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 !

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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”

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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

 

How To Choose a Real Estate Lawyer

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Congratulations on the purchase of your home! Purchasing a home is one of the biggest decisions you will make in your life.

How To Choose a Real Estate Lawyer

Once you have found that perfect home with your realtor and have your mortgage financing in place, the next step is to choose a lawyer.
 

CHOOSING A LAWYER

It is important to choose a lawyer to represent you on the purchase of your home as soon as possible. If you have included the condition on “lawyer review” in your Agreement of Purchase and Sale, please allow a minimum of 3-4 business days prior to the date set to waive the condition. As soon as the Agreement is firm (meaning that all conditions have been fulfilled), please inform your real estate agent which lawyer you have chosen. At that point, your real estate agent will fax or deliver the Agreement of Purchase and Sale on your behalf to the lawyer. It is your responsibility to follow up with the lawyer to confirm they have received the Agreement of Purchase and Sale. The lawyer requires the firm Agreement of Purchase and Sale in order to open a file & start working on your behalf.
 

HOW TO DECIDE WHICH LAWYER IS RIGHT FOR ME

  • Recommendation
    • Ask your friends, family members, co-workers which lawyer they used for the house purchase & get their honest feedback on what the experience was like for them.
    • Ask your real estate agent and mortgage broker for a recommendation to some of the lawyers they have worked with previously.
  • Compare Price
    • The lowest price is not always the best value. You may be unpleasantly surprised on closing at ‘additional costs’ that were not included in the quote.
    • Ask for a quote from several law firms, confirm what items are included in the price and get the quote in writing, if possible.
  • Check Availability
    • Is the lawyer able to accommodate your closing date? Some dates are traditionally busy closing days, such as the last day of the month during the summer.
    • Does the lawyer offer flexible appointment times? Will you be required to attend their office during the day or be required to take time off work?
    • Is the lawyer available when you call?
  • Experience
    • How long has the lawyer been in practice?
    • What is the main focus of that lawyer’s practice? You should choose a lawyer who is a real estate lawyer, not necessarily your best friend’s divorce lawyer.
    • A local lawyer that specializes in Real Estate Law will know all the legal technicalities of buying and selling a home in the region in which you are buying!

 

AFTER CHOOSING A LAWYER, WHAT HAPPENS NEXT?

  • Instruct your Financial Institution to forward your mortgage instructions to your lawyer as soon as possible. Confirm with your Mortgage Broker that all your conditions for financing have been fulfilled & sent into the financial institution. Follow up about 2-3 weeks before closing with the lawyer’s office to make sure your mortgage instructions have been received by your lawyer. Most law firms have an additional charge should they not receive mortgage instructions more than 2 business days in advance of your closing date.
  • Prior to closing you must instruct your House Insurance Agent to place fire insurance coverage, “guarantee replacement cost value” on the property effective the closing date, showing loss payable to your mortgage company as first mortgagee. Ask your insurance agent to send a copy of the “Binder Letter” to our office.

What does the lawyer do?

  • Conducts a title search and related inquiries related to assuring you of clear title.
  • Advises you on any title-related issues affecting the home purchase.
  • Prepares the mortgage(s) and/or line of credit documents.
  • Ensures registration under New Home Warranty Program (new home construction).
  • Confirms price and other adjustments on the Statement of Adjustments, requisition correction of any title deficiencies.
  • Check for liens on Title (for example, Construction Liens).
  • Check for executions against the owners.
  • Advises you regarding Title Insurance versus obtaining a Solicitor’s Opinion on Title and the costs associated with each.
  • Reviews the Agreement of Purchase and Sale and/or Status Certificate (for condominiums).
  • Determines how you are to take title to the property (Joint Tenants or Tenants in Common).
  • Conveys the property to you by registering the property in your name as per your directions.

APPOINTMENT WITH THE LAWYER

Approximately two to three days prior to the closing date your lawyer will meet with you to review and sign the documentation required for closing. At the time of the appointment, you will be required to produce 2 pieces of identification. Your lawyer is bound by the mortgage instructions set out by each financial institution to verify your identity via the appropriate forms of identification. Each financial institution has its own requirements for acceptable identification. You will be required to provide valid photo identification, such as a valid driver’s licence, valid passport or a landed immigrant card.
The secondary piece of identification can be a Social Insurance Card or a valid credit card issued by a Canadian bank (for example, Royal Bank of Canada, CIBC, Scotiabank, TDCT, Bank of Montreal). Credit cards must be signed on the reverse. All original identification must be produced and photocopied by the lawyer or one of the staff members when you attend at their office for your appointment in order for your transaction to be completed.
 
On the day of closing your lawyer will:

  • Update the title search and sheriff’s searches
  • Obtain and review executed closing documents from the solicitor acting for the other party, as well as obtain the keys to the home.
  • Electronically transfer funds to the other solicitor’s trust account.
  • Upon deposit of all funds and receipt of the solicitor’s documentation, the closing will then be completed electronically in your lawyer’s office.
  • Once the final registration has taken place you will be contacted by the law clerk assigned to your file. The law clerk will advise you when and where the keys will be available for pick up. Usually you will come to the lawyer’s office, but if you are purchasing from a builder, you would have to attend at the builder’s site office to pick up keys.
  • As soon as you have the keys you can move in!

 

POST CLOSING

Approximately 4-6 weeks after closing, you will receive from your lawyer the Reporting Letter. This Letter is comprised of copies of the lawyer’s documentation you signed prior to closing and copies of the registered documents from closing. Your deed will be a part of this package. You should keep these documents in a safe place! A Reporting Letter is also sent to your financial institution to report on the registration of the mortgage.