By Brian Madigan LL.B.

The Royal Bank of Canada just conducted its annual homeownership survey. Apparently, the majority of Canadians are saying it’s a good time to buy. So, that means that consumer confidence appears to be returning.

The Royal Bank expects that the lower prices that are available now will lure purchasers back to the market over the next two years.

A survey was conducted of 2,026 consumers, in the second week of January, found that 65% believe it is a buyers’ market in the second week of January and 27% indicated that they would purchase a home within two years. In terms of market timing:

“Additionally, almost half indicate it makes sense to buy a home now versus waiting until next year.”

“Young adults and renters are most likely to spark an upsurge in home sales…”,

“In the under-35 group, 48 per cent said they plan to buy, which is up sharply from 36 per cent last year. Renters also appear to be saying they are tired of paying someone else’s mortgage payment, with 38 per cent planning to become homeowners in the next two years.”

Karen Leggett, the Royal Bank’s head of home equity financing, said low mortgage rates “and favourable housing prices are influencing home purchase intentions this year and may be the reason why more Canadians are poised to purchase over the next two years.”

Ms. Leggett said the poll, conducted for the Royal Bank by Ipsos Reid, found that the vast majority of Canadians believe that the purchase of a home is a good investment. “The current economic environment does not appear to have dampened Canadians’ overall confidence in the housing market,”

These comments are indicative of the mood among consumers. They recognize that this is a reasonable time to buy. Also, there is pressure at the lower end of the moment. That is where the market needs to begin.

The Bank of Canada prime rate was lowered on 3 March 2009 to one-half of one percent. Now, that’s a low rate! The only problem is that you have to be a Canadian Chartered Bank in order to qualify. But, that is the base and all other rates are built on that. Variable rate mortgages are often at rates under 3% or 4%. Some advertised rates are in the 2% range. This obviously represents an excellent opportunity at this time.

If you are a buyer, then you should be looking to enter the market soon!

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

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By Brian Madigan LL.B.

Question: I am concerned about my mother. Ten years ago, she married a man who now seems to be in ill health. He has operated his own business for over thirty years. Their only real asset is the house. He refuses to make a Will and claims that my mother is protected because the house is in joint tenancy. Is this true?

Answer: No, joint tenancy is not really the answer and it offers no protection for your mother concerning his interest in the house. This arrangement is sometimes referred to as a “poor man’s will”.

When property is held in joint tenancy between a husband and wife, the property is immediately vested in the wife at the time of death. However, this just means the husband’s half; she already owns her own half.

The only step necessary to effect a legal transfer, is to register a death certificate issued under the Vital Statistics Act (this will take 30 days) or Funeral Director’s certificate (this should be available immediately). Upon registration, your mother will be able to convey the entire property (by her signature alone) to a third party.

Is there any reason why your mother might not get her husband’s share of the house? Yes, there are many reasons, however the most important might be that is his only asset, and all of his debts have to be paid out of it.

Essentially, there are four types of debts that have to be considered:

1) executions (these are past judgments filed against the husband),

2) outstanding taxes,

3) obligations arising under the Family Law Act and the Succession Law Reform Act, and

4) outstanding but unresolved statutory, contractual and tort liabilities.

Outstanding taxes are a real issue and could be quite significant. Since the husband was self-employed, there might have been a sizable tax deferral amounting perhaps to 2 ½ years income tax. Now, that has to be paid! Was he collecting GST or PST? It all has to be paid when he dies! Any deferred capital gains? Well, it can’t be deferred any longer. Was this property his principal residence for tax purposes? If not, it’s taxable.

What about the Family Law Act? Fortunately, it looks like your mother as surviving spouse is covered. But, that’s only part of the story. What if there were a first wife, two children of the first marriage, an out-of-wedlock child, a disabled brother, and an elderly mother. The bad news is that they can all claim under the Family Law Act. Their claims will be quantified (that is converted into money) and treated as if they were debts against the husband’s one half of the house prior to death.

To make matters worse, this self- employed gentleman operated a business as a sole proprietor. Now, all debts of the business also effect his share of the house.

Let’s assume that he had the good sense to incorporate his business. Still, he is personally liable for 6 month’s worth of wages to his employees as a Director of his company. And, your mother might be liable for this same amount too, if she too was a Director.

There are legal procedures available to enforce these liabilities as against the single asset of the estate being his one half share of the house held in joint tenancy. After satisfaction of all the debts, the surviving spouse is entitled to the remainder of the husband’s equity in his share of the house.

This gentleman should see a lawyer in order to effect a proper estate plan. His belief although well-intentioned is not sufficient.

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

By Brian MadiganLL.B.

While there are some advantages to joint tenancy, there are also some problems. The primary advantage is the ease of administration of a deceased’s estate. It is simple and uncomplicated, nothing more than the registration of a death certificate is required to effect the transfer.

However, with joint tenancy there are two presumptions that need to be considered:

1) the presumption of a resulting trust, and
2) the presumption of advancement.

Resulting Trust

If one party transfers property to another gratuitously, then the law will assume that the transfer was intended as a trust and not as a gift. The person holding title would now do so, for the benefit of the transferor as Trustee and not for themselves on their own account. So, the transfer was for “legal title” only and not “beneficial title”. This is only a presumption. It can be satisfied if the contrary intention can be proved. The obligation would be upon the recipient to satisfy a Court that there was truly a “gift”.

Advancement

There is another common law doctrine that needs to be considered. In fact, it conflicts with the resulting trust doctrine, or perhaps it could be considered as an amendment or qualification. It is the doctrine of the “presumption of advancement”. It was developed several hundred years ago to support gifts made by fathers to their children. It was presumed that the father would have a legal obligation to support the child and would therefore have intended the transfer as an outright gift. So, the principle of advancement could be used to defeat the principle of the resulting trust in such circumstances.

As time went by this doctrine was extended to include wives and others who were dependent upon the grantor.

Modern legal jurisdictions all recognize that this doctrine is antiquated. In some cases, it has been abolished, reduced or modified by the Courts or by legislators.

The problem is that in Ontario, it’s still here.

So, let’s look at a rather common situation. An elderly parent holds title to the family house. The children have all grown up and moved out. Eventually, it seems reasonable to undertake some sort of estate planning. This usually involves a Will, Powers of Attorney, beneficiary nominations, and possibly the transfer of the family home. So, someone comes up with the bright idea that the title should be conveyed to the parent and one of the children in “joint tenancy”. This will eliminate probate fees on the value of the house and might eliminate the need for probate altogether.

Let’s assume that Joe (the father) conveys the title to Maureen, his daughter in joint tenancy. But, Joe has two other children, Robert who is a workaholic and Jennifer who lives in the United States. There is no question that Maureen is the one who is called upon to look after dad’s daily needs, groceries, housekeeping, trips to the doctors etc.

This can’t go on forever, and it doesn’t. Joe dies. So, who gets the property?

Maureen claims it’s hers. It was in joint tenancy. Robert and Jennifer say it should be split three ways. They claim the doctrine of resulting trust should apply. Maureen is presumed to be a Trustee and dad the beneficiary. Maureen counters with the doctrine of the presumption of advancement. She is a child of Joe, and he must have intended to provide her with an additional benefit. After all, she was “the one” caring for him. And, so it goes. In fact, basically all the way to the Supreme Court of Canada.

All these issues are presently before the highest Court in Canada for consideration and resolution. The Court has reserved judgment in Pecore vs. Pecore, and Brooks, Estate Trustee vs. Saylor.

In the meantime, while we are awaiting a decision, there is some guidance from the Ontario Court of Appeal. That Court said that you have to look at the whole of the evidence. Look at the bank accounts, look at other relevant factors and make a determination about Joe’s true intention as demonstrated by his behaviour. Only, if you can’t figure it out, apply the two legal doctrines. That seems to make sense. But, let’s wait to see what the Supreme Court of Canada says before we draw any unnecessary conclusions.

One word of advice while we’re waiting: document dad’s intentions!

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

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By Brian Madigan LL.B.

Everyone has a Will. The problem is that most people don’t know where it is. They have never seen it, they never signed it and they don’t know what it says.

The Ontario Government has written out a generic Will for everyone. It’s set out in the Succession Law Reform Act. So for those of you who have never taken the time to sign one of your own, let’s have a look at what it says when it comes to dividing up your property:

1) the first $ 200,000 to my spouse,

2) the balance, ALL to my spouse, (except if I have a child),

3) one child, then ½ to my child and ½ to my spouse, (except if I have more than one child)

4) 2/3 to my children to be shared equally, and 1/3 to my spouse,

5) all to my parents (if I have no spouse and no children),

6) all to my brothers and sisters (if no one in 5),

7) all to my nieces and nephews (if no one in 6),

all to my next of kin (if no one in 7), and

9) all my estate to the Province of Ontario (if no one in 8).

There are a couple of additional rules that you need to know. Children may represent their deceased parents as long as the parent was a child, brother or sister of the person who died intestate. Half blood is the same as whole blood. Adopted children are included, as are unknown and undetermined relatives (as long as the connection can be proved by DNA). There is no such thing as “in-laws” or “godchildren”. These people are just strangers, and if there is an intention to include them, they must be mentioned in a Will.

You will also appreciate that it may be difficult to determine just precisely who is included in the term “next-of-kin”.

All in all, the generic Will seems to be reasonably fair. The only real problem is that nobody really ever likes it completely. Everyone wants to change it, even just a little bit.

Also, there is nothing in there about any kind of tax planning or particular financial management opportunities. And, there is nothing about the guardianship of your children. So, if you have children, don’t just leave them up for grabs, sit down and write out your intentions when it comes to guardianship.

After children, the next important issue might be your house. It’s not necessarily going to your spouse! Who gets it? Is that fine with you? What about your parents’ home? As time marches on, preparing your own Will might be something to think about.

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

By Brian Madigan LL.B.

I thought that I would give you 15 good reasons to buy title insurance. Actually, there are more than fifteen, but if these fifteen are not enough, then you’re just not going to be convinced.

Until 1997, the common practice in Ontario was to secure an opinion on title from a solicitor. If something went wrong, then you simply sued the lawyer. Now, that’s easier said than done! Title insurance has now come to the rescue. Certain identified risks are covered under a policy of insurance. The coverage is much broader than the matters set out in an opinion letter from a solicitor.

Here are some of the reasons why “insurance” may be better than an “opinion”:

1) it covers matters not included in a title opinion,

2) you don’t have to sue your lawyer if something goes wrong,

3) it provides funds to solve the problem,

4) the insurer provides creative solutions to rectify the issues,

5) it pays your legal fees,

6) it provides compensation to you, if your problem cannot be resolved,

7) it covers the claim and legal fees if someone sues you,

it’s inexpensive, and there is a one-time premium,

9) you may save on the usual disbursements in a transaction because some searches are not completed,

10) you may save the cost of a new survey in most cases,

11) it protects you against survey errors, in both old an new surveys,

12) it protects against errors in information provided by municipalities and utilities,

13) you may negotiate to obtain additional coverage for other issues including environmental hazards, native land claims and risks you have assumed by contract,

14) it protects you against certain construction liens,

15) it protects you against fraud and forgery,

16) it continues to provide coverage for problems arising after the closing date,

17) it protects your mortgagee so that the deal will be closed and the mortgage funds advanced,

And, I’m sure you really didn’t want to sue your lawyer!

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