By George Craig, Partner

Please see also: Barriston Moving Tips Part 1

As your moving day draws closer, revisit your checklist and ensure that you have completed all of your preliminary organizational tasks. At this point, you should have made arrangements with your insurance, moving, cleaning & utility companies – most of which can be dealt with over the phone or internet in the months/weeks preceding your move. All that remains to be done at this point concerns the physical move to your new home. Set aside some time to complete the following tasks:

• Arrangements with Movers: Touch base with your moving company. Ensure that you know what your responsibilities are and what, if any, assistance or information they require from you at this stage.

• Layout Your New Home: Draw a floor plan of your new home and indicate the location of where you would like your furniture placed. This will help the movers on moving day, and also give you a good idea of what furniture you need to purchase/discard. If you can get the furniture placement right the first time, it will save you having to move large items throughout your new home when the movers are long gone.

• Plants and Frozen Foods: Make specific arrangements for the moving of items which require special care including plants, frozen food, mirrors and glass. If you can make these arrangements ahead of time, you’ll have less to worry about on your moving day. Remember that the movers are there to help you – organize and delegate tasks accordingly.

• Clean up: The clean-up of basements, garages and tool sheds are often left until the end of the packing process, and may be overlooked completely. It’s a dirty job, but it needs to get done - set aside a block of time to sort and clean out your garage, basement and tool shed.  Check with your local Municipal Office about discarding hazardous waste, electrical items, tires, and other items that require special disposal. You may also want to look into ‘junk’ removal companies who may be able to dispose of these items for you. 

• Valuables: Gather all of your most valuable possessions, pack them securely, and set them aside. You should plan to move these items with you on moving day.

• Mirrors and Pictures: Mirrors and pictures that are breakable should be left on the walls or in their normal location until you are ready to actually move them. Your movers may be able to help with the removal and wrapping of mirrors and other framed items – ask the pros when it comes to fragile items.

By Graydon Ebert, Associate 

When multiple parties purchase a property one of the important considerations to be made is how the parties’ should take title to the property. There are two options: Joint Tenants or Tenants In Common.

For the parties to take title as joint tenants there must be what is termed the “four unities”: possession, interest, title and time. The unity of possession is present where the parties each have an equal right to possession of the property. The unity of interest is present where the parties’ interest in the property is identical in size and duration. The unity of title requires that the parties’ receive their title to the property from the same document and the unity of time requires that the parties acquire their title to the property at the same time. If the four unities are present, the parties have a concurrent interest in the property in which all of the joint tenants have a unified right of possession to the whole of the property with a right of survivorship.

What is a right of survivorship? Essentially, if one of the joint tenants dies, his or her interest in the property would pass to the remaining joint tenants and would not get distributed pursuant to the provisions of a will. For example, if Adam, Bob and Chris own a property together as joint tenants, upon the death of Adam, his interest in the property would be assumed by Bob and Chris and not to a beneficiary under Adam’s will. If Bob then dies, Chris would be the sole owner of the property.

Taking title as tenants in common is different. When parties take title as tenants in common, they take title to an undivided fractional share of the whole property and do not have a right to survivorship. Tenancy in common only requires a unity of possession. Tenants in common can leave their share of the property to someone in their Will or transfer their separate interest to a third party. Using our above example, if Adam, Bob and Chris own a property together, with each owing a 1/3 interest as tenants in common, when Adam passes away, he can leave his share by Will to his wife Debbie. Then Debbie, Bob and Chris are the owners of the property.

It is important to note, that there are instances where a joint tenancy can be converted into a tenancy in common. If the joint tenants die in a manner where it is unclear as to who survived who, they will have been deemed to have been tenants in common in equal proportion unless there is a very specific intention to the contrary.

Also, a joint tenancy will end if any of the four unities required for a joint tenancy are destroyed. This would result in a tenancy in common and an end to the right of survivorship. The most common instance would be where one tenant transfers his interest in the property to another party. In this case, there is no longer unity of title or time as the third party has acquired his interest at another time and by another document. In this instance, the new party holds a proportionate interest in the property as a tenant in common and the remaining joint tenants will hold the remaining interest in the property as joint tenants. Using the above joint tenants example, if Adam decided to sell his interest in the property to Ernie, Ernie would hold a 1/3 interest in the property as a tenant in common which he could further transfer or bequeath by Will. Bob and Chris would remain joint tenants in respect of the further 2/3 interest in the property and there would remain a right of survivorship, such that if Bob were to die, Chris would own the full 2/3 share of the property as tenant in common with Ernie.

The most common instance where more than one party holds title to a property is where title to the property is held by two spouses. In this instance, the spouses will usually take title as joint tenants as this allows the property to automatically be held solely by the surviving spouse upon the death of the first spouse without the property becoming property of the first spouse’s estate.

Every situation is different and a discussion with a lawyer as to how title should be taken to the property being purchased is worthwhile so that future planning considerations can be made. The Real Estate lawyers at Barriston LLP are available to help you figure out the best way for the parties to take title to the property.

By Nathalie Tinti, Associate

There is much discussion around exempt verses taxable supply of property.  I have been advised by many accountants: the rule is: everything is subject to HST unless there is a specific rule that says otherwise!

A common such exemption relating to real property is the sale of a previously occupied residential home.  A residential home or “complex” is a property used for long term occupancy (normally more than 60 consecutive days) by an individual as a place of residence.  There are, however, several “traps” that could exclude such residential property from exemption.  The following is a brief list of things for vendors and purchasers to watch out for:

1.   Is the Vendor a GST/HST registrant and have they claimed an input tax credit on the last acquisition or improvement of their property?

No matter how small, or even if claimed in error, if there has been an input tax credit claimed a subsequent sale of the property is not exempt.

2.   Is the land being sold comprised of more than half a hectare (1.23 acres)?

Generally, ½ hectare together with the home is exempt from HST.  If the property is larger than this, from a tax perspective there are 2 transfers:  One, the home with ½ hectare, which is exempt; and one for the remainder of the vacant land.  The HST owing is on the value of the land above the ½ hectare.  There is a further exemption if the excess land is necessary for the use and enjoyment of the property (the interpretation of which may be a good topic for my next blog!).

3.   Is there a business currently operating on the property (mixed use?)?

A property containing a residential complex and another component (i.e. a commercial unit) are deemed to be two separate supplies.  There is an exemption for the residential portion of the sale, however, the commercial property is taxable.  There is, however, a further exemption if the property is primarily (more than 50%) occupied by the owner of a relative (for example, a personal residence containing a small portion used as a home office or to operate business).

4.   Has the property been used for short term rental accommodations?

Properties used primarily to provide short term accommodation are taxable when sold.  An example of this is a cottage that is only used to provide short term rentals.  If the property owner also uses the cottage primarily for their own use, the exemption likely applies.

As a general rule, if you are a purchaser of a property, you want to ensure the Agreement of Purchase and sale stipulates the HST is “included in” the purpose price.  Conversely, if you are a vendor, the Agreement of Purchase and Sale should state the GST/HST is “in addition to” to the purchase price.

 Most importantly, although most real estate lawyers can give you a general guide to whether GST/HST is applicable to your sale or purchase, the best practice is to call your accountant, explain your specific situation and obtain his or her advice.

By Graydon Ebert, Associate

Either through an express term of your mortgage or under the statutory provisions set out in the Mortgages Act your mortgage lender has a right to sell your property under power of sale should there be a default in payment of money due under the mortgage after a specified time and after providing a certain amount of notice to required parties.

The purpose of this blog is not to discuss the procedure to properly put a property under power of sale, but rather to discuss a borrower’s right to redeem its mortgage should the property be put under a power of sale.

If the mortgage lender has commenced power of sale proceedings, section 22(1) of the Mortgages Act permits a borrower to bring the mortgage into good standing after default and acceleration of the mortgage debt before an action for enforcement of the mortgage has been commenced and before there has been a sale of the mortgaged property. This essentially means that until the mortgage lender has sold your property, you have the right to repay all money due under the mortgage and any expenses incurred by the mortgage lender and the mortgage lender will not be able to sell your property.

The question becomes: when has there been a sale of the property? There was a discussion in our office about what constitutes a sale, with some arguing that there has been a sale when the mortgage lender enters into an agreement of purchase and sale with a third party, and others arguing that the sale does not happen until the transaction with the third party has closed.

Given, the difference of opinion in the office, I set out to figure out when exactly a “sale” has taken place under the legislation. The early case law interpreted “sale” as the acceptance by the mortgage lender of a third party’s offer to purchase the property. This meant that as soon as the mortgage lender had a binding agreement with a third party to purchase the property, the borrower no longer had the ability to redeem their mortgage and put it in good standing.

Subsequent cases went in a different direction and held that if the agreement of purchase and sale with the third party and the mortgage lender specifically provided that the borrower had to redeem the mortgage up until closing, that the sale is conditional upon the borrower not exercising its right to redeem and therefore is not a “sale” under the legislation until the closing of the transaction.

Obviously, this would explain the different answers in our office. However, a case of the Ontario Court of Appeal, Logozzo v. Toronto-Dominion Bank, seems to have resolved the debate. In this case, the borrower had granted a mortgage to the mortgage lender which went into default and for which a notice of sale was served. The mortgage lender entered into an agreement with a third party to purchase the property which had a clause that the purchaser understood that the borrower had the right to redeem the property up to the time of waiver/expiry of all rights of termination or fulfillment of all conditions. Subsequent to the mortgage lender entering into the agreement to sell the property to a third party, the borrower accepted an offer to sell the property. The borrower requested that the court set aside the TD Agreement.

At trial, the judge held that while a binding agreement of purchase and sale is a “sale” under the legislation, if the agreement contemplated a right of redemption continuing after the date of the agreement then the borrower’s right to redeem was preserved until closing. The Court of Appeal overturned the trial judge and held that a borrower’s right to redeem cannot be extended past the date when the agreement of purchase and sale is entered into with the third party for two reasons. If the rationale behind the previous decision was that the sale was conditional, this was incorrect because the borrower had not yet paid or tendered the redemption funds, and as such the borrower could not rely on its right to redeem. If the rationale was based on the fact that the agreement provided for a right to redeem, it was incorrect because the borrower was not a party to that agreement and could not enforce it.

What does this all mean? If you own a property and you have been served a notice of sale by the mortgage lender, to exercise your right to put the mortgage back in good standing, you must do so before the mortgage lender has a binding agreement to purchase the property with a third party. If you plan on putting your mortgage in good standing, you must act fast or risk the chance that the mortgage lender will enter into an agreement with a third party and you will lose your opportunity.

If your mortgage lender has begun power of sale proceedings against your property, and you want to know your rights, do not hesitate to contact one of our real estate lawyers.

By Joanne McPhail, Partner

Clients of mine recently purchased a property, only to discover on closing that the air conditioner had been removed right before closing.  They now find themselves in the midst of a small claims court action for damages for the loss of the value of the unit – which was only one year old.  The clients had done a walk through prior to making an Offer on the property, and had viewed the air conditioning unit.  They recall remarking that it looked new.  They even went so far as to contact the installer (the company’s sticker was on the unit) to inquire on its age, and were advised that it had been installed that year.

When the Offer was drawn up and executed by the parties, the air conditioning unit was not listed as an exclusion.  Upon realizing, after closing, that it had been removed, we contacted the lawyer for the Vendor.  The Vendor’s position was that the MLS listing did not say air conditioning.  However, our clients’ position was that the unit was there when they walked through the property, and it was affixed to the property, and was not specifically excluded in the Offer, so would have been included in the purchase price.  The case will come down to the “degree of annexation” – was the A/C unit a fixture or mere personal property (a chattel)?  In this instance, pictures of the unit indicate that it was indeed very affixed, both to the building and integrated through the furnace.  We hope the judge sees it the same way.

These are unusual circumstances, however, if you are buying a property and have any doubt about whether something is included – set it out in the offer specifically, just to be safe.  Water softeners seem to cause the greatest amount of confusion in this area, especially since now, they can be plumbed in with plastic tubing and easily removed.  As always, the clearer an agreement can be about the intentions of the parties, the less likely litigation will ensue.

By Kathryn Whitehead, Associate

Every real estate client, whether they be a purchaser, seller or mortgagor, always seems mystified by how much money their real estate transaction is going to cost, and how their money is broken down and applied.  To help you make sense of it all, here is a breakdown and  a few tips about where your money is going. 

Firstly, a portion of the total cost will always be for legal fees.  In typical residential real estate transactions, the Real Estate Lawyer will provide a flat legal fee in order to complete the work requested.  This is the amount you are paying to the lawyer for their expertise.  It is important to note that most lawyers will reserve the right to increase their legal fees if unusual circumstances arise that require additional work outside of the normal transaction.  If your transaction falls of the tracks, make sure you discuss with your lawyer how much additional legal fees, if any, may be added to the original quote provided.

Secondly, a portion of the total cost will always be for disbursements.  Disbursements are costs or expenses that the lawyer or law firm pays in advance on your behalf.  The lawyer or law firm will then look to you for reimbursement on closing.  For example,  disbursements may consist of: title insurance, title searches, tax certificates, execution searches, government registrations, photocopies, faxes, long distance, etc.  It is important to note that every single real estate transaction is different and the total portion cost for disbursements will vary from file to file, but especially between purchases, sales, and mortgages.   Further, some lawyers may lump together their legal fee costs with disbursement costs when giving a quote to a potential new client so make sure you ask them to break down the fees so you understand where you money is being spent.

Thirdly, a portion of the total cost will always be for HST.  Unfortunately, HST is now payable on certain disbursements and all legal fees.  It is important to add this extra percentage when coming up with your total transactional costs.

Finally, if you are a purchaser, make sure you discuss with your lawyer how much Land Transfer Tax is payable on the purchase transaction. The amount is calculated based on the consideration, or purchase price of the property, and is easily calculated.

Hopefully, if I have been successful, the above breakdown and various tips will give you some more insight into your next real estate transaction, and keep you on track with your budget!     Always remember, if you don’t understand how your money is being spent make sure to ask!

By David Lucenti, Associate

Recently, a client was in to see me regarding the purchase of a new home.  He told me that he was intending to make an offer on a new home, but wanted me to review the Offer his agent prepared prior to signing.  I was surprised to hear this, because in most cases today, a lawyer does not see an Offer until it is signed and binding on each party.  I told my client that I would be happy to review the Offer and advised him that having a lawyer review the Offer prior to signing can help avoid difficulties later on and ensure that the client’s best interests are protected.

It is important to obtain as much information about the property as you can prior to reviewing the Offer, so that you can properly advise your client.  Some of questions a the purchaser’s lawyer might consider asking the client include:

• Is there a swimming pool?
• How is the property heated?
• Does the property have a septic system?  Is there a survey?

Once you have a good understanding of the property, you can begin your review of the Offer.  Typically, a lawyer will ensure that the property is properly described in the Offer.  The lawyer can confirm this by searching the subject property in Teraview.

In addition, a lawyer can include escape clauses that will allow you to terminate the Offer if you are unable to proceed with the purchase.  For instance, a client may want to terminate the Offer following an inspection of the subject property or if the client was not able to secure financing for the purchase or unable to sell their present home.  By including such escape clauses, the client can protect themself in the event the purchase cannot be completed.

The purchaser’s lawyer can also advise as to what warranties ought to be included in the Offer. For example, warranties regarding the swimming pool in the backyard or septic system are important to include in the Offer.   The purchaser’s lawyer may also recommend including a clause requiring the seller to provide an up-to-date survey for the property.

Lastly, the purchaser’s lawyer can advise early on as to some of the closing costs involved in buying that new home i.e. land transfer tax, registration fees, title insurance fees, search fees, real estate fees, utility adjustments and, of course, those pesky legal fees.  Often times, a new buyer forgets about such costs and is caught off guard by such fees and finds themselves scrambling on the day of closing to find the necessary funds to close the transaction.

So, for all those purchasers (and vendors) in the market for a new property, I recommend that you call your lawyer prior to signing on the dotted line.

by Andrew Ain, Partner

Common Element Condominium Corporations (or “CECC”’s) are becoming more prevalent in Ontario, particularly in new freehold town home projects and waterfront developments.

A CECC consists of only common elements. There are no “units” but rather, CECCs are comprised solely of a specific common element. The common elements may include roads, parking facilities, a clubhouse, a marina, etc. and are tied to a separate property called a ‘parcel of tied land’ (or “POTL”s). The POTL could be a townhome or detached home, and doesn’t have to be contiguous to the CECC property, as long as it’s within the same land registry division.

CECCs are attractive to developers because they circumvent the need to satisfy municipal road standards required in a traditional subdivision. Accordingly, developers can benefit from fitting more units into a particular land area, and reducing their road construction costs. At a practical level, developers often work with their solicitor to create and sell separate parcels of tied land to each purchaser (in most cases freehold townhomes), which are not part of the CECC. They then create a CECC which includes all the facilities, roads, services, etc., the costs for which will be paid by the purchasers of the POTLs.

The owners of the POTL are responsible for their share of the common expenses relating to the CECC, which is no different than the treatment of expenses in a traditional condominium corporation. Liens for unpaid common expenses are treated similarly and will rank in priority to any encumbrances registered against the POTL, including first mortgages. In addition to sharing the costs of maintaining the CECC’s facilities, however, owners of the POTLs also share the ownership, use and enjoyment of these facilities.

A CECC is permanently tied to its corresponding POTL so that a POTL cannot be sold separate and apart from its interest in a CECC and vice versa. The common interest relationship cannot be severed - the benefits and the burdens run with the land unless the condominium is terminated under the Condominium Act.

Because the POTL is not a unit in a condominium, the purchase of a POTL and an interest in a CECC is completed using a standard agreement of purchase and sale for freehold properties. As such, certain condominium rules will not apply. While the Ontario Real Estate Association agreement of purchase and sale will appear unchanged in many respects, the sale will include schedules (or in some cases, a separate agreement) addressing the purchase of the interest in the CECC.

By Honest Alf Dick – the Little Guy Lawyer

In Blog #4, I mentioned “zoning bylaws” and I’m sure that most of you are familiar with them – but, did you know that our law had controls of use of land long before the first municipal bylaw was passed?

Centuries ago in England, a man owned a successful pub together with a vacant lot next door.  He needed some money so he decided to sell the vacant lot but, understandably, he did not want a pub built there – a pub that could compete and ruin his existing business – and so he extracted from the buyer a promise (we call it “a covenant”) that the buyer would not build a pub on it (at this point it becomes a “restrictive covenant”).  That promise, if broken by the buyer, could be enforced in the Courts to prevent a pub being established there by the buyer.

However, the buyer sold the vacant land to Mr. Third Person and told Third Person about the covenant.  Now Mr. Third Person was not very nice because he wanted to build a pub on that land and he said the covenant was a personal agreement which the seller could enforce only against the buyer, not against Mr. Third Person, even though he knew about the promise.

The seller went to Court and – what do you know – the Court said that, because certain rules had been followed by the seller, the promise was said to “run with the land” and therefore would be binding on nasty old Mr. Third Person as the new owner.  So, no pub on that vacant land.

We still use restrictive covenants today in Ontario – sometimes properly, sometimes not – therefore if you are thinking of buying a parcel of land with a “restriction” on it, talk to your lawyer as to whether it is something that you want to have removed.

By Graydon Ebert, Associate

Recently I was meeting with a client to sign the documents for his purchase and mortgage of a new property. When going through his mortgage, he was puzzled as to why the mortgage was going to be registered for a higher amount that he was actually receiving. Understandably he was also confused why the bank was registering the interest rate on his mortgage at an exorbitant rate instead of the more modest rate that he negotiated with the bank. He was especially surprised when I told him that this practice was relatively common.

Are the banks trying to pull a fast one on unsuspecting home owners? While the banks often, and sometimes deservedly, get a bad rap for hidden fees, charges, etc., in this instance they are actually saving you money and time. How could that be?

More and more often, lenders are using mortgages in more creative ways. For example, they are using them to secure home equity lines of credit that are used not only to finance the acquisition of a property but also a line of credit secured by the equity in property. For example, a property may be worth $300,000. The owner may receive $250,000 in funds to close the deal and a line of credit for an additional $50,000. In this case, we will receive instructions from the lenders to register the mortgage for $300,000, even though the owner is only receiving $250,000 in funds and may never use the line of credit at all. Why? The lender wants the flexibility to enforce the mortgage to the maximum amount they will receive if the credit is extended to its fullest. The alternative is that the lender will register for the amount of funds received by the owner, and each time the owner receives advances from the line of credit, the lender will require that a new mortgage be registered for the new amount of credit outstanding. This is burdensome and costly, as the lender will require you to pay for the cost of the new mortgage and you will have to spend time at your lawyer’s office and the bank signing a new package of documents.

The same reason why lenders will often register at a higher amount than the funds received applies to why they will often register at a higher interest rate than what the parties have agreed upon. Especially where the mortgage secures a home equity line of credit with a variable rate, the lender will register at a significantly higher rate (often prime plus 10%) to give them the flexibility should interest rates rise, so a new mortgage won’t have to be registered if rates go up, saving the home owner the time and expense.

It is important to remember that just because the mortgage is registered for an amount higher than what the lender is advancing you and for a rate higher than they are charging, your actual repayment terms and the applicable interest rate is what is in your mortgage agreement. The lender cannot come after you for more than that. So while it looks like your bank may be trying to catch you off guard, in fact they are saving you a bit of time and money down the road. Now I bet you’re really surprised!

By HONEST ALF – the Little Guy Lawyer

This is part 4 of a 4 part series – please see Part 1, Part 2 and Part 3 before reading this part 

Now you know where the term “real estate” came from – from those clever Romans who spoke Latin.  But do you know what it includes? 

For this, we move a little further along in history in England – that’s where our “land law” comes from.  In the year 1066, William the Conqueror and his French Knights from Normandy beat up on the Saxons, and William took a look at all of England and said:  “I like it, I will own it!” (or words to that effect) and so he did.  He, as King, owned the whole country but he knew he could not farm it by himself – besides he had several hundred knights who had helped him and who wanted some reward -  so he gave rights, involving huge tracts of land, to his knights;  a knight might have rights over a whole county but ownership remained in the King.  The knights then gave rights to their helpers and so on down the line until you got to the peasant – the lowly serf – who actually worked the land.  It was like a giant pyramid with one King at the top and thousands of peasants at the bottom – but the King technically owned everything.  It was called “feudalism” and it lasted for centuries. 

The theory of ownership by the Crown continues today in Ontario;  for example, if someone dies with no Will and no living next of kin, his or her property reverts to the Crown – it’s called “escheat” – so that’s a good reason to have a valid Will so you avoid giving stuff back to Her Majesty. 

And the concept of owning only “rights” in the land continues today.  The “title “ to every piece of land in Ontario must start with a Crown Grant – often called “Letters Patent” – but, for example, it might not give you the rights to the minerals in the ground under your feet.  I’ll bet you didn’t know that, did you? 

Nowadays, “owning” land gives you a pretty large bundle of rights – you can lease it out, you can sell it, you can leave it to your heirs – but what does it include?

By Joanne McPhail, Partner

Back in “the day” when a young person buying a home needed some help from his/her parents to get their first mortgage, the parents would act as “guarantors” of the mortgage.  This obviously came with risk to the parents, but more often than not, after those risks were explained, parents were willing to sign on the dotted line to help their kid get that coveted first home.  A few years later, the banks had gone through some enforcement procedures, suing parents where their kids had defaulted on their mortgages, and in some instances, the parents were successful in defending those actions by claiming they didn’t truly understand what they were signing when they had originally executed that guarantee and they got nothing in return for doing so.  The banks got antsy about this, and so started requiring the parent to go on title with the kid, so they were getting something in return for signing off on the mortgage.  This, however, had an impact on the kid (and their ability to deal with the home however they wished) as well as the parent.  There were both tax and estate planning implications to these arrangements.  So we started out trying to minimize some of these issues by giving the parent a 1% interest in the home so, for instance, if the child sold the home 5 years later, the parent would only have to pay capital gains tax on 1% of the increase in value.  Keep in mind that usually, in these situations, the parent already has his or her own principal residence and so any other properties they “own” would be subject to capital gains taxes on sale. 

We are now seeing an increase in lending institutions requiring joint tenancy between the child and the parent, which is causing even greater difficulties from a tax and estate planning perspective.  Often, by the time we get the instructions on a mortgage, it is too late to negotiate this, so please keep this in mind.  How you hold title does matter.  And if you need your parent on title with you, speak to your lawyer about how your lender is wanting this structured, so you know before you sign on the dotted line, whether this makes sense for you.

 Buying your first home is a big step.  Bring your lawyer along during the process, to ensure it’s a step in the right direction.

By HONEST ALF – the Little Guy Lawyer 

This is part 3 of a 4 part series – please see Part 1 and Part 2 before reading this part 

Real estate, as we have discussed, includes a bundle of rights or “estates” but what is included in the term? 

Basically it refers to anything permanently affixed or attached to the land such as trees, rocks, growing crops, topsoil.  That’s not hard to imagine but the fun begins when mankind starts adding things, such as a house or a fence or a barn – isn’t it always the case that mankind can find ways to complicate things? 

Anything attached to the land we call a “fixture” – anything not “attached” is personal property.  Therefore, a toilet sitting on display at a plumbing store is personal property – we call it a “chattel” – but, when that toilet is connected into the plumbing system of a building, it becomes a “fixture” such that when I buy that building, the connected toilet comes with it. 

A lot of “fixtures” are pretty easy to identify – light fixtures, heating fixtures, plumbing – but sometimes there are grey areas which can cause disputes.  If you buy a house and you see a pretty child’s swing set in the back yard, you might be upset, after the deal closes, to find that it was just resting on the ground and has disappeared.  It reminds me of the old adage:  “When in doubt, spell it out” – when buying real estate, spell out clearly in your Agreement of Purchase and Sale what items are to be included in the price.  It will cut down the “surprise” and “disappointment” factors when you move in.

By Kathryn Whitehead, Associate

 Most home buyers are thorough when it comes to learning as much as possible about the condition of a prospective new home. Few are willing to buy a house with any flaws such as a leaking roof or structural defects. Those who discover issues, but wish to proceed with the purchase regardless, often ask their solicitor to look for an adjustment in the purchase price to compensate for any discovered problems. 

Even some of the most careful home buyers (particularly those moving from urban to rural areas) overlook a critical system in the house that could be very costly to replace: the septic system. 

Although septic systems should last anywhere from 20-25 years if properly installed and maintained, they are not foolproof. Many buyers presume that if the water drains from the sink, and the toilets flush, everything is fine - but this does not necessarily mean that everything will be working fine after closing. 

While you’ll want to know of any septic system defects, you’ll also want to make sure the tank can handle what you need it to. A system that may have handled a single resident just fine may be overtaxed if subjected to a family of six - something that happens frequently in cottage country. 

If you are considering buying a home with a septic system, have the system inspected by a certified on-site system professional (such as a licensed septic system installer, licensed sewage hauler or engineer) prior to purchasing the home. Call your local municipal office, public health office or Ministry of Environment office for a list of qualified professionals. A thorough inspection should include: a discussion with the homeowner, a review of the system permit, a tank inspection, a leaching bed inspection and a house inspection. 

Ask the Vendor for a copy of the septic system permit, which can be obtained from the homeowner or the local municipality, Ministry of the Environment or public health office depending on the jurisdiction. For older septic systems, there may be no permit. Once you obtain a copy of the permit, check the age, size and type of system and ensure that the size of the tank is sufficient with respect to the house. A qualified Inspector can help you to review this information. 

You’ll also want to know how well the system was maintained, as not all home owners maintain their tanks as they should. Ask the Vendor for a copy of any records of system maintenance (tank pump-outs, repairs, etc.). Under normal circumstances, a septic tank should be pumped out every two years or so. Even if you find that the tank was cleaned regularly, ideally you should still have the system inspected by an expert. 

If you discover issues with the septic system of a prospective new home but wish to proceed with the purchase, ask your solicitor to negotiate an adjustment in the purchase price.

By Graydon Ebert, Associate 

More and more, owners of multi-unit residential buildings are becoming interested in converting their rental property into condominiums, for a variety of reasons. This conversion raises a whole host of issues for both the owners and the renters of the property. 

To convert the property, the owner will need to apply to the municipality for approval of the conversion. As this conversion is considered a subdivision of land, approval of the conversion is subject to the subdivision control provisions found in the Planning Act. These provisions set out the criteria that the municipality shall consider when approving the conversion. They also allow the municipality to impose reasonable conditions on the approval. The Condominium Act also allows the municipality to require that the owner have an inspection of the property carried out by an engineer or architect who must report back to the municipality. The municipality can then impose any conditions it considers reasonable in light of the report. What this all boils down to is that if an owner wishes to convert its property into a condominium, the owner should be prepared to satisfy a laundry list of conditions from the municipality, dealing with such things as building deficiencies, reserve funds and more. 

The main question a renter wants to know is whether their rights are affected by the conversion of the property to a condominium. There are restrictions on a landlord’s right to possession of premises converted to a condominium when it is occupied by a tenant. Generally speaking, a purchaser of a newly converted condominium unit does not have a right of possession of a unit over the right of an existing tenant. This means that the purchaser of a newly converted unit must honour the lease of an existing tenant. Additionally, if the landlord is a developer and not a private unit owner, the tenant shall have a right of first refusal over any perspective sale of the premises on the same terms and conditions as the prospective buyer.

The above is intended as a general overview of the condominium conversion process. If you are the owner of a property and wish to convert it into a condominium or a renter of a property which the owner intends to convert to a condominium, and you want more information about the process or you want to know your rights, please do not hesitate to contact one of our real estate lawyers.

By George Craig, Partner 

The purchase and/or sale of real estate often involves a personal move for the parties involved. The following tips are the first of a four part series of advice on how to make your move a smooth transition. These suggestions are not intended to be exhaustive, but may provide some helpful information in the event that you are facing a move either now or in the future. 

• Get Organized: The first and perhaps most important step in a move is to get organized well ahead of time. This will minimize inconvenience, hassle and confusion as you get closer to your closing and moving dates.

• Prepare List: Begin organizing your move by establishing one central location for all of the information you will require to successfully complete your move. Include in this list the names, phone numbers and addresses for the following (for both your new and current home): utilities, professionals, insurance, publications, clubs, organizations, financial institutions and licences. 

• Utility Services: It is your responsibility to attend to the reading of meters and the payment of accounts with respect to your home sale/purchase. Arrange to have your gas, water, and electric meters read on the day you move out, and to have your utility bills forwarded to your new address. 

• Insurance: Contact your insurance agent to ensure that you have appropriate coverage for your new home, and be sure to include coverage for items in transit during your move. 

• Change of Address: Notify the post office of your change of address (this can be done at your local office or online at http://www.canadapost.ca). You should also advise your regular mailers of your new address.

• Inventory: Take time to complete an inventory of the assets in each room of your house. Determine with respect to each asset whether it will be: kept, discarded, cleaned, sold or stored. The inventory will also be a helpful record for insurance purposes. 

• Cleaning: Any carpets, rugs, draperies or clothes that need to be cleaned should be attended to prior to the move. When you receive the clothing or other items back from the cleaners, store them in their cleaning packaging until the move is complete. 

• Food: Check your kitchen, pantry and freezer and make meal plans to use up goods prior to the move. Decide whether the unused food will be moved and if so, how. 

• Garage Sale: One way to dispose of unnecessary items is to have a garage or yard sale. This will help you to get rid of any unwanted or unnecessary items, and to reduce the amount items to be moved. A yard sale is a good opportunity to say goodbye to your neighbors and perhaps make a little money to put toward your moving costs. Check whether a permit is necessary. 

• Tax Deductions: The last ‘getting started’ tip is to ascertain what tax deductions are available to you with respect to the move. If there are any tax deductions available to you, be sure to keep track of all expenses directly related to your move, including temporary living expenses. For information on tax deductions, check out the Canadian Revenue Agency’s ‘Information about Moving Expenses’ bulletin.

 Getting organized is half the battle of moving to a new home. The more you can get done ahead of time, the less disruptive your move will be.  Whether you set aside a few days or plug away over a few weeks, organize and eliminate any chaos.

By  Honest Alf  – the Little Guy Lawyer

So I was told I had to write a blog about the law of real estate – land law, if you like – so I thought to myself:   “I wonder if anyone knows (or even cares) about where the term “real estate” came from.  Take the word “real”;  if something, like land, is “real”, then is everything else “unreal”? 

No, that couldn’t be – except maybe in the virtual world of computers, a discussion I won’t go near – so maybe there’s a better approach.  Bearing in mind that a lot of the English language is derived from Latin, I found that the Latin word “res”, means a “thing or matter” as distinguished from a “person”, and, over the centuries, the term “real” was used in Middle English to mean “relating to things especially real property”. 

Okay, so it comes from Latin – by the way, in Latin the word “res” is feminine, so if a man falls in love with his land, maybe we know why! 

So the law broadly distinguishes between “real” property (land and anything attached to it) and “personal” property or chattels – in other words, anything else e.g. clothing, money, you name it. 

And what, pray tell, is an “estate”?  Well, it’s an interest or right in that land.  For example, you could have only the right to occupy the land (then you are a “tenant”) or you could have the right to occupy and sell it (then we call you the “owner”).  

“Real Estate” and “Real Property” now mean pretty much the same thing – it’s the bundle of rights that you have in a parcel of land.  What’s that you say?  Don’t I own the land?  Ah, that’s for the next chapter.  Stay tuned.

Purchasing a home is often one of the biggest decisions a person will make in his or her life.  While it is certainly an exciting time in one’s life, it is often followed by a huge “gulp” knowing that it will be one of the biggest investments they will ever make. 

Recently, I spoke with a client who had just signed off on the purchase of his first home.  Naturally, he was very excited and had numerous questions regarding the process.  After we discussed some of the various issues regarding purchasing a new home, including closing costs, he asked me if he would have to pay land transfer tax.  My response, of course, was “it depends”. 

Section 2 of the Land Transfer Act, R.S.O. 1990, c. L.6 (the “Act”) states that “every person” tendering for registration a conveyance by which ‘any land” is conveyed to or in trust for a transferee shall pay land transfer tax upon registration of the conveyance.  Accordingly, unless an exemption applies, the Province of Ontario requires purchasers to pay land transfer tax on the registration of any Transfer/Deed. 

The applicable amount of land transfer tax imposed can vary depending on the situation. However, the rates prescribed in the Act are as follows: 

• 0.5% of the value of the consideration for the conveyance up to and including $55,000;
• 1% of the value of the consideration which exceeds $55,000 up to and including $250,000; and
• 1.5% of the value of the consideration which exceeds $250,000.

With respect to first-time home buyers, the Ministry of Finance states that they eligible for a refund of the land transfer tax if the following conditions are met:

• The purchaser(s) is/are at least 18 years of age;
• The purchaser occupies the home as their principal residence within nine (9) months of the date of transfer; and
• The purchaser has never previously owned a home, or an interest in a home, anywhere in the world.

In this case, the maximum amount of the refund is $2,000. 

My client told me that had never been married and that he met the above requirements.  He also told that he was purchasing the property for $225,000.  I told him that based on the requirements of the Act, the land transfer tax generally applicable to his transaction would be $2,250 ($225,000 x 1%).  However, because he was an eligible first-time buyer, he was entitled to the maximum refund of $2,000.  Therefore, the actual land transfer tax payable would be $250.

If my client was a spouse under the Act, both he and his spouse would need to be first time buyers in order to qualify for the refund. The Act defines a “spouse” as:  “people married to each other or unmarried people who have lived together continuously for a period of not less than 2 years or have been in a relationship of some permanence if they are the natural or adoptive parents of a child”.  However, if my client’s spouse previously owned a home, or had an interest in a home anywhere in the world while she was my client’s spouse, neither party will qualify for the refund, despite my client’s eligibility.

Often times, new home owners are not aware of the various closing costs involved in purchasing a home.  It is important that you speak with your lawyer to discuss such costs, including land transfer tax, before signing the Agreement of Purchase and Sale.

If you are buying north of Toronto, you will at least be pleased to know that you are not required to pay Toronto’s Land Transfer Tax in addition to the Province of Ontario’s tax.

by Joanne McPhail, Partner

Generally speaking, everyone purchasing land in Ontario must pay the government a tax – called Land Transfer Tax (“LTT”). This includes land transfers between family members and spouses, unless the transfer falls within an exception.  There are three general LTT exceptions when property is transferred between family members:  transfers between spouses, gifts, and transfers to family business corporations.

Spouses

Spouses (or former spouses) are exempt from the payment of LTT in the following situations:

• When no cash changes hands and the receiving spouse assumes encumbrances registered on the land, if applicable. Perhaps a husband would like to transfer the matrimonial home into his wife’s name - so long as any mortgages or other debts registered on the land are assumed by the wife, and no other payment is made, then no LTT will be paid;
• When the transfer is in compliance with a written separation agreement, including an agreement between the spouses to live apart; or
• The transfer is pursuant to a court order or judgment.

Gifts between Family Members

Although the Land Transfer Tax Act does not expressly exempt gifts between family members from LTT, gifts of this sort are effectively exempt. For example, assume a grandmother (the transferor) would like to transfer the family cottage to her grandson (the transferee) – as long as there is no payment given between the family members, the value of the “consideration” (the figure used to calculate LTT) will be nil, and the tax will also be nil. If there is any assumption of liabilities, regardless of whether the land is transferred as a gift, LTT must be paid based on the value of the mortgage being assumed.

Family Business Corporations

A family business corporation is a private corporation in which all issued shares are owned by members of the same family. Ordinarily, if a family member wants to transfer land to their family business corporation, they will be required to pay LTT. An exemption to this rule may apply, however, when:

• The individual transferring the property carried on business on the land (which does not include farming, leasing of real property, or a personal services business);
• The individual transfers that land and the business to a family corporation; and
• The family business corporation will continue to carry on such active business on that land.

The purpose of the transfer must be to enable the transferee corporation to continue operation of the active business on the land being transferred. For example, John Smith may own the land where he operates Johnny’s Pizzeria.  If John would like to transfer both the Pizzeria, and the land, to his family corporation, Smith Family Restaurants Inc., and the family corporation will continue to operate Johnny’s Pizzeria on the land, no LTT needs to be paid. 

by Nathalie Tinti, Associate

Further to my last blog post on this topic, I would like to thank all of you who contacted me with your questions and comments. 

Now, for all of you just tuning in, we are speaking about Original Shore Road Allowances (“OSRA”) and the process by which you purchase them. OSRAs are public highways that exist at the water’s edge.  There are many reasons why you may want to purchase an OSRA, but usually the issue rears its head when you go and apply for a building permit from your local municipality because you want to build a dock or a boat house and quickly find out that you do not own the land on which you wish to build.  By virtue of the Municipal Act, municipalities must have by-laws in place for road closures and disposition of land.  This blog gives a cursory overview of the process, however, the intricacies of each municipality can usually be found on their websites or in person at their offices.

Common requirements from municipalities in order to purchase an OSRA are such things as:

• you must own an abutting property;
• your property taxes must be paid in full; and,
• you will be responsible for your own lawyer fees as well as the municipality’s.

In many circumstances, if the purchase is not contentious, you may retain the services of the municipality’s lawyers, thereby saving you the costs of 2 lawyers.

The process starts by the submission of an application, which can be obtained from your local municipal offices, or in many instances, on their website.  Application fees vary, but are usually between $500.00 and & $750.00, depending on the municipally. Once your application is submitted and you receive word that approval of your application has been given, you will need to retain the services of a surveyor.  The OSRA will need to be surveyed in order to be transferred.  It is worth noting that most municipalities do not transfer flooded portions of the OSRA.  Unflooded portions  are usually sold and those portions of the OSRA that are under water are retained.

Watch out for your timelines!!!  Most municipalities have strict timelines in place in order to process the sale.  The timelines are very reasonable and, in most circumstances, if there is a valid reason for short delays, extensions will be granted.

After the survey is approved and deposited at your local registry office, a by-law is passed by the municipality stopping up and closing the road and authorizing the sale of land to the abutting property owner.  Costs are based on the square footage of the OSRA and vary from lake to lake and from municipality to municipality.

Once the compensation is paid, the transfer of land occurs and viola, you now own your OSRA!  Build away!!

by Dave Smith, Partner 

New home buyers beware – the price on the front page of your Offer is often not the full purchase price – and the builder/seller has no legal obligation to make full disclosure of extra charges to you. 

I was recently reminded of this issue when reviewing a client’s pre-construction purchase contract for a fee simple town home abutting a common element condominium plan for the roads and amenities in the neighbourhood.  The 81 page purchase agreement was typical for a pre-construction project.  There was a floor plan without measurements of any guaranteed size, with options for the builder to revise the plans, alter elevations or reverse the footprint.  Furthermore there was an obligation to pay a number of undisclosed but unlimited charges.  As is usually the case, the contract was custom prepared by the builder.  Also included were the condominium organization documents.  I have found these documents are usually intimidating and incomprehensible to clients, and they do not bother to read them. 

Buried in the purchase contract and in the condominium organization documents were a number of additional costs to the buyer.  These included Tarion Warranty registration fees; utility meters and connection charges, Transfer preparation fees, just to name a few.  Additionally there were ongoing charges to be incurred in the future by the homeowners under the condominium documents. 

The lessons:  ask about undisclosed charges in the sales office before signing anything, and read the organizational or disclosure statement for the condominium. 

Finally, always have an experienced real estate lawyer review the purchase agreement and condominium documents within the prescribed cancellation or conditional period (usually 10 days). 

Be careful out there!

By Andrew Ain, Partner

Common Element Condominium Corporations (or “CECC”’s) are becoming more prevalent in Ontario, particularly in new freehold town home projects and waterfront developments.

A CECC consists of only common elements. There are no 'units', rather CECCs are comprised solely of a specific 'common element', which may include roads, parking facilities, a clubhouse, a marina, etc. These common elements are tied to a separate property called a ‘parcel of tied land’ (or “POTL”s). The POTL could be a townhome or detached home, and doesn’t have to be contiguous to the CECC property, as long as it’s within the same land registry division.

CECCs are attractive to developers because they circumvent the need to satisfy municipal road standards required in a traditional subdivision. Accordingly, developers can benefit from fitting more units into a particular land area, and reducing their road construction costs. At a practical level developers often work with their solicitor to create and sell separate parcels of tied land to each purchaser (in most cases freehold townhomes), which are not part of the CECC. They then create a CECC which includes all the facilities, roads, services, etc., the costs for which will be paid by the purchasers of the POTLs.

The owners of the POTL are responsible for their share of the common expenses relating to the CECC, which is no different than the treatment of expenses in a traditional condominium corporation. Liens for unpaid common expenses are treated similarly and will rank in priority to any encumbrances registered against the POTL, including first mortgages. In addition to sharing the costs of maintaining the CECC’s facilities, however, owners of the POTLs also share the ownership, use and enjoyment of these facilities.

A CECC is permanently tied to its corresponding POTL so that a POTL cannot be sold separate and apart from its interest in a CECC and vice versa. The common interest relationship cannot be severed - the benefits and the burdens run with the land unless the condominium is terminated under the Condominium Act.

Because the POTL is not a unit in a condominium, the purchase of a POTL and an interest in a CECC is completed using a standard agreement of purchase and sale for freehold properties. As such, certain condominium rules will not apply. While the Ontario Real Estate Association Agreement of Purchase and Sale will appear unchanged in many respects, the sale will include schedules (or in some cases, a separate agreement) addressing the purchase of the interest in the CECC.

For assistance with CECCs or other Condominium issues, contact your lawyer.

By Andrew Ain, Partner 

There are many situations where an individual may wish to change their name, marriage being the most common of these. After marriage, many new spouses presume that their nuptials are the only requirement needed to allow them to legally adopt the other spouse's surname. While many may proceed unhindered by only assuming their new married surname, the law actually requires individuals to take action in order to legally adopt it.

If you were married prior to April 1^st, 1987, you may legally assume your spouse's surname and stop reading here. If you were married after April 1^st, 1987, or if you are in a common-law relationship and wish to legally adopt your spouse’s surname, there are steps you must take in order to legally do so.

First, you must be legally married or living common-law with your spouse . Second, you must decide whether you’d like to replace your birtyh name with your spouse’s surname or combine your birth name and married surname using a hyphen. Finally, you must comply with Ontario’s Change of Name Act. The nature of the Act is draconian in that it effectively strips you of all vestiges of your prior identity, but compliance with the Act is necessary in order to legally change your surname.

 Compliance with the Act requires that you:

• Complete and file an Election to Change Surname form. If you are common-law, you will also need to complete and file a Joint Declaration of Conjugal Relationship form. (To obtain these forms, call the Office of the Registrar General at 1-800-461-2156);
• If you file your Election to Change Surname form within 90 days of marriage, or within 90 days of filing a Joint Declaration of Conjugal Relationship form, there is no fee. After the 90 day period there is a $25 fee;
• If legally married, provide a copy of your Marriage Certificate, issued by the proper authority of the jurisdiction where the marriage was solemnized;
• Provide all birth certificates and/or change of name certificates in your possession.

Following compliance with the Act, the Government of Ontario will register your change of name, note it on the birth registration and issue both a change of name certificate and a new birth certificate. If you were born outside of Ontario, the government will only register the change of name and issue a change of name certificate.

In practice, not many newlyweds or common-law couples will take these legal steps and non-compliance won’t cause them much more than minor angst.  In some circumstances, however, you may need to have your lawyer complete a Change of Name Application to clear up a title problem or draft an Affidavit confirming you are the same person as named in your birth certificate.

by John Cockburn, Partner

Question

We sold our home and agreed to a $10,000.00 deposit held by our Realtor.  The conditions were waived a month ago, firming up the sale so we went ahead and purchased another home on a firm and binding agreement. 

Our lawyer just received a letter from our purchaser’s lawyer telling us that the purchasers have changed their mind and bought another house and were asking for the return of their deposit! 

We naturally assumed that we would get the deposit in the event of a default and have other rights against the purchasers…….but our lawyer has been unable…….so far to get a cent for us and her bills are mounting…..what is up? 

Answer 

Unfortunately a real estate deposit in a trust account of a realtor is of little practical value to a vendor.  It is not the realtors fault but the Act governing relators prevents them from releasing the deposit unless either the defaulting purchaser consents in writing or a court order has been obtained ordering the release. 

A defaulting purchaser will seldom “consent” and obtaining a court order will take many months and will cost you thousands of dollars!!! 

Solution

Be certain as a vendor that the deposit is made payable to your solicitor in trust as solicitors are not bound by the realtors legislation!

by Kathryn Whitehead, Associate

In this day and age where a home is likely the largest investment an individual will make, it is always recommended that a home inspection be completed prior to purchase.  Although the law does not require a home inspection in order to complete a purchase, it is likely safe to say that almost all real estate lawyers would suggest one be completed prior to purchase - it just makes sense!  Please, do your homework, reduce your exposure, and ensure you are purchasing your dream home problem free.

WHAT IS IT

 A home inspection is a process whereby a qualified home inspector comes to the premises and does a visual inspection of the property in question to determine the quality of the workmanship as well as the habitability of the property.  The home inspector will generally inspect the house from the roof to the basement and all things in-between.  Some of the main things included in the home inspection will be reviews of the plumbing, electrical, water heater, and heating & cooling systems.  Possibly the most important thing an inspection will reveal is whether the home was constructed according to local building codes and that it is in good standing, so to speak.  In addition to your general home inspection, some home inspectors & inspection companies will offer added services such as water, radon or mold testing for an additional price.

WHO TO GET / HOW TO CHOOSE THE PROPER INSPECTOR

 It is always a good idea to get someone who is qualified and experienced to perform the home inspection.  Some people think that they can save money by getting a friend or family member (who might even be in the construction industry) to complete these inspections, but this is highly discouraged.  The inspector should be neutral, as well as impartial, when it comes to the party requesting the inspection.  This way, the inspector will give a completely unbiased opinion as to the actual state of the property and should not have any tendency to ‘sugar-coat’ or ‘down-play’ any defects discovered.  Further, a qualified home inspector will carry liability insurance so if a claim is made in negligence, there will be a pool of funds to help satisfy any judgment.

WHY IT SHOULD BE DONE ON ALL HOMES (new & old)

Even if the prospective home is only a few years of age, it is still wise to get a home inspection.  If one chooses not to get an inspection on the basis that a home is not very old, the purchaser may end up acquiring something that they didn’t bargain for.  Have you ever heard the saying “Caveat Emptor”?  In the legal world this means “buyer beware”.  It basically is the notion that the purchaser should do all it can within its power in order to ensure that what they are purchasing is exactly what they have intended to pay for, nothing more and nothing less.  If the purchaser fails to do their due diligence and a problem arises after the sale of the home, it is possible the purchaser will be out of pocket for the problem themselves.  In the event that a home inspection had been completed prior to purchase, it is likely that the defect would have been noticed and could have been addressed in the agreement of purchase and sale.

EXAMPLE

 A newly-wed couple purchased a four (4) year old home and decided to forgo a home inspection.  Needless to say, this turned out to be disastrous for them in the long run.  Although a home inspection was suggested,  the couple declined to have an inspector due to the age of the home.  Unfortunately, they took possession to their new home only to find it flooded!   Ultimately, there was a problem with the brickwork & foundation which allowed water to seep through into the house.  This not only caused the couple tens of thousands of dollars in water damage,  but the Vendor’s denied any claim for compensation.  The opposing lawyer claimed caveat emptor applied and that the Vendors were not responsible for the water damage.  Not only did this lead to the clients being out of pocket to fix the problems, but it also meant added legal costs in trying to recover damages from the sellers.

CONCLUSION

 I hope I have made it clear how important a home inspection really is.  Regardless of the age of the home, or the visual state it is in, an inspection should always be completed prior to purchase.  It may cost a few hundred dollars, but it is a small investment that will help protect one of your largest investments and may potentially save you time, money, aggravation and legal costs!

“I am the king of this castle”;  “I am the lord of this land”;  I can do what I want – it’s my land”! 

How many times have you heard these words, or similar ones, from landowners?  They often get quite indignant that someone else should have any control over what they do with, or on, their land. 

And yet, just think about what a chaotic mess we would be in if a landowner was allowed to open a small, toxic chemical plant next to a hospital or nursing home.  Our society is founded on the Rule of Law and that means that we submit to the right of government, be it federal, provincial or municipal (which, after all, are creations of the Crown which ultimately owns the whole country, in theory at least) to impose controls and restrictions on what we can do with our bundle of rights that we call “land ownership”. 

And so we have laws, such as zoning bylaws and environmental controls, that limit what we can do with, or on, our land.  A large body of law has accrued over the decades to deal with land uses and even to decide which municipality should have jurisdiction over what land. 

Our law in Ontario, flowing as it does from English law, is a delicious combination of principles declared over the decades by decisions of Courts of law – we call those decisions “the Common Law” – and of rules created by legislation passed by government. 

We’ll talk some more about how some of these things evolved. 

by Graydon Ebert, Associate

The Government of Canada has recently introduced new rules for all mortgages insured by the Canadian Mortgage Housing Corporation (“CMHC”). The law requires that mortgage insurance must be obtained from CMHC where the homebuyer has made a down payment of less than 20%. The government made 4 important changes to the rules.

1)  The maximum amortization period has been reduced from 30 years to 25. The effect of this change is that monthly mortgage payments will be slightly higher as they will be amortized over less years, but the interest paid over the mortgage will be significantly reduced.

2)   The maximum loan amount that a borrower can get when refinancing has been reduced from 85% of the value of the home to 80%.

3)  The government has introduced limits on the gross debt and total debt ratios that lenders use to assess a borrower’s ability to pay when approving the borrower for a mortgage.

4)  Mortgage insurance is only available for homes with a purchase price of less than $1 million. For homes over $1 million, the borrower must make a down payment of at least 20%.

Now perhaps you are in the market, looking for a new home. Maybe you have already been pre-approved for a mortgage. Maybe you have signed an agreement of purchase and sale and have made a mortgage insurance application. Maybe you have bought a condo but it hasn’t been built yet. Maybe you are looking to refinance or renew your mortgage. If you are in any of these situations, you probably want to know if these new rules will apply to you.

The first thing to remember is that if you make a down payment of 20% or more, these rules do not apply to your mortgage.

The new rules take effect July 9, 2012. They will not apply where a mortgage application has been made before July 9,2012 to satisfy a binding agreement of purchase and sale, financing or refinancing agreement. If your agreement of purchase and sale is dated earlier than July 9, 2012 and a mortgage insurance application  has been made before that date, the new rules will not apply, even if there are outstanding conditions in your agreement that have not yet been fulfilled.

Any new mortgage insurance application received between June 21, 2012 and July 9, 2012 that does not conform to the new rules must be funded by December 31, 2012. This is relevant to those who are considering purchasing a condo in the near future that has not been built. If the purchaser has bought a condo that hasn’t been built and made a mortgage insurance application between June 21, 2012 and July 9, 2012, the new rules will apply if the mortgage is not funded by December 31, 2012. So you have to be careful. If you are thinking about purchasing a condo in the next couple weeks that you won’t be paying for until it is built, the new rules will apply unless you receive the mortgage funds before December 31, 2012. You need to make sure you know when the condo construction will be completed to know whether the new rules will apply.

If you have been pre-approved for a mortgage, but will not sign an agreement of purchase and sale and make a mortgage application before July 9, the new rules will apply to your mortgage.

If you are planning on renewing your mortgage or switching your mortgage to a different lender, you won’t be affected by these changes as long as no new funds are added to the mortgage.

If you are planning on being active in the real estate market or refinancing your mortgage in the next couple of weeks, or have already begun the process, make sure you know if the new rules apply to your situation, and if so how the new rules will affect your plans going forward.

by Joanne McPhail, Partner

by Dave Smith, Partner

Nathalie Tinti has told you about the issues surrounding ownership of the shoreline in front of your cottage (Don’t let an Original Shore Road Allowance (OSRA) Take You by Surprise!). In addition to shore ownership, a major issue that we often see in cottage properties is how you can access  your dream escape on the lake.  If you are fortunate enough, and have probably paid a premium, to obtain a maintained municipal road providing access, you likely do not have a concern. You will want to inquire and ensure that the road is not seasonal only because that would mean that it is probably not plowed or maintained during the Winter.

However, if your access seems to be by a “private” road, a number of possible rights and obligations may apply.

There may be a registered right-of-way or easement to connect a municipal road to your property.  That is a good thing!  The  documents that give the easement or right-of-way will need to be reviewed carefully to determine exactly the rights that you have for travel, and to make sure  that such rights are assignable.  Often there is  an agreement between neighbours who enjoy the benefit of the access route, to share in the cost of its upkeep.  But there often is not, and a more informal relationship exists.  Don’t be surprised when you find out that certain users do not share in the annual maintenance costs. These are usually the people that use the lane the most!  They say that they never wanted the intrusive traffic laden laneway in the first place, and prefer to get to their isolated cabin in the woods by water.

The lesson:  question the neighbours to find out who’s in charge and what are the rules.  Many cottage properties do not have a registered easement or right-of-way at all.  Some try to rely upon the Road Access Act which was first enacted in 1978 to prevent the arbitrary obstruction of an established access route.  The Act has been partially successful but not entirely.  The Act does not create any rights.  The person enjoying the access has no right to improve or alter it.  And the owner of the property over which the access is found has no obligation to maintain it.  So the muddy ruts may have to remain.  You may not be able to expand the route to accommodate your boat and trailer.  But the owner cannot block or obstruct your access.

There is substantial law that deals with prescriptive easements, easements by necessity, equitable easements, express or implied grants, easements by proprietary estoppel, etc. It’s a mess and it’s ugly.

Caution – carefully canvass your legal rights on access.  Be careful out there.

by Nathalie Tinti, Associate 

Knowing that your neighbour down the way was charged for not applying for his permit last year when he built his dock, you realize that you need a permit to rebuild.  And since you are rebuilding anyway, you might as well make your dock into that gorgeous “U” shape 7,000 feet of dock space that you have always wanted!  Off you go to your local Municipal office, full of energy, drawings in hand and a smile that would make your grumpy aunt Fanny May break into song.  Within minutes of being in the Municipal office, you hear  4 words that you have never heard before that are about to throw you for loop… “Original Shore Road Allowance” or OSRAs as we in the real estate business like to call them.

Along with those 4 words comes an explanation as to what it is and why you don’t own it.  And then usually comes a call to your lawyer, because it simply cannot be true that you do not own to the water’s edge of your very expensive cottage property.  Guess what, unless you or a predecessor owner have purchased it, you do not own to the water’s edge of your waterfront property.

In and around Georgian Bay, Parry Sound and Muskoka, 66 foot (or 1 chain as they like to say in the golden olden days) shore road allowances are the rule rather than the exception.  The reason for these original shore road allowances is not thoroughly documented, however, it appears that the reason for them probably dates back to times of logging operations.  These OSRAs provided the lumberman with the right to trespass on private lands to haul logs.

The good news is, most of the time, these OSRAs can be purchased from the Municipality.  Thanks to snowmobilers and ATV operators finding out about the OSRAs and using them as trails, much to abutting property owners chagrin, pressure from tax payers forced municipalities and the Government to sell these ORSAs to abutting property owners in order to secure their privacy.  The real purpose of the OSRAs has long since passed, and municipalities now have the option of retaining them or selling them. 

The process by which this happens will be the topic of my next blog.