By Brian Madigan LL.B.

This is a interesting question and has often been long debated. Most lawyers have amended listings agreements for the last fifty years to provide that “the commission is payable only if the transaction closes”.

But, is this amendment still necessary?

Let have a look at the relevant portions of the Listing agreement. Here are parts of paragraph 2 which deals with the entitlement and payment of the commission. The full paragraph is set out below for ease of reference.

In the example I have filled in the blanks, and assumed it is a straightforward sale, so no need to discuss tenancy or options.

“2. COMMISSION: In consideration of the Listing Brokerage listing the Property, the Seller agrees to pay the Listing Brokerage a commission of 5% of the sale price of the Property for any valid offer to purchase ….. the Property from any source whatsoever obtained during the Listing Period and on the terms and conditions set out in this Agreement OR such other terms and conditions as the Seller may accept.

……The Seller further agrees to pay such commission as calculated above even if the transaction contemplated by an agreement to purchase …… agreed to or accepted by the Seller …… is not completed, if such non-completion is owing or attributable to the Seller’s default or neglect, said commission to be payable on the date set for completion of the purchase of the Property ……”

So, let’s assume that the owner lists the property at $419,900.00 and receives an acceptable offer of $400,000.00 to close on 31 March 2009. The buyer submits a deposit of $20,000.00 which is held by the seller’s agent. The buyer defaults and cannot close on 31 March.

Let’s have a look at the operative provisions in the agreement:

Commission Percentage: 5%

Purchase Price: $400,000.00

Commission amount: $20,000.00

Entitlement: based upon “any valid offer… obtained during the listing period… and on ….. such other terms and conditions as the Seller may accept.”

Accepted Offer: was indeed $400,000.00

When payable closing: March 31,2009, if the transaction closes

When Payable, no closing: March 31, 2009, if the transaction fails to close due to seller’s fault

The seller cannot simply default on the agreement, and get out of the agreement with the buyer and the listing agreement.

The mere fact that the listing agreement is silent on the buyer’s default, doesn’t mean that the commission is not payable. The commission is still payable. The triggering event was the “valid offer” not a “completed sale”. The “patch-up” clause was only needed for the seller’s abortive transaction.

Now, the next question: Who gets the deposit?

The listing agreement goes on to provide:

“Any deposit in respect of any agreement where the transaction has been completed shall first be applied to reduce the commission payable. Should such amounts paid to the Listing Brokerage from the deposit or by the Seller’s solicitor not be sufficient, the Seller shall be liable to pay to the Listing Brokerage on demand, any deficiency in commission and taxes owing on such commission. All amounts set out as commission are to be paid plus applicable federal Goods and Services Tax (GST) on such commission.”

The above statement initially looks favourable to the seller since it says “Any deposit in respect of any agreement where the transaction has been completed shall first be applied to reduce the commission payable….”.

However, that provision merely deals with the deposit on a completed sale. It is silent when it comes to an abortive sale. Remember, the listing agent is likely holding the deposit in trust for the parties. Once, the buyer signs off, the deposit would appear to be the property of the seller. Now, the listing agent sends the seller an invoice for the balance of the commission and GST payable, namely $20,000.00 plus $1,000.00 in GST.

And, remember, the triggering event was the “valid offer” not a “completed sale”.

So, if you don’t want to receive a bill for a commission and GST on an abortive sale, then it’s still wise to amend the listing agreement to provide that the “commission is payable only if the transaction closes”.

It made sense 50 years ago, and it does today.

Needless to say, that many realtors will forego the commission on a transaction if the buyer defaults.

Reproduced below is the complete wording in Paragraph 2:

“2. COMMISSION: In consideration of the Listing Brokerage listing the Property, the Seller agrees to pay the Listing Brokerage a commission of……………………….% of the sale price of the Property or………………….
for any valid offer to purchase or lease the Property from any source whatsoever obtained during the Listing Period and on the terms and conditions set out in this Agreement OR such other terms and conditions as the Seller may accept.

Any deposit in respect of any agreement where the transaction has been completed shall first be applied to reduce the commission payable. Should such amounts paid to the Listing Brokerage from the deposit or by the Seller’s solicitor not be sufficient, the Seller shall be liable to pay to the Listing Brokerage on demand, any deficiency in commission and taxes owing on such commission. All amounts set out as commission are to be paid plus applicable federal Goods and Services Tax (GST) on such commission.”

The seller cannot simply default on the agreement, and get out of the agreement with the buyer and the listing agreement.

The mere fact that the listing agreement is silent on the buyer’s default, doesn’t mean that the commission is not payable. The commission is still payable. The triggering event was the “valid offer” not a “completed sale”. The “patch-up” clause was only needed for the seller’s abortive transaction.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

There are indeed some very significant issues related to the determination of whether a chattel has become so affixed to the realty that it is no longer a chattel but is an actual improvement to the land and has become a fixture.
Consider the following:

• These basic common law principles determine competing claims to ownership of the improvement

• whether building permits would need to be applied for and development charges paid in respect of Pearson airport

• for tax purposes, depreciation could be taken on equipment (Note, in Canada, the regulations under the Income Tax Act permit a tenant to claim capital cost allowance for alterations or improvements to leased property (see sections 1102(4) and 1102(5) of the Income Tax Regulations and Interpretation Bulletins IT 324 and IT464R)

• landlord’s right to distrain against a tenant or determine the priority of competing interests to the property under the Personal Property Security Act
• property financing, where the effectiveness of security given in the property may dependent upon the right of ownership

• A tenant’s right to sue the landlord for leasehold improvements under principles of unjust enrichment may be affected

• A tenant’s renewal rights in the improvements may be affected on termination of the lease. If the parties do not make renewal rights clear, the tenant could be left without rights in the new buildings which have become the property of the landlord

• Rights on expropriation may be affected, since on expropriation, an “owner” is generally entitled to be compensated for the market value of the land

• The entitlement to insurance proceeds may also be affected by who has title to the improvements where they are partially or completely destroyed

Obviously there are other issues as well, but the above matters are noteworthy and should be considered particularly in commercial leases.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

It seems unusual for a real estate agent to be selecting a title search date without speaking to the client’s lawyer, yet, they do all the time. Rarely, if ever, is there any pre-agreement consultation.

But, what if the title search period ends too soon? That can be bad news for the buyer. And, what if the title search period ends too late? That can be bad news for the seller.

The real problem is that the agents often select these dates without any real knowledge of the facts in the case. The decision is based on “usual times in most cases”.

Let’s have a look at the title search clause:

“8. TITLE SEARCH: Buyer shall be allowed until 6:00 p.m. on the …………………….. day of………………………………, 20……., (Requisition Date) to examine the title to the Property at Buyer’s own expense…”

It requires a purchaser’s solicitor to search the title, determine if there is anything that might constitute a title defect, and requisition the appropriate solution. For example, the purchaser would like to place a large swimming pool in the rear yard. The purchaser bought the property because it backed onto a ravine and offered plenty of privacy. He thought that the Muskoka-like backyard would be ideal for a pool. However, the title search revealed and 15 foot easement through the middle of the rear yard, effectively severing it into two parcels, neither of which were large enough to permit the installation of a swimming pool.

Let’s assume that the Requisition date is June 15th. That means that the purchaser’s solicitor must send over a requisition to the vendor’s solicitor by 6:00 pm on June 15th. It can be sent either by courier or by fax.
Likely, it will read something like the following:

8. REQUIRED: On or before closing a release of the property from the easement registered in favour of Melrose Construction Company Limited on 25 August 1980 as Instrument No. 342574 providing the company, its servants, agents, contractors and suppliers with ingress and egress over a temporary roadway a distance of approximately 20 feet from the edge of the ravine, being 15 feet in width.

This is a valid requisition. The question is whether or not it is delivered in time. That means by 6:00 pm. It does not mean 6:01 pm.

What are the consequences?

If the requisition is “in time”, the purchaser may elect to terminate the transaction; if the seller’s solicitor cannot rectify the problem.

If the requisition is “out of time”, the purchaser cannot terminate the transaction, and the seller’s solicitor does not need to rectify the problem.

Truly, if the purchaser wants a swimming pool, this is the wrong property.

Rectification of the Title Defect

The next question deals with the rectification of the title defect. Is this a solvable problem? What is the solution? In this case, there was an old access driveway which ran along the edge of the ravine during the construction period. Now, that driveway would run through the rear yards of all of the houses backing onto the ravine. It was needed for a few years, until all the houses were constructed, but it is not really needed now. Everyone has a lawn and landscaping in the rear.

However, the easement was created almost 30 years ago. Where is the constriction company now? Will it sign a release? The issue is just arising now because this is the first time someone wanted to install a swimming pool.

Now, we have a problem for the vendor and the vendor’s solicitor! Can this title defect be repaired in time? It seems simple enough, but what is the time limit? Under the terms of the agreement of purchase and sale, the time limit is the day of closing. That means the actual day of closing by closing time (usually 6:00 pm). It does not mean a day or two later. There is a provision in the agreement which states that “time is of the essence”. That means that all time limits will be strictly observed.

So, the important date here is the closing date, not the requisition date. Let’s assume, the closing date is June 21st. That might be enough time if you could find the signing officers of Melrose, but certainly not nearly enough time if you need a Court Order. In fact, the same is likely true, if the closing were June 30th. That’s just two weeks, again a very short period of time, if this problem is to be solved.

And, don’t discount the premium costs. A law firm is little to charge more, if everything has to be undertaken on short notice. That basically means that a $5,000 Court Order becomes a $15,000 Court Order, if it is required urgently.

A much more likely date, for a resolution would be mid July or even late July. This is fine provided the purchaser wants the property and is anxious to close the deal. What if the market has fallen and the purchaser believes he has overpaid by $30,000.00? In this case, he is less likely to consent. Perhaps, he would if a reduction in price were offered.

The question here, is whose mistake was this? The seller’s agent should have been aware of this issue. The agent should have determined this fact early. The agent is under a legal obligation to verify the facts. The agent would then know, that if a buyer wanted to install a pool that this easement would be a problem. Also, the seller’s lawyer would require a period of four to six weeks to solve it. Had the Requisition date been amended to May 30th or May 15th then there would have been sufficient time to solve the title problem. Without the amendment, the falling market will force the seller to reduce the price by $30,000.00.

That’s a $30,000.00 mistake, and could have been eliminated will a slight change in the requisition date.

All in all, that simple careless act cost the seller $30,000.00 and would be negligence on the part of the seller’s agent for failing to change it. Or, at the very least have cautioned the seller about this risks.

So, agent’s negligence arises in the improper setting of the title search dates:

1) the purchaser’s agent having a period that is too short, and
2) the vendor’s agent having a period that is too long.

The risks arise by following a standard rule of thumb:

• The search period does not end prior to the expiration of conditions
• The solicitors are not provide with copies of the agreements until expiration of conditions (or generally, simply too late)
• The search period runs too close to the closing date

Solve these issues simply:

• If you are acting for the purchaser, the search period can run right up to the day of closing
• Deliver the agreement immediately to the purchaser’s solicitor

• If you are acting for the vendor, make sure that the search period ends 30 to 45 days prior to the closing date, so there will be adequate time to resolve matters
• Deliver the agreement immediately to the vendor’s solicitor

• If you are acting for either party, consult with the client’s solicitor before the agreement, afterwards, is too late

Far too often, the agents will have a compromise date, very close to the closing date. This is not always suitable. The other issue that can arise is the conflict of interest situation when the agent acts for both parties. What requisition date is selected in those circumstances?

This is an area where there is a significant risk of professional negligence. Be careful!

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

Let’s assume that a mortgagee has instituted power of sale proceedings, what, if anything, can the mortgagee do to delay or prevent the sale?

In the interim period, the owner could continue to market the sale of the property. Rarely, if ever, will a mortgagee achieve as high a price as the owner might achieve. So, it’s quite worthwhile for the owner to try to sell it.

Just in case you’re not too familiar with the terms, the mortgagor is the owner, and the mortgagee is the lender.

Quick Action: If the mortgagee issued a Notice of Sale too quickly, the proceedings may be a nullity. This could arise if a demand for full payment were made and the limited in the demand had not expired. In such cases, the mortgagee would require a Court Order allowing the power of sale proceedings to take place.

Pay up Arrears and Costs: Most of the time, the mortgagee will require pay of the entire balance outstanding. Under the Act, the mortgagee can simply pay up the arrears and costs. If that takes place, then the mortgage is back in good standing. The enforcement proceedings are at an end.

Pay Arrears and Costs into Court: In some cases, the mortgagee will have instituted legal proceedings including an action for recovery of possession of the property. If that is the case, the mortgagee still has the right to pay up the arrears and costs as well as $100 for security, and the proceedings will be stayed. The accelerated principal need not be paid. If judgment has not been recovered, the action will be dismissed. If judgment has been recovered, the proceedings in the action will be stayed provided that “no sale or recovery of possession of the land or final foreclosure of the equity of redemption has taken place.”

Request for Information: A mortgagee is entitled to certain information from the mortgagee including the amount of the accelerated principal. Upon receipt of the request, the mortgagee is obligated to respond within 15 days, failing which no further proceedings may be taken. If the mortgagee fails to respond without a reasonable excuse or, if the response is incomplete or incorrect, any rights that the mortgagee may have to enforce the mortgage shall be suspended until the mortgagor has complied.

Requisition an Assignment: The mortgagor as well as all subsequent encumbrancers and excecution creditors are entitled to an assignment of the mortgage upon payment in full of the principal, interest and expenses. The right if favour of each party is separate and independent of one another. The mortgagee is obligated to reply and comply with such requests.

Technical Difficulties: The Notice must comply with the contract and the Act. If there are any technical issues they should be raised at once and rectified by the mortgagee. Courts will usually respond to such issues and deal with the matter equitably. The mortgagor might be awarded costs and additional time to pay.

Court Injunction: On fair and equitable grounds the mortgagor will be awarded an Injunction. This stops the proceedings. One condition is the mortgage payments must be kept up to date until final disposition. This tactic will not work if the mortgagor has no hope of refinancing.

Acceptance of Partial Payments: In many cases, the mortgagor will have made a partial payment. This frequently occurs without the active participation of either party. The mortgagee issues the Notice, and the mortgagor’s regular cheque is cashed. This means that the proceedings will have to start over again unless the mortgagee specifically indicates that bit will accept the cheque as a partial payment only without staying its proceedings.

Particulars of Costs: The Act requires a mortgagee to set out its costs being claimed in the power of sale proceedings. Failure to do so can result in delay, or the Court failing to award costs.

These are some of the steps that might be taken by a mortgagor to put the brakes on.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

The Province of Ontario has introduced new legislation the “Apology Act”.
When an injury occurs, the lawyers and insurance companies rush to the scene. The first thing they say to their clients is:

“don’t say anything”.

The question is how can this be helpful. Sometimes silence is the same as arrogance, and that simply encourages people to sue.

The new legislation permits an apology to be offered without it being considered as an admission of liability. Sometimes such a statement would nullify insurance coverage.

An “apology is defined as follows:

“apology” means an expression of sympathy or regret, a statement that a person is sorry or any other words or actions indicating contrition or commiseration, whether or not the words or actions admit fault or liability or imply an admission of fault or liability in connection with the matter to which the words or actions relate.

Effect of apology on liability

2. (1) An apology made by or on behalf of a person in connection with any matter,
(a) does not, in law, constitute an express or implied admission of fault or liability by the person in connection with that matter;

(b) does not, despite any wording to the contrary in any contract of insurance or indemnity and despite any other Act or law, void, impair or otherwise affect any insurance or indemnity coverage for any person in connection with that matter; and

(c) shall not be taken into account in any determination of fault or liability in connection with that matter.

Evidence of apology not admissible

(3) Despite any other Act or law, evidence of an apology made by or on behalf of a person in connection with any matter is not admissible in any civil proceeding, administrative proceeding or arbitration as evidence of the fault or liability of any person in connection with that matter.

Exception

(4) However, if a person makes an apology while testifying at a civil proceeding, including while testifying at an out of court examination in the context of the civil proceeding, at an administrative proceeding or at an arbitration, this section does not apply to the apology for the purposes of that proceeding or arbitration.

The purpose of the new law is to ensure that an apology does not constitute an admission of fault or liability by the person, except for the purposes of a proceeding under the Provincial Offences Act , and does not affect the insurance coverage available to any person in relation to that matter.

Also, an apology is not admissible in any civil proceeding, administrative proceeding or arbitration as evidence of the fault or liability of any person in relation to that matter.

However, if someone apologizes while testifying at a civil proceeding, administrative proceeding or arbitration, the benefit of this legislation does not apply for the purposes of that proceeding or arbitration.

The legislation will be helpful in certain limited circumstances. It will aid professionals who were negligent, particularly doctors. Often a patients family may be reluctant to sue if an apology were provided by a doctor or hospital. Silence is interpreted as arrogance, and incites the patient and their family.

It will also assist large corporations, gas companies with explosions, food companies distributing contaminated products and so on. Again, the arrogance factor is mitigated by offering an apology and an explanation.

When it comes to real estate agents, this legislation is not of much help. As a collective group, real estate agents are not generally viewed as arrogant. If there is a loss caused by an agent, then there is a reasonable likelihood of a lawsuit. Apologies really aren’t here nor there. The damage is financial and there is no personal injury.

Consequently, the Act will have little if any benefit to the real estate community.
If you’re going to be sued, you will be!

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

There is an opportunity under the Family Law Act to designate a home as a “matrimonial home”.

You might think that married couples would wish to avail themselves of this opportunity. However, it’s rarely used. In fact, no one bothers.

The reason is rather simple. If a property is not designated then third parties will presume that it is a matrimonial home. The consent of both parties will be required. The third party purchaser or mortgagee will not want to take a chance.

So, here are some of the rules that apply:

• A designation means that the property is a family residence
• There can be more than one property designated
• If both parties designate a property (or more than one) then all other properties that are not so designated will be deemed not to be matrimonial homes

Essentially, this means that the designation provisions are helpful to lawyers when a couple who are negotiating a separation agreement of divorce settlement need to dispose of one of their properties. When times are good, the designation is not particularly helpful since it only compromises matters later.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

An issue that appears to occur on a regular basis is the proper computation of the number of days to cash the purchaser’s deposit.

Let’s assume that the parties enter into an agreement of purchase and sale on Wednesday, and one day later, on Thursday the purchaser’s sales representative delivers the deposit cheque to the vendor’s brokerage. That means the listing brokerage has received the deposit and now has “5 business days” to cash it, by depositing it into the statutory trust account.

The key day is the day of receipt. The day of the agreement is not relevant.

So, when do you start counting? Thursday or Friday? Always, Friday! It is the first day, Thursday doesn’t count. The broker has five days. The cheque could be delivered late on Thursday and that would eat up one of the days. If it arrives early on Thursday, then, that’s a bonus.

The final day for placing the cheque in the account would be the following Thursday. That is the end of the five day period.

Saturday and Sunday don’t count because they are not business days. And, if there were a holiday on Monday, that day wouldn’t count either.

Here’s what the day computation looks like:

0……..Wednesday, the date of the agreement (A)

0……..Thursday, the date of receipt (R)

1……..Friday

x……..Saturday

x……..Sunday

2……..Monday

3……..Tuesday

4……..Wednesday

5……..Thursday

6……..Friday

The following Friday is day 6, so that is too late.

It is important to know that the date of the agreement (A) does not trigger an obligation on the part of the brokerage. It is only the receipt (R) of the cheque.

Why would the agreement be important as noted by RECO? It is only important to determine whether in fact the cheque is a deposit in accordance with the terms of the agreement.

Suppose a purchaser was required to pay two deposits one ($10,000) when the agreement came into force and a further deposit ($20,000) upon satisfaction of certain condition, 30 days later. The purchaser is leaving on holidays, and chooses to leave two cheques with the brokerage. The first cheque is to be deposited within 5 business days. The second cheque is to be deposited “within 5 business days” of it actually becoming a deposit within the meaning of the agreement of purchase and sale.

The rules with respect to the computation of time are as follows:

Except where a contrary intention appears,

(1) where there is a reference to a number of days between two events, they shall be counted by excluding the day on which the first event happens and including the day on which the second event happens, even if they are described as clear days or the words “at least” are used;

(2) where the time for doing an act expires on a holiday, the act may be done on the next day that is not a holiday.

So, while it is always advisable to do things as quickly as possible, if it’s Thursday and you have the cheque in your possession, you need to know that it must be deposited before midnight.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

With all the bad news in the media these days, I thought that I should say something positive. The average price of resale single family homes rose 5.14% in the last month.

Now, if I were promoting stocks, I would also say that represents an annualized rate of return of 61.17%. But, that would be rather silly. That would suppose that the same monthly rate of return would continue uninterrupted for a period of 12 months. That is not going to happen in the real estate market, and do you know something? It’s not going to happen in the stock market either!

So, let’s get back to reality and the Toronto and GTA real estate market.

GTA Resale Prices

$ 343.632.00…….January 2009

$ 361,305.00…….February 2009

You should also appreciate that the average price was $ 361,415.00 in December 2008, so the January decline was quite significant. Really, this simply means that the average price has returned to its 2008 year end level.

GTA Resale Volumes

4,120………..February, 2009

6,015……….. 2008
6,772……….. 2007
6,756……….. 2006
6,171……… 2005
6,060……….. 2004

The number of sales was very low in the month of February. Compared to 2008, there was a 31.5% decline in sales, and compared to the month of February in the previous 5 year period, there was a 35.16% decline in the number of sales.

So, what does this mean? It certainly means that prices are holding their own despite lowered volumes. In fact, with a decline of about one third in volume, you would expect to see a major loss in values, but, that hasn’t happened. If you were to analyze the data further, it would show upward pressure on the level of prices.

During the month of February, only a limited number of better houses were on the market. The same was true in January. If everyone expects a bad market, why would anyone who had a good house and had a choice, select January or February to sell?

The result at the moment would seem to suggest that there are some good bargains out there. Also, there is upward pressure on the prices. Those two forces, namely, an increased demand and rising prices should encourage many prospective buyers to return to the marketplace.

Besides, the mortgage rates are now the lowest they have been in a half century.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

Oftentimes, it is difficult to determine precisely the legal obligations owed by an agent.

You have to be aware that real estate brokers and sales representatives are regulated under the Real Estate and Business Brokers Act, 2002.

This Act sets out the primary obligations in a real estate transaction. Vendors and purchasers fall into two distinct categories: clients and customers. In effect, there is an “A” list and a “B” list. Mostly, prospects are likely to choose the client category, since that raises the legal obligations. Infrequently, they will choose customer status.

So, what duties are owed?

With this type of question you must first determine the status of the two parties, that is, the seller and the buyer. Are they clients or are they customers?

Then, you need to determine which registrants owe which particular set of legal obligations to the parties. Here, the question relates to the number of brokerages, brokers and sales representatives and their relationship to the other party to the transaction and their relationship to one another. That is a separate discussion.

In summary, the legal obligations may be summarized as follows:

For Clients:

• Fiduciary duties at common law
• Public duties under REBBA
• Statutory duties under REBBA for “clients”
• Legal obligations of a specific nature
• Legal obligations of general nature

For Customers:

• Public duties under REBBA
• Statutory duties under REBBA for “customers”
• Legal obligations of a specific nature
• Legal obligations of general nature

You will notice that there are two differences in the legal obligations owed to clients and customers:

1) Clients are owed fiduciary duties at common law and customers are not.

2) REBBA sets out different obligations with respect to clients and customers.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

There are special considerations that apply with respect to a matrimonial home.

In most cases, people believe that if a couple is married then the house is split 50/50. Others, usually older people think that the wife is entitled to the home. Both are wrong!

The Family Law Act came into force in Ontario in 1978. It changed the previous laws related to the division of property upon marriage breakdown quite drastically. It introduced a scheme of community property which had been popular in many of the States to the south of the border.

So, here are the relevant provisions from the Act:

Matrimonial home

18. (1) Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.

Ownership of shares

(2) The ownership of a share or shares, or of an interest in a share or shares, of a corporation entitling the owner to occupy a housing unit owned by the corporation shall be deemed to be an interest in the unit for the purposes of subsection (1).

Residence on farmland, etc.

(3) If property that includes a matrimonial home is normally used for a purpose other than residential, the matrimonial home is only the part of the property that may reasonably be regarded as necessary to the use and enjoyment of the residence.

Possession of matrimonial home

19. (1) Both spouses have an equal right to possession of a matrimonial home.

Idem

(2) When only one of the spouses has an interest in a matrimonial home, the other spouse’s right of possession,

(a) is personal as against the first spouse; and

(b) ends when they cease to be spouses, unless a separation agreement or court order provides otherwise. (R.S.O. 1990, c. F.3)

There are of course several principles that may be drawn from these rules:

• The property must be ordinarily occupied by both parties as a family residence
• A cottage in the woods, used by only one of the parties will not count
• Since it says “every property”, there can be more than one matrimonial home
• Condos and co-ops count, as do mobile homes
• If you are looking at a farm, it’s the farmhouse and not the farmlands
• Both spouses have an “equal right of possession”
• It doesn’t matter who actually owns the property
• This right is “personal” against the spouse
• It doesn’t affect third parties
• This right ends upon dissolution of the marriage

Now, there are a number of other provisions in the Family Law Act related to the matrimonial home and also related to the division of property, but the important matter is to realize that these are the rules concerning the matrimonial home. There is nothing in the Act that says that it has to be split 50/50, and there is nothing that says that it should go to the wife. Both beliefs are misunderstandings.

Prior to 1978, in many divorce decrees and settlements it was commonplace for the wife, who usually was the non-working spouse to receive the house. That principle which had become somewhat customary was abolished by the Family Law Act, and the 50/50 division of property scheme was introduced. But, the 50/50 arrangement had its limitations:

• It only applied to property acquired during the marriage
• Property acquired before was exempt
• Property acquired after the date of separation was exempt
• The parties could agree to another division of property (90/10 is fine) by way of a marriage contract
• The parties could not however exclude or restrict the “equal right of possession”

Equal Right of Possession

So, just exactly what does this mean? It simply means that regardless of who owns the property, if the property is a matrimonial home then both parties are entitled to possession and occupation. No one gets to be kicked out. No one gets turfed because they are not on the deed. Naturally, as you might assume either party could make application to Court for an Order of “exclusive possession”, but that is a Court decision.

Anyone who owns a matrimonial home may not sell or mortgage it unless the other spouse consents. That could be a problem because the purchaser or the mortgagee will take the property subject to the spouse’s interest. Obviously, modern conveyancing practice requires the spouse’s signature.

In fact, it is this rule that enforces the spouse’s rights. Otherwise, the party having title could just sell the property from underneath the other spouse.

The equal right of possession is no higher a right than the titled spouse’s right to the property. So, if the property was legitimately sold prior to the occupation by the non-titled spouse, or if it were subject to a prior mortgage then those rights prevail. Both the registered owner and the non-titled spouse have to give up the property.

In most case involving a mortgage both parties would have signed, so if the mortgage is not being paid, the mortgage can sell the property under power of sale.

One further qualified right should be mentioned. Upon the death of the registered owner, the surviving spouse may continue to occupy the property for a period of 60 days.

So, the only real special right concerning a matrimonial home is the “equal right of possession”, and this has absolutely nothing to do with the division of the property.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Coldwell Banker Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com