By Brian Madigan LL.B.

(Ontario Real Estate Source)

Where’s the Toronto Market Going?

If past years are any indication of the future, then we may be able to make some reasonable predictions.

This year has been quite predictable. The market peaked 15 May 2010, and has been in decline ever since.

July and August are likely to show poorer numbers. This is the summer doldrums. It happens every year, and this year, it has nothing to do with the HST.

In September, the market should start to pick up and turn upwards.

The market will continue to rise through to the end of October. The final numbers in October are likely to match the earlier highs that we saw in May. So, that means that there is a little more room for the market to grow.

The market is likely to settle down somewhat in November, and decline a bit in December. The reason I say this, is that it happens most years.

Now, I do have to qualify that by saying “all things being equal”. Actually, I don’t have any idea what that really means, but I still need some kind of a qualifier here.

Let’s assume that there is no major market meltdown. The worldwide stock exchanges don’t lose half their values. Let’s also assume that banks generally don’t fail. And, insurance companies too! As well, as the major manufacturers.

Assuming those things, and that we have a normal market, then the average price of a single family home should rise to $446,593 by the end of October. While it will lose some ground, that number should reappear once again in February 2011.

The year started out at $411,093. A $446,593 figure should it hold would provide $35,500 in increased value. That would be an 8.64% return over the year. The end of the year, or 31st of December results could easily be 1% off that figure for about a 7.5% annual return. That’s better than most years.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

(Ontario Real Estate Source)

The HST is now in effect. Will it have a significant impact upon the real estate market?

Probably, not!

The market is on a downward slope right at the moment. This is due to the increased interest rates, increased inventory and the predictable summer slide in prices and number of transactions.

The Ontario Real Estate Association recently indicated that the HST will add about $1,500.00 to the cost of a resale home. That accounts for the additional tax on legal fees, real estate commission, home inspection fees, moving costs, home appraisals and home energy audits.

The recent Toronto Land Transfer Tax added much more than that, and it actually had little impact.

The average cost of a resale home in the greater Toronto Area was $435,034.00 as of 30 June 2010. A $1,500.00 increase in tax added to the transaction is negligible. It adds 0.34% to the deal or about one third of one percent. That’s just not enough to have a measurable impact on volumes, transactions, sales, inventories and prices.

The market itself could move 4 or 5% in one single month for other reasons. Over long periods of time real estate shows about a 5 to 6% annual return.

However, I do appreciate that no one likes new taxes, but it’s here now, and the current downward trend has nothing to do with the HST.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

(Ontario Real Estate Source)

Just what is it and where does it come from? In English common law, the concept seems to have lost its meaning. Not too many people seem to know what it means, just legal scholars and historians have an interest in the subject.

Today, there are really two different definitions of the term, and it depends upon whether you are discussing public or private property.

In respect to public property, the concept has ancient origins actually predating the common law and the feudal system in the Middle Ages.

Property which was occupied and held by force against others was held in “allodium”. Basically, that means “without any restriction, of any kind or nature, whatsoever”. People would come across unoccupied, vacant land and would simply make it theirs. There was no one around, no one to say that they could have it, no one to grant permission, no one to sign a deed. In this regard, “might was right”. If you had the property, and could defend it against others, then it was yours in “allodium”. Since there was no place to register your title, it was simply acknowledged that you held allodial title. That simply meant that you had no deed.

To a certain extent, the concept of “allodial title” is just a legal fiction. It doesn’t really exist in the legal system. It is simply a method of comparing it to other properties and helping to understand the differences between it and “fee simple”.

So, let’s have a quick look at the feudal system from medieval times. The King owned all the land. He leased it out to his tenants, and they sub-let it to others and so on, in a grand pyramid scheme. You definitely would want to be near the top.

In 1066, William the Conqueror, from France succeeded in the Battle of Hastings. He made significant changes to the feudal system, and by 1215, the first (of a series) of Magna Chartas was passed. This restricted the role of the King and is considered to be the first constitution of England. Within the next century, substantial changes were made to the property system. Tenure gave way to estates. So, rather than “leasing” land from the King, people who occupied land were considered to hold some ownership rights (estates) in the land. The estates could be restricted or limited in some way. It could be present or future. It could be temporary (a leasehold estate) or it could be full ownership with all the “bells and whistles” that go with that. This kind of estate was referred to as “fee simple”. This was the highest estate that anyone could have. It was subject to certain rights in favour of the King, but other than that, it was completely unrestricted.

Basically, there were four rights retained by the King. A property would be: 1) subject to the right of the King to require servitude from the property, 2) subject to the right of the King to repossess the property, 3) subject to the right of the King to inherit the property, and 4) subject to the right of the King regulate the property. These are now sometimes referred to as taxation, expropriation, escheat and eminent domain.

So, in the English common law system, an estate in fee simple is as good as it gets. But, you had to get this estate from somewhere! In fact, you got it originally from the King. There was a Deed or a grant. There was an actual piece of paper that was “evidence” of your ownership. The only way that could happen is if you had a legal system and everyone agreed to go along with the rules.

Now, let’s go back to our concept of allodial title. First, there is no one around. The place is vacant. You could probably go an entire lifetime without ever seeing anyone other than from your own family or clan. Land is not scarce, people are. There is no legal system. There is no registry office. No one keeps records of anything. So, to have allodial title is simply to own your land by occupancy.

Actually, the only way that you can hold title this way is if you are a country. There are no deeds. Other countries simply accept that they will not claim your land, since you are likely to defend it.

There is one other concept of allodial title, but it applies to private ownership. To a certain extent, it is just an historical concept. Land that was “unowned” perhaps in the wild west prior to settlement, or perhaps native or aboriginal lands that were occupied prior to the European immigration in the 16th century.

There are just a few states and none of the provinces that continue to maintain a concept of allodial title. Most have abolished the concept. At best, it was really pseudo-allodial title. It was possible to receive a grant in favour of a person specifying allodial title. Recently, the State of Nevada will permit such a grant in limited circumstances provided the individual pays up their property taxes in advance. But the concept of a grant is foreign to the concept of allodial ownership.

Allodial title is completely free and clear of all obligations, liens, encumbrances, taxes, mortgages and the like. However, where it is still recognized either historically, or presently it is still a rather pseudo-allodial title since the four basic restrictions that apply to fee simple ownership, apply to it as well: taxation, expropriation, escheat and eminent domain.

Any restrictions whatsoever, any recognition of a superior, granting institution would be fully alien to such a concept. Allodium simply means occupation of lands without challenge. This must imply to a certain extent: wilderness lands. So, that means the moon and the planets are up for grabs. Just get there first!

I thought that I might provide you with an excerpt from an apologist who authored a justification for reprisals against a King who wanted to exert his ownership over lands which the author felt were held “in allodium”. The author is much more familiar with the concept of allodial title than I, and offers something of an insight into the rights of property ownership as we understand them today.

“That we shall at this time also take notice of an error in the nature of our land holdings, which crept in at a very early period of our settlement.

The introduction of the feudal tenures into the kingdom of England, though ancient, is well enough understood to set this matter in a proper light.

In the earlier ages of the Saxon settlement feudal holdings were certainly altogether unknown; and very few, if any, had been introduced at the time of the Norman conquest.

Our Saxon ancestors held their lands, as they did their personal property, in absolute dominion, disencumbered with any superior, answering nearly to the nature of those possessions, which the feudalists term allodial.

William, the Norman, first introduced that system generally. The lands, which had belonged to those who fell in the battle of Hastings, and in the subsequent insurrections of his reign, formed a considerable proportion of the lands of the whole kingdom. These he granted out, subject to feudal duties, as did he also those of a great number of his new subjects, who, by persuasions or threats, were induced to surrender them for that purpose.

But, still much was left in the hands of his Saxon subjects; held of no superior, and not subject to feudal conditions. These, therefore, by express laws, enacted to render uniform the system of military defense, were made liable to the same military duties as if they had been feuds; and the Norman lawyers soon found means to saddle them also with all the other feudal burthens.

But still they had not been surrendered to the king, they were not derived from his grant, and therefore they were not holden of him. A general principle, indeed, was introduced, that “all lands in England were held either mediately or immediately of the crown,” but this was borrowed from those holdings, which were truly feudal, and only applied to others for the purposes of illustration.

Feudal holdings were therefore but exceptions out of the Saxon laws of possession, under which all lands were held in absolute right. These, therefore, still form the basis, or groundwork, of the common law, to prevail wheresoever the exceptions have not taken place.

America was not conquered by William the Norman, nor its lands surrendered to him, or any of his successors. Possessions there are undoubtedly of the allodial nature.
Our ancestors, however, who migrated hither, were farmers, not lawyers. The fictitious principle that all lands belong originally to the king, they were early persuaded to believe real; and accordingly took grants of their own lands from the crown.

And while the crown continued to grant for small sums, and on reasonable rents; there was no inducement to arrest the error, and lay it open to public view.

But his majesty has lately taken on him to advance the terms of purchase, and of holding to the double of what they were; by which means the acquisition of lands being rendered difficult, the population of our country is likely to be checked.

It is time, therefore, for us to lay this matter before his majesty, and to declare that he has no right to grant lands of himself. From the nature and purpose of civil institutions, all the lands within the limits which any particular society has circumscribed around itself are assumed by that society, and subject to their allotment only.

This may be done by themselves, assembled collectively, or by their legislature, to whom they may have delegated sovereign authority; and if they are alloted in neither of these ways, each individual of the society may appropriate to himself such lands as he finds vacant, and occupancy will give him title.

That in order to enforce the arbitrary measures before complained of, his majesty has from time to time sent among us large bodies of armed forces, not made up of the people here, nor raised by the authority of our laws: Did his majesty possess such a right as this, it might swallow up all our other rights whenever he should think proper.

But his majesty has no right to land a single armed man on our shores, and those whom he sends here are liable to our laws made for the suppression and punishment of riots, routs, and unlawful assemblies; or are hostile bodies, invading us in defiance of law.

When the course of the late war it became expedient that a body of Hanoverian troops should be brought over for the defense of Great Britain, his majesty’s grandfather, our late sovereign, did not pretend to introduce them under any authority he possessed.

Such a measure would have given just alarm to his subjects in Great Britain, whose liberties would not be safe if armed men of another country, and of another spirit, might be brought into the realm at any time without the consent of their legislature.

He therefore applied to parliament, who passed an act for that purpose, limiting the number to be brought in and the time they were to continue. In like manner is his majesty restrained in every part of the empire. He possesses, indeed, the executive power of the laws in every state; but they are the laws of the particular state, which he is to administer within that state, and not those of any one within the limits of another.

Every state must judge for itself the number of armed men, which they may safely trust among them, of whom they are to consist, and under what restrictions they shall be laid.

To render these proceedings still more criminal against our laws, instead of subjecting the military to the civil powers, his majesty has expressly made the civil subordinate to the military. But can his majesty thus put down all law under his feet? Can he erect a power superior to that which erected himself? He has done it indeed by force; but let him remember that force cannot give right.”

The comments noted above were offered by Thomas Jefferson as a justification for the Boston Tea Party and the American Revolution.

But, you have to admit that he certainly did understand and appreciate the concept of allodial title.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

(Ontario Real Estate Source)

A problem frequently arises in real estate transactions when people say they witness signatures, but they don’t.

Here’s a quick scenario. Bob wants to sell his house, so he hires Jack, a realtor. An offer is faxed into Jack’s office. Bob is on vacation out of the country. Jack e-mails Bob, and Bob gives him the fax number where he is staying. Jack faxes it over, and discusses the offer with Bob by phone. Then, Bob faxes it back to Jack’s office.

It’s not witnessed! So, Jack decides to witness the document, and signs his own name just above the line where it says “witness”.

What’s wrong with this scenario?

Jack said he witnessed the document but he didn’t. That’s the problem!

Now, you can appreciate that Jack’s involvement was helpful. The correct and proper procedure would be to properly document Jack’s involvement.

So, what should Jack have done?

Jack should “authenticate” the document. He really can’t witness it, because he wasn’t there. He should strike out the word “witnessed” and insert ‘authenticated not witnessed”.

What’s the difference? A witness needs to be personally present, and see the person sign the document in front of them. They become a compellable witness in any legal proceedings. They would be expected to comment on several aspects concerning the signing of the document. They should be able to say that the person appeared to have capacity to sign. They knew they were signing a legal document. The person did not appear to be under the influence of alcohol, drugs, medication or fatigue. In all respects, they appeared to be knowledgeable and execute the document without duress or coercion from any other party.

Authentication is somewhat different. The person was not personally present, but can state with a reasonable degree of certainty that the signature is that of a specific individual. They know the signature. They have the signature on file. The signature compares favourably with the signature on file, or they “recognize” the signature. Banks will undertake this task regularly.

You will appreciate that just because the signature looks similar that there is no real guarantee. It’s just a best guess, but it’s a best guess by someone who has certain business records on file, or a certain professional (or otherwise competent) recognition of the signature.

There is obviously one further step. The signature could be “guaranteed”. This means that the authenticating party is absolutely certain, and offers a contractual invitation to a third party to rely upon the truth of the statement.

In the case of the Bank manager: “Authenticate” could lead to a tort liability, a “Guarantee” could lead to a contractual liability.

In Jack’s circumstances, he could raise his involvement and “certification” to the next level. He could state “authenticated and guaranteed”. That would be as close to actually witnessing as possible. But, you will appreciate that it still falls slightly short. He wasn’t physically present, so he truly cannot say anything about intoxification or other factors that might have been an impediment to Bob’s signing of the document.

In real life, all too often someone in Jack’s position will simply sign above the witness line. That’s risky!

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

(Ontario Real Estate Source)

The Successors and Assigns clause is a traditional provision that has been included in agreements for hundreds of years.

Let’s have a look at the standard form agreement of purchase and sale and see what it says in the “Successors and Assigns” clause:

“28. SUCCESSORS AND ASSIGNS: The heirs, executors, administrators, successors and assigns of the undersigned are bound by the terms herein.”

Let’s have a look at each line, thought, or partial sentence by a letter of the alphabet for later review:

28. SUCCESSORS AND ASSIGNS:

A) The heirs,

B) executors,

C) administrators,

D) successors and

E) assigns

F) of the undersigned

G) are bound by the terms herein.

So, now let’s have a look at each of the sentences or partial sentences and see what we come up with.

A) The heirs,

This is a provision designed to make some third parties equally responsible for the performance of the agreement as the parties who have actually signed the agreement, namely the seller and the buyer.

You will appreciate that no one can truly “bind” their heirs to an agreement. All that can really be done here is to ensure that the heirs, should they elect to affirm the contract, are bound by its terms.

B) executors,

The concept of executors is a little different. A person may truly “bind” their own executors to an agreement. There is no option of affirmation here. In this case, the party is deceased. An executor takes authority immediately upon death from the powers provided to them under the terms of the Will.

In Ontario, the correct term is “Estate Trustee”. For some reason, that expression was not used in this agreement. The term executors is a well known, and well accepted concept that has been used for hundreds of years in common law jurisdictions.

An application for “probate”, that is, a court order which approves of the Will and declares this document “probated” to be in fact, the last Will and testament of the deceased cannot be made until 7 days after the date of death.

In Ontario, such an appointment is now, the appointment of an “Estate Trustee with a Will”

C) administrators,

Not everyone who dies has made a Will. The long term common law expression for someone who looks after an estate of a deceased person who dies without a Will, is an administrator. Like the term executor, “administrator” is well known and well accepted.

In Ontario, such a person would make application to the Court and would be appointed as the “Estate Trustee without a Will”. The term “administrator is not used.

When it comes to administrators, there are appointments made that do not require the person to be deceased. Appointments can be made in respect to those who are bankrupt, or insolvent. Under other statutes, appointments can be made in respect to those who are incompetent.

This particular paragraph is intended to be generic and apply to many different jurisdictions and not just Ontario. It would be the laws related to the residency of the individual that would generally apply.

D) successors and

Successors simply means “those who follow”. The intention here is to bring into the paragraph, all those who might follow suit. So, those acting under a power of attorney would be covered. Those acting who in some way have acquired the interest in the agreement by operation law are intended to be covered.

Let’s consider the case of two joint owners of a property who enter into an agreement to convey to a purchaser. One owner dies. The second owner acquires the deceased party’s interest by right of survivorship. This does not entitle the survivor to void the contract. On the contrary, the surviving joint tenant is obligated to complete the transaction.

Not all parties are natural persons. Many are corporations or partnership. The successor corporation or partnership is still bound by the terms of the agreement.

E) assigns

Assigns suggests a contractual assignment in favour of a third party. If there is such an assignment then the third party is bound. There may be a provision in the agreement which:

• Permits assignment
• Permits assignment with approval, or
• Prevents assignment

These other terms need to be applied as well.

F) of the undersigned

This covers the sellers, the buyers, and any third party guarantors, or third party covenantors like spouses consenting pursuant to the Family Law Act.

G) are bound by the terms herein.

This is the consequence. They are bound in the same way to the contract, just as if they had signed it themselves.

Comment

The “Successors and Assigns” clause is designed to leave the risk of death, incapacity, insolvency and bankruptcy with the party who suffered such event, rather than shifting such a risk to the other party to the agreement.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

(Ontario Real Estate Source)

The “Family Law Act” clause has become part of the agreement of purchase and sale since the Family Law Act first came into force in 1978.

Let’s have a look at the standard form agreement of purchase and sale and see what it says in the “Family Law Act” clause:

”22. FAMILY LAW ACT: Seller warrants that spousal consent is not necessary to this transaction under the provisions of the Family Law Act, R.S.O.1990 unless Seller’s spouse has executed the consent hereinafter provided.”

Let’s have a look at each line, thought, or partial sentence by a letter of the alphabet for later review:

22. FAMILY LAW ACT:

A) Seller warrants that spousal consent

B) is not necessary

C) to this transaction under the provisions of the Family Law Act, R.S.O.1990

D) unless Seller’s spouse has executed the consent

E) hereinafter provided.

The Family Law Act deals with the issue of consent in respect to the disposition of a matrimonial home. Basically, each spouse has an equal right of possession to the matrimonial home. Title ownership is not relevant. The Act then requires the execution of a spousal consent from the non-titled spouse in order to release the right of possession. Naturally, a titled spouse would sign the document as a seller.

So, now let’s have a look at each of the sentences or partial sentences and see what we come up with.

A) Seller warrants that spousal consent

The provision starts out as a warranty by the seller. The warranty is confined to the spousal consent.

B) is not necessary

The actual warranty by the seller is simply that the “consent” is not necessary.

C) to this transaction under the provisions of the Family Law Act, R.S.O.1990

This is the Act which sets out the requirement for the consent.

D) unless Seller’s spouse has executed the consent

This part of the sentence is really saying that if the spouse signed the agreement, then the spousal consent was necessary; and if the spouse did not sign the agreement, then the spousal consent was unnecessary.

E) hereinafter provided.

There is a specific “Spousal Consent” paragraph contained in the agreement, following the seller’s execution of the agreement.

Comment

This provision is a warranty. However, the entire matter of spousal consent is somewhat problematic, and we will consider some of the relevant issues under that particular clause.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

(Ontario Real Estate Source)

The Property Assessment clause is a new provision in the agreement. Generally, it appears to be well-meaning.

Let’s have a look at the standard form agreement of purchase and sale and see what it says in the “Property Assessment” clause:

“19. PROPERTY ASSESSMENT: The Buyer and Seller hereby acknowledge that the Province of Ontario has implemented current value assessment and properties may be re-assessed on an annual basis. The Buyer and Seller agree that no claim will be made against the Buyer or Seller, or any Brokerage or Salesperson, for any changes in property tax as a result of a re-assessment of the property, save and except any property taxes that accrued prior to the completion of this transaction.”

Let’s have a look at each line, thought, or partial sentence by a letter of the alphabet for later review:

19. PROPERTY ASSESSMENT:

A) The Buyer and Seller hereby acknowledge that

B) the Province of Ontario has implemented current value assessment and

C) properties may be re-assessed on an annual basis.

D) The Buyer and Seller agree that no claim will be made

E) against the Buyer or Seller,

F) or any Brokerage or Salesperson,

G) for any changes in property tax

H) as a result of a re-assessment of the property,

I) save and except any property taxes

J) that accrued prior to the completion of this transaction.

So, now let’s have a look at each of the sentences or partial sentences and see what we come up with.

A) The Buyer and Seller hereby acknowledge that

This is simply the commencement of the statement.

B) the Province of Ontario has implemented current value assessment and

The Province took over the valuation of properties from the municipalities. Formerly, the assessed value was difficult to understand and compare to other properties. This made the system cumbersome.

Market value assessment is now the new standard. The Municipal Assessment Corporation (MPAC) will conduct an evaluation of every property in Ontario. An attempt is made to have the values reflect current market conditions. Consequently, the appraised value as determined by MPAC will be the “assessed value” of the property, unless challenged and placed under appeal. The assessed value will remain in place for the calendar year. Early in each new year MPAC will send to each property owner a notice of the assessed value of the property. These values are subject to change either up or down. That decision is made upon the basis of comparative statistics from market sales.

A type of house might increase in value, ie. bungalows compared to two storey structures. A neighbourhood might increase in value due to consumer demand. Both those items would be taken into consideration by MPAC in establishing a value for the property.

Accordingly, it is “market value” that becomes the “assessed value”. And, it is the “assessed value” that is used to calculate the municipal taxes. That is a function of the mill rate established by the municipality times the assessed value.

C) properties may be re-assessed on an annual basis.

Not only may properties be reassessed, it is extremely likely that they will be re-assessed. There is a small increase in values each year, and this is reflected in the MPAC annual assessment.

D) The Buyer and Seller agree that no claim will be made

Both parties are said to be in agreement that there will be no claims.

E) against the Buyer or Seller,

It seems reasonable to specify the other party to the transaction.

F) or any Brokerage or Salesperson,

Now, there are three categories of registrants under the Real Estate and Business Brokers Act, 2002, brokerages, brokers and salespersons. So, this provision seems odd.

First, it relieves the registrants of responsibility, when they are not parties to the agreement.

Second, it omits “brokers”. That is probably an oversight, but the Courts are not particularly likely to bend and extend this provision in favour of brokers.

The true agent at law is the Brokerage. The agent’s agent is either a broker or sales representative. It is possible however that a broker may still fall within the definition of salesperson.

The Act states “salesperson” means an individual who has the prescribed qualifications to be registered as a salesperson under this Act and who is employed by a brokerage to trade in real estate. In fact a broker does have all the necessary qualifications (and more) to be registered as a salesperson, and is in fact employed and trading in real estate.

G) for any changes in property tax

There may be changes in property tax. In fact, every year, there should be something of an increase.

H) as a result of a re-assessment of the property,

The re-assessment can result from reconsideration or appeals of the initial assessment or a re-evaluation by MPAC.

Note that it is only the re-assessment which is the subject matter of this paragraph.

I) save and except any property taxes

This is the stated and agreed upon exception to the rule.

J) that accrued prior to the completion of this transaction.

This particular matter would then be known. So, let’s consider a situation where the owner believes that his taxes are too high. He appeals his assessment. In the meantime, he sells his house, or he lists his house. The matter proceeds through the normal channels and he may institute a further appeal.

All of these matters fall within the exception. He can be sued. If he ultimately wins, then there is no particular reason why the buyer might sue, but if he loses, then, he’s at risk.

This brings us back to the reference “not to sue the agent”. Maybe that would be a good idea! What did the listing say about taxes? Maybe the new buyer who really has the greatest interest in the property taxes and the assessment should have been provided with an opportunity to participate in the MPAC proceedings?

Did the buyer have this opportunity? Did the listing agent advise that the assessment was under appeal? Did the buyer’s agent request that the buyer attend?

Comment

This provision is a relatively new clause for agreements. Only recently has the current value assessment regime been set in place in Ontario. This particular paragraph could be improved. Rather than actually discouraging litigation which is what it purports to do, it really opens up questions and may lead to litigation

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage
905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

(Ontario Real Estate Source)

In accordance with the provisions of Division D of the Income Tax Act, non residents are taxed upon the disposition of taxable Canadian property. The definition set forth in s.115 includes real estate.

Since the potential taxpayor is out of the country, the collection of any tax arising upon the sale becomes problematic. Consequently, the Canada Revenue Agency relies upon s.116 for assistance. This section imposes a liability directly upon the purchaser to report, collect and remit the appropriate tax.

Here is what the section says:

“Disposition by non-resident person of certain property

(4) Where a non-resident person who has sent to the Minister a notice under subsection 116(3) in respect of a disposition of any property has
(a) paid to the Receiver General, as or on account of tax under this Part payable by the non-resident person for the year, 25% of the amount, if any, by which the proceeds of disposition of the property exceed the adjusted cost base to the non-resident person of the property immediately before the disposition, or
(b) furnished the Minister with security acceptable to the Minister in respect of the disposition of the property,
the Minister shall forthwith issue to the non-resident person and the purchaser a certificate in prescribed form in respect of the disposition.”

You will notice that under section 116, it is the duty and obligation of the non resident to report the proposed transaction in advance, post security for the amount of the tax, and obtain the clearance certificate for the purchaser. Perhaps, “duty and obligation” is not entirely appropriate. Certainly, it is at the very least the “role” of the non resident to deal with the matter in advance.

When this does not happen as it should, here is what the Income Tax Act says about the purchaser’s obligations and corresponding rights.

“Liability of purchaser

(5) Where in a taxation year a purchaser has acquired from a non-resident person any taxable Canadian property (other than depreciable property or excluded property) of the non-resident person, the purchaser, unless
(a) after reasonable inquiry the purchaser had no reason to believe that the non-resident person was not resident in Canada,
(a.1) subsection (5.01) applies to the acquisition, or
(b) a certificate under subsection 116(4) has been issued to the purchaser by the Minister in respect of the property,
is liable to pay, and shall remit to the Receiver General within 30 days after the end of the month in which the purchaser acquired the property, as tax under this Part for the year on behalf of the non-resident person, 25% of the amount, if any, by which
(c) the cost to the purchaser of the property so acquired
exceeds
(d) the certificate limit fixed by the certificate, if any, issued under subsection 116(2) in respect of the disposition of the property by the non-resident person to the purchaser,
and is entitled to deduct or withhold from any amount paid or credited by the purchaser to the non-resident person or otherwise recover from the non-resident person any amount paid by the purchaser as such a tax.”

So, what does that mean?

• If a purchaser acquires property from a non resident then this provision applies.

• Taxable Canadian Property, oftentimes referred to as TCP includes real property.

• There is a liability to pay a tax.

• There are three exceptions:

• 1) after reasonable inquiry there is no reason to believe that the person is not resident,

• 2) the non resident is covered by a tax treaty (this provision is new), or

• 3) the Minister has issued a certificate.

• Payment must be made in 30 days.

• Amount is calculated as 25% of the amount by which the purchase price exceeds the amount so specified in the certificate (if any).

• Purchaser is entitled to deduct or withold from any amount paid or credited to the vendor, the amount so paid.

• Purchaser also has the right to recover any such amount paid as a tax.

So in many cases, section 116 will present problems. The purchaser needs proof of residency. An Affidavit of Residency is the usual document provided. It is executed under oath by the vendor confirming that he is not a non resident. It usually sets out tow time periods, the present and the time of closing.

The actual wording is often as follows:

“The vendor states that he is not now and will not be at the time of closing of this transaction a non-resident of Canada within the meaning of section 116 of the Income Tax Act (Canada).”

This creates somewhat of a problem since the Canada Revenue Agency has not specified exactly what evidence it will accept as a “reasonable inquiry”. This naturally suggests that if the vendor were in fact known to the purchaser, then the purchaser would be placed upon further or more detailed inquiry. However, in normal circumstances where the parties are unknown to one another, the Affidavit seems to be acceptable. Real estate practitioners have followed that custom and relied upon the CRA’s general acceptance of that document.

The new provision is designed to speed up the process in cases where there is an applicable tax treaty. But, this is difficult. Rarely, if ever, would a purchaser have sufficient and intimate knowledge of the business affairs of the non resident that the purchaser would be able to accept as a risk the application of an appropriate tax treaty.

That leaves us with the final option which is the Clearance certificate. So, if there is no certificate, then the purchaser will deduct 25% from the purchase price. If there is one already available, then the purchaser will withhold 25% of any amount over the limit.

It is not a defence to say that the non resident got all the money. If the purchase price was $100,000 and there was no certificate, then $25,000 must be withheld and remitted. Otherwise, the purchaser must come up with another $25,000 from his own money.

You will notice that the civil laws between the parties is amended accordingly. This applies in common law provinces and Quebec which has a civil code. The purchaser has a right to deduct the amount. It doesn’t matter what the contract says. And, if the purchaser pays his own money to the CRA, then he has the right to recover any amounts so paid.

This article is time sensitive. Tax laws change frequently, as did this section only a few months ago. It is only intended to address issues concerning the disposition of residential real properties in Canada. Commercial properties and corporations holding real estate as part of their portfolios is completely beyond the scope of this article. In such matters, the purchaser may be obligated to withhold 50% of the purchase price not 25%. Readers are cautioned to seek proper tax advice from a lawyer or tax accountant before undertaking such a transaction.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

(Ontario Real Estate Source)

There are actually legal rules to prevent procrastination. I know, you thought procrastination was harmless. Well, in some cases it is, but when it comes to the law, you had better have a look at the Limitations Act.

In some jurisdictions it is called the statute of limitations. In Ontario, it is the Limitations Act, 2002. Basically, the laws were updated at that time.

Many different statutes contained limitation periods. This revision was an attempt to both update and modernize the rules.

Think of the basic concept: “enough is enough”, or the expression “when it’s over, it’s over”. That’s exactly what it is!

A limitation period is an attempt to hurry things up and get things done. This is not a good rule for procrastinators. So, for those with ADD (or ADHD), this law could be the bain of your existence. However, if you suffer from OCD (Obsessive Compulsive Disorder) you don’t need this law. You’ve already done whatever you need to do.

The law is an attempt to bring closure to legal matters within a reasonable period of time. Evidence can deteriorate over time as well as memories. Therefore, it makes sense that issues should be resolved as soon as possible.

It would make a mockery of the judicial system if a plaintiff could threaten a lawsuit, then wait until most of the witnesses and the defendant had died, and then sue and collect damages from the defendant’s estate 30 years, 40 years or 50 years later.

In order to prevent that, certain time frames were established. They were generally absolute as measured by time, ie. 6 years after the contract was signed, 6 years after the assault took place, 2 years after the accident.

Ontario has brought in a new regime of limitations on lawsuits. In part, it is based upon

• a time of commencement and
• a time of termination.

The plaintiff must reasonably be aware of the potential to claim as against the defendant. That’s the time of commencement. Then, depending upon the actual issue or matter, there is an end period. Often, this is two years later.

The result is clear: if the plaintiff fails to file suit, then his right of action has expired. Two years and one day is too late. It’s over. The defendant can’t be sued, no matter what he did. This naturally assumes that the two year period applies.

Here are some common time periods:

Two Years

Contracts
Torts
Assault
Car accidents
Hospitals
Health Care Professionals
Insurance
Lawyers
Public Authorities
Police
Schools
Veterinarians
Architechs
Engineers

Shorter Periods

Specifically, there are some shorter periods for actions against the Crown, defamation, divorce, and family law matters, as well as certain insurance claims. For example a fire loss or a loss to an automobile will carry a one year limit.

Additionally, there are notice periods in advance of certain proceedings and if there is no compliance then the lawsuit is barred. Consider the obligation to register a Construction lien within 45 days of the date of substantial completion.

Please note this article is not intended to provide legal advice or guidance, it is merely intended to provide an explanation of the intent of the law for the layman.

Discoverability Test

You will appreciate that the first real test here is to get the limit running in the first place. Where there is a contract or a tort (ie. an assault) or a car accident, then the starting date is clear to everyone.

However, consider a leak to the basement by way of a hairline crack. When does the homeowner become aware of the damage? Whose fault is it?

Let’s assume that at a certain time, the homeowner investigates the crack, discovers some damage, calls a contractor, obtains some estimates, authorizes work to be undertaken, becomes aware of further hidden damage, authorizes further repairs. You will see that with one simple matter, there could be several different times when a Court might conclude that the time period started to run.

We might also consider different defendants whose conduct brought them into dealings with the homeowner, ie., the former owner, the real estate agent, the home inspector, the appraiser, the contractor, the neighbours or the city (if the problem were caused by something they did).

The Basic Limitation

Here’s a quick summary of the law from the Act:

“Basic limitation period

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

Discovery

5. (1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.”

And, there is a final, final, final date if all else fails.

“Ultimate limitation periods

15. (1) Even if the limitation period established by any other section of this Act in respect of a claim has not expired, no proceeding shall be commenced in respect of the claim after the expiry of a limitation period established by this section.”

Real estate matters

You need to know that there is a separate and distinct Act that applies in the case of real estate. Long established time periods were not shortened, they were simply transferred from the old Limitations Act to the new Real Estate Limitations Act.

Comment

You will find that the laws generally make sense and are contemporary in terms of allowing people to “get on with their lives”. If you are going to sue, then it’s simple: sue!

Now, you may also be wondering how much effect this new legislation will have on the homefront. None! None whatsoever!

So, take for example a situation when a husband may have been guilty or responsible for some kind of transgression no matter how minor. There is no limitation of any kind. The wife may raise this transgression over and over. There is no applicable time limit. The statute of limitations didn’t apply to such matters in medieval times, and it still doesn’t today.

Now, let’s assume that the wife on the other hand failed in some matter.(This is just a hypothetical question, so bear with me). It can be raised by the husband for about one minute, then it’s over. There’s one exception to this, and that might involve placing a child at risk in a car. I would say, this topic could be raised for 15 minutes, then it’s over. Bear in mind, the child must be an infant or toddler, teenagers don’t count. You are back to the one minute limit for them.

So, in all probability, the new shorter time limits under the Limitations Act, 2002 were drafted by those without sympathy for ADD sufferers.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

By Brian Madigan LL.B.

(Ontario Real Estate Source)

You only get one chance to make a first impression, so let’s make it count.

Oftentimes, when sellers are getting their homes ready for sale they concentrate on the inside of the house. There’s nothing wrong with that. That’s what all the magazines say to do; but what about the outside?

There may be some low-cost ways to substantially improve the first impression the potential buyer will have of your property. In short order, here they are:

• Paint the Front Door
• Paint the Garage Doors
• Paint the Front of the house
• Powerwash the Driveway and Sidewalks
• Powerwash the Bricks
• Powerwash the Fence
• Re-seal the Driveway
• Fix the Front Step
• Fix the Lawn
• Repair the Doorbell

Paint the Front Door

For one full minute possibly more, the potential buyer will be standing about 4 to 6 feet away from your front door. Make this time count! Paint it, so that it’s perfect.

Paint the Garage Doors

Two car garages are quite common and frequently they dominate the exterior appearance of the home. When prospective buyers are walking up the driveway, this is all they can see.

Paint the Front of the House

If you are painting some of the front, then, why not the whole front? This will really set the tone for the purchasers. And, while we’re on the subject of painting, you can use an inexpensive paint if you’re selling. No one will know the difference.

Powerwash the Driveway and Sidewalks

Get rid of the accumulated debris and dirt. Restore the driveway to its original colour, along with your sidewalk. This is simple and straightforward.

Powerwash the Bricks

If you have a new home with a brick facade you may find that the first three or four feet are covered with mud. Some builders will clean this off with a powerwasher and some won’t. If it’s still there, then you should remove it.

Powerwash the Fence

Most new wood fencing is the “green wood” variety. Chemicals are applied under pressure and the overall appearance is a greenish colour. After a few years it turns dull and after fifteen years it turns a rather weather-beaten grey. It is at this point that many home owners decide to paint or stain the fence. However, why not just pull out the powerwasher? You will be able to restore the colour to about 70% to 85% of its original colour if you wash it just one. If you do it a second time, you should be well over 90%. It was just dirt, dust, mould and other bacteria that discoloured the surface. And, as an added bonus, there’s no cleanup.

Re-Seal the Driveway

This is one of the largest surfaces around your home, and most of the time it’s actually the first thing that prospective buyers get to see up-close. If you have an ashphalt driveway five or more years old, then re-seal it with a blacktop finish. If it’s interlocking brick, then there are special sealers available. If you need to remove the oil stains, consider just turning the bricks upside down.

Fix the Front Step

The front step is a quite common problem. Right in front of the door you will likely find an extension of the foundation, but just a few feet away your sidewalk begins. The winter frost will make every effort to prevent these two areas from ever being in alignment. So, you might want to address this issue. If you do, purchasers will immediately conclude that this is a well-maintained home.

Fix the Lawn

If your lawn is not covered in snow, then you should make sure that it looks great. Fertilize it, water it and pull out the weeds! And, if you have a garden, it wouldn’t hurt to plant a few flowers.

Repair the Doorbell

And I don’t mean put a sign out saying “please knock, doorbell doesn’t work”. Just fix it. You would be surprised to see how many houses are listed for sale and the front doorbell doesn’t work. This creates a very negative first impression, and running through the prospective purchaser’s mind is the question: “what else doesn’t work”, and what do you think that they are thinking about the asking price?

All of these items are quite inexpensive. It will only take two weekends and will pay off handsomely.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com