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!!