

Stigmatized Properties and Latent Defects

Don 0 Comments

stimatizedproperties1

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.

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 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!

The Obligation of Disclosure in Agreements of Purchase and Sale (APS) …and The Case Of Marijuana!

Bryan Mayes 0 Comments

Why-Everybody-Should-Be-Allowed-To-Grow-Marijuana-At-Home

Beatty et al. v. Wei et al. is a Superior Court of Justice decision dated June 5, 2017. This case is significant because it speaks to representations and warranties made by a Seller in an Agreement of Purchase and Sale, specifically with respect to the relationship between representations and warranties made to the best of the Seller’s knowledge and belief and the ability to rescind an otherwise valid APS. The basic facts of this case are as follows: An APS was entered into between Buyer and Seller. In the Agreement, the Seller represented and warranted that to the best of their knowledge and belief, the property had not been used for the growth or manufacture of illegal substances. At the time this representation and warranty was provided, this was in fact true. Before closing, the Buyers discovered through their own investigation that the property had in fact been used to produce marijuana in 2004. This was confirmed by a letter by Toronto Police. The Buyers refused to close the transaction and demanded the return of their deposit. The Sellers refused to agree to the termination of the APS and brought an application for declarations that the APS was a firm and binding contract, the Buyer had breached the APS and that the deposit had been forfeited. The Buyer applied for declarations that they were not required to complete the transaction and for the return of their deposit.

The Court ultimately found in favor of the Buyer. The Buyer was able to rescind the APS and the deposit was returned. Why? The Judge reasoned that this representation and warranty given by the Sellers was relied upon by the Buyers and induced them to enter into the APS. If it were the case that the Sellers had discovered there once was production of marijuana at the property, the Seller would be obligated to notify the Buyer before closing because they would no longer be able to make that representation and warranty. This would be a material change to the contract and would be grounds for rescission. The Judge reasons that the Buyer’s rights are not affected merely because they were the ones who made the discovery, and thus the same principle must apply. This was a material change to the terms of the APS and the Seller could no longer sell the property on the same material terms and conditions agreed upon in the APS.

Real Estate Agents should be mindful of this decision because of the potential implications it could have when this representation and warranty is made in an APS. If your Seller represents and warrants that to the best of their knowledge and belief a particular circumstance about a property is either true or untrue, a Buyer may have a valid claim for termination of the APS if in reality the state of the property conflicts with what your Seller has represented and warranted. If acting for a Seller, be aware of the potential risks to the APS if a representation and warranty is made that is discovered to be a mistaken belief in reality. If acting for a Buyer, if your Client has been induced to enter into an APS based on a mistaken belief that is represented and warranted by a Seller, your Buyer may have a right to terminate the APS and to have the deposit returned.

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 Bryan Mayes, Solicitor with Paquette Travers

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!

What is “First Dealings for Estate Sales”?

Don 0 Comments

Dream house.

Recently I have had several agents raise questions on a clause in an Estate sale which referred to first dealings and the fact that probate might not be needed. So what is a “First Dealings for Estate Purposes.”

The requirement in Land Titles is that upon the death of an owner, the estate trustee must obtain probate. The conversion of properties from the old registry system to Land Title has lead to an exemption from the requirement for Probate for these converted properties to Land Title Qualified.

The First Dealings Exemption is applicable if the deceased acquired the property while it was registered under the registry system and was subsequently converted to Land Title Qualified and the deceased still owned the property, then the owner will be exempt from the requirement for probate. This First Dealings Exemption will still apply as long as the dealings do not transfer title, such as mortgages and discharges.

The exemption will still apply if a joint tenant has died on the registration of a survivorship application will not vitiate the first dealings exemption for the survivor. Inter-spousal conveyances due to the dissolution of a marriage will not disqualify the owner from the First Dealings Exemption. This exemption is only available where there is a Will and where the property is in the Land Title Qualified.

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

Oh Canada! What You Need to Know About Residency Status in Closing the Deal

Bryan Mayes 0 Comments

canada-immigration-flag-and-passport

The introduction of the Non-Resident Speculation Tax in April of this year has made it imperative that Real Estate Agents confirm the residency status/citizenship of their Buyers well in advance of the closing date. We have encountered issues days before closing wherein the Client, as it turns out, has not actually been granted Permanent Residency Status/Canadian Citizenship by the Government of Canada. If the closing date arrives and the Buyer is unable to provide our office with proof of either Permanent Residency or Canadian Citizenship (birth certificate, passport, permanent resident card, etc.) then two options become possible:

  1.  The Buyer pays the NRST which equals 15% of the purchase price and may be eligible for a rebate after closing;
  2.  Extend the closing date of the transaction until the Buyer can provide our office with proof of Permanent   Residency/Citizenship.

Neither of these options will result in a happy Buyer. To avoid this potentially disastrous circumstance from arising, we recommend that all Real Estate Agents confirm the residency status/citizenship of their Buyers (with proof!) well in advance of the closing date. We have found that sometimes clients think that they are Permanent Residents/Canadian Citizens but have never actually been legally granted this status by the Government of Canada. Determining if this will be a problem in advance of the closing date will give the Buyer time to apply to the Government to receive the appropriate documentation before the closing date.

Addressing this potential problem immediately is crucial to avoiding potential issues on closing and, ultimately to cause your Buyer to close their transaction happily and hassle free.

Author: Bryan M. Mayes, Lawyer

Paquette & Travers Professional Corporation

519-744-2281 x 302

 bmayes@ptlaw.ca

 www.paquettetravers.com

Closing the Deal for Common Element Condominiums (POTL’s)

Don 0 Comments

condo

We have experienced problems recently with agents not using the proper form for the condominium POTL sales and purchasing nor using the proper terms. The Agreement does not mention the condominium corporation at all.  Some Agreements refer to monthly fees without stating what they are for, while 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.

Purchasers have refused 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 the condominium corporation which is unknown.

A few closings were delayed because the purchaser refused to close unless the seller paid the condominium fees for 5 years due to the failure to disclose there was a condominium 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 condominium 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 condominium 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 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.

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

Watch for more Travers Tidbits to follow each month!