Author Archives: ggslaw987

Why I Run

Many have asked me why I run. Or, they say “you’re a big guy, how can you run?”

I don’t enjoy the pain. I certainly don’t enjoy cold dark mornings. I would much rather remain cozy under the covers.

Running is not easy. Running is hard. I started running by walking, and adding in some running steps. Over time, the walking steps decreased and the running steps increased.

Over a one-week period, I will run 3 times – usually 10 kms on Tuesdays and Thursdays and then a longer run on Saturday or Sunday, whichever day has nicer weather. Yes, I am a fair weather runner. I hate the freezing cold even though I do it when I have to. The other days, I will do some other form of exercise with one-day off.

My other forms of exercise are weight training to strengthen my upper body and lower back, push ups, burpies (which I hate the most) and isometric exercises like planks and even yoga – all intended to help me strengthen my ability to hold my upper body upright for longer and longer distances. But, running has always been my preferred choice of exercise and all other forms of exercise are intended to compliment and further my running ability.

So, why do I run?

Like most people, I want to carve out time in my day that is just for me. No distractions. No cell phone or email message beeps. No abrupt interruptions from co-workers asking “you got a minute?”  Of course I have a minute. We all have minutes that are eaten up by daily rituals of doing something for others – all day long – and now – right now – as I run – there is no cell phone – no interruptions whatsoever.

As I run, I tune into my energy level, my posture, my breathing, my joints, my muscles, and my hydration and nutrition. As I run, I focus on all these aspects and I strive to create harmony between them – a balance between wanting to finish and finish well.

Health is a consequence of my running and running is a consequence of my health. Without one, you can’t have the other. Running helps control my weight and drives me to remain focused on good nutrition.

I feel rather naughty telling you that I get a “high” from running. All runners know exactly what I mean. You run the first little part and struggle as you get your pace and breathing under control and work out the kinks in your muscles until you get to the point when you feel unstoppable and free. Like you can go on forever. When you wish it did not have to end. It’s called the “runners high” and results from your body releasing a magical mysterious drug that can never be regulated or outlawed from the Olympics – Endorphins!

A google search tells us that:

Endorphins are among the brain chemicals known as neurotransmitters, which function to transmit electrical signals within the nervous system. … Endorphins interact with the opiate receptors in the brain to reduce our perception of pain and act similarly to drugs such as morphine and codeine.

Wow! Our body is so amazing that it can alleviate pain naturally and it’s free!

Running is the satisfaction of knowing that “I did it”. That I ran the distance and ran it well. That I challenged myself and my limits. That I took my body on a journey and came out the other end feeling exhausted and elated at the same time.

Running is my peace. In the truest sense, running is “my time”. It is pure and simple. For that 1 or 2 or 3 hours, you will not get my attention. My mind does not care for the latest news blast, weather report or the latest political gaff – I just don’t care. I let myself go into a solitude existence – deep in my thoughts. The only thing I am concentrating on is my breath and every fibre in my body as my feet rush beneath me. I feel the wind on my face. I see people and cars and hear noise all around me but in some strange way, there is no noise and all that I see is a blur. So, don’t honk or waive at me. I will not hear you. I will not see you.

Some say this is selfish of me. And I ask “what is wrong with being selfish for the right reason”? To clear my head. To focus and put things into perspective. To re-connect with my breath and body. To re-energize my soul. What is wrong with all of this?

If I am not clear headed, focused or fresh in my mind, then how can I be as positively engaged with my clients, my co-workers and, most importantly, with those I love?

So don’t ask me why I run, just come run with me!

It’s not a bubble – It’s a devastating storm

Real estate lawyer, closing costs

I believe it is everyone’s right to have a safe and affordable home to raise a family.  The reality in today’s economy is quite the opposite.  I see people making desperate decisions to buy a home out of their price range for fear that they won’t be able to afford anything similar if they wait.  They are maximizing their credit cards, borrowing more from parents and cutting back on certain activities for their children just to make ends meet.

I had recently quoted Benjamin Tal, Chief Economist with CIBC World Markets, who spoke of a generation that is going to “inherit inequality”.  I won’t event attempt to explore the depth of the subject, but suffice it to say that there is a growing demand on rental units.  Just yesterday, I had a client that is selling her home because she can’t afford to live in it.  Yes, she intends to bank the little amount of equity she will get out of selling her home and rent.  I see this trend more and more.

The implication of what Tal was saying is that, if you are not a home owner now that you may not likely be a homeowner in the near future given the trend of skyrocketing home prices.  And, today’s Globe and Mail article about Ontario pushing Ottawa for some form of tax on speculative buyers or increasing the capital gains tax is a sign that governments recognize the seriousness of the problem.

Just think, you have people buying properties based on speculation of profiting, low inventory of homes on the market and first time home buyers trying to get into the market.  How does a first time home buyer compete with an investor with very little homes for sale?

Don’t get me wrong.  I don’t criticize investors.  After all, they have children for whom they want to provide a home and ensure a financial nest egg for themselves.  I get it.  But, if average people can’t afford to buy their own home and must turn to renting, that will put a corresponding strain on all levels of government, primarily provincial and municipal, to provide affordable housing.  It is a storm brewing like no other.

Ironically, I know that builders are in tune with this growing demand for rental housing units and have already started building a mix of condominiums and rental apartments.  The only issue is that market pricing remains an issue because demand is growing for good rental units.

My question is whether all levels of government can create a unified strategy in concert with builders whereby builders have the right incentives to build affordable rental units for growing families?  A grand idea perhaps, but if it works, would this not be a more cost effective alternative to managing government deficits and pressure to keep increasing tax revenues?  Just saying……

Buying a home? Talk to a Real Estate Lawyer »

Burlington, Hamilton, Milton, Mississauga, Guelph

What does Trump have to do with home ownership in the GTA?

Benjamin Tal, Deputy Chief Economist with CIBC World Markets, made a spectacular presentation to kick off the Landpro conference today at the Paramount Centre in Vaughn.

Tal spoke about the economy and real estate outlook for the GTA.

Tal started with Trump’s election and ended with the rise of housing prices, the trend towards a reduction in the number of CMHC insured properties and the need for “purpose built” developments (aka the need for more rental units).

Taking liberty with Tal’s insightful analysis, he believes Trump will only last 1 term as President because his expressed and demonstrated approach to creating more “jobs” (his mantra) is inconsistent with the economic realities occurring in the USA and the world.  He called Trump “inflationary” and predicted that Trump will fail in creating more jobs and trade.

Tal pointed out that the manufacturing sector in the US is outperforming Canada which should be the exact opposite given our much lower dollar.  But overall, manufacturing jobs have been falling long before China entered the WTO.

The number of American workers receiving disability benefits in 2016 outnumbered the number of production workers.  Government tax cuts reduce revenue which increases government borrowing.

Canada’s share of low paying jobs is rising.  And although there is an availability of good jobs, Tal said employers can’t find workers with the right skill sets to perform those jobs.

Canadian manufacturing is near full capacity and needs investment to lift exports.

From 2015 to 2025, there will be approximately $800 billion in the transference of wealth in the form of inheritances which Tal labelled as “inheriting inequality”.   This is tied to an individual’s ability to buy homes at their current prices and future prices.

The Bank of Canada’s real motive in keeping interest rates low is to support our weak dollar and not necessarily to promote private home ownership.

Rising home prices in Toronto are forcing people to look further and further away from City centre to find homes within their price range.  Although low interest rates continue to promote new home ownership, the high cost of homes coupled with the new federal mortgage rules constricting the number of CMHC insured homes, Tal predicts will create an increased demand for rental units.

Sorry Tal if I butchered your fantastic presentation – it was refreshing and insightful.

Article by Real Estate Lawyer Karmel Sakran »

The Principle Residence Exemption is under attack

Until recently, when you sold your principle residence you did not have to declare it on your tax return and you were not at risk of paying income tax on its increase in value from the original purchase price.

As of October 3, 2016, the federal government requires you to report the sale of your principle residence to determine a pattern of whether the principle residence exemption should be disallowed.

According to the Minister of Finance, Bill Morneau, the federal government wants to target “perceived abuses of the PRE” or, in other words, to target individuals that flip homes for profit as a source of taxable income.

And, despite the fact that the federal government established a number of legislative measures and CRA administrative changes (all of which I leave to your accountant to explain), the fact is that there remains much uncertainty on who will not qualify for the PRE.

The biggest difficulty for CRA is that making a “profit” (being the growth or increase in equity) has always been a natural aspect of home ownership.  We use the increased equity to “upsize” and even to “downsize” and bank the excess.  The point is that we have always used our home as a source of advancement and retirement.

The financial environment for homeowners is now uncertain.  Homeowners are now faced with the prospect of having to justify why they are entitled to the increased equity from the sale of their home and why they qualify for the principle residence exemption.

How will CRA determine when the growth or equity from the sale of a home constitutes taxable income?

Will someone’s intentions and personal reasons factor into the equation?  If so, what personal reasons will qualify?  I didn’t like the neighbourhood?  The school?  The neighbours?  Change in employment?  Or, I simply changed my mind about the home?

How much profit is too much before it becomes taxable income?  $10,000?  $100,000.00?

How long must a person or family live in the home before it’s sold?  Six months?  Six years?  And how much renovation is too much?  Interior non-structural improvements?  A one room addition?  Demolition and complete re-construction?

I find it difficult to imagine regulations that will define all these questions into an objective application for all situations.

As an aside, those that claim the PRE means that they are not entitled to claim or deduct the substantial costs associated with buying or selling a principle residence, like:

  • realtor and legal fees;
  • land transfer tax;
  • title insurance;
  • mortgage interest and pre-payment penalties;
  • relocation costs;
  • repairs and improvements/renovation;
  • municipal taxes;
  • development costs;
  • and more.

And, you are not eligible to claim the H.S.T. rebate when it’s your principle residence.

The fact is that there is an imbalance of power between CRA and taxpayers. I suspect that many taxpayers will be forced to settle and pay tax against some or all of the growth/increased equity generated from the sale of their home just to get CRA off their backs.

It is a murky area that may inhibit one’s right to mobility and investment in one’s own home.  Trying to capture a few “perceived abusers” will risk eroding pride of home ownership and cause harm and harassment to a greater number of well-intentioned individuals.

So what if a person makes a living flipping homes?  If it is their principle residence, why should they not qualify for the principle residence exemption?  I say leave the principle residence exemption alone, subject only to the authenticity of one’s residence.

Real Estate Lawyers for Burlington, Hamilton, Milton, Mississauga, Guelph »

“WHY” the new stress test lending requirements?

 

stress-test

The federal government, bless their heart, have implemented a financial stress test for homebuyers effective October 17, 2016.

Qualifying for a mortgage has always been a “stress test” for borrowers but we never called it that.  The federal government tweaked their lending rules in four substantive ways:

  1. Banks now have to assess mortgage applicants against the Bank of Canada’s five-year fixed rate (currently 4.64%);
  2. No more than 39% of your total household income can go towards your housing costs such as utilities, property taxes, mortgage and home insurance;
  3. You must have a minimum credit rating of 600; and,
  4. Amortization must not exceed 25 years.

In the past, homebuyers could qualify under the bank’s five-year variable rate (currently under 3% for most financial lenders).  Now, of course, the new lending rules mean that many new homebuyers or high ratio borrowers will have to wait until they have a larger down payment or consider buying a cheaper home.

Quite frankly, the new lending rules are most unfair to first-time homebuyers.  Others before them got away with much more lenient lending rules and, as a result, were able to buy their new home.  That doorway has now been closed.

Why the new lending rules by the federal government?  Many know that the federal government, through the Canada Mortgage and Housing Corporation (“CMHC”), insures high ratio lenders.  Those are individuals that put less than 20% and more than 5% down on the purchase of a home.

The federal government has legislated a $600 billion limit on the total dollar amount of its mortgage insured loans and, the current balance of CMHC insured outstanding loans sits at $523 billion as of 2016 Q2.  The upper cap of $600 billion is almost maxed out.

In looking at the CMHC Mortgage Loan Insurance Highlights 2002 – 2016 Q2 https://www.cmhc-schl.gc.ca/en/hoficlincl/homain/stda/data/data_005.cfm, it appears to me that the federal government wants to stabilize the risk to itself and to homeowners from the volatility of the market.

Although there are several CMHC indicators which remain consistent (such as the average loan to value ratio of CMHC insured homes remaining between 53% to 55%), the soft and unpredictable economy coupled with other CMHC indicators suggest borrowers are being more aggressive in their borrowing habits.  In my view, this trend is concerning to the federal government.

Looking at some CMHC statistics and specifically, CMHC insured households:

  • the average loan amount per household prior to 2015 sat around $140,000 and increased in 2015 to $175,000; that’s an average increase of $35,000 insured per household;
  • the number of insured households per quarter:
    • 2013 Q1 – 52,000;
    • 2013 Q3 – 114,000 (highest prior to 2016 Q2);
    • 2014 to 2015 Q4 range of 50,000 to a high of 91,000;
    • 2016 Q1 dropped to 63,700 households; then,
    • 2016 Q2 dramatic spike to 117,500 newly insured homes (highest ever).

When you consider the recent spike of $35,000 in the average dollar amount insured per household and the highest jump ever in 2016 Q2 to 117,500 of insured households, these raise huge concerns for the federal government.  Clearly, first-time homebuyers are caught up in the buying frenzy and bidding wars.  With the stagnant low interest rates, people are making more and more aggressive bids, including high ratio borrowers which is likely contributing to the overall increase in the average insured amount per household.

When you also consider the borrowing trend of high ratio borrowers insured by CMHC/federal government alongside a recent report (http://www.huffingtonpost.ca/2016/07/21/canada-economic-outlook_n_11108646.html) that downgraded Canada’s economic growth forecast to 1.4% for 2016, plus the fact that the Bank of Canada is hard pressed to increase its lending rate, the federal government stepped in to tighten its lending rules for high ratio (and low ratio) borrowers.

In the event the “bubble bursts” in the housing market, the symptom will be the decline or attrition in housing prices while the substantive socio-economic impact will be families losing their home.  This is what, I suspect, the federal government wants to avoid.

Article written by Karmel Sakran

Oct. 19, 2016

The New Economy of Law

The New Economy of Law

I just returned from the Pro Bono Conference held in Ottawa last week organized by Pro Bono Ontario.  I attended because our law firm provides a pro bono legal services without fanfare.  We provide pro bono legal service because it is the right thing to do.

I attended the conference in order to try and see how we can do things better.  How do we act responsibly in balancing the “business of law” – paying our staff and overhead – with the desire to continue providing pro bono legal services responsibly?  And, are there ways to do things better on both fronts?

I met many fascinating lawyers in public and private practice who educated me on what they are doing and what they plan to do.  I came away with many ideas which I will take back to the lawyers and staff in my office.

It may appear to some lawyers that doing pro bono work is something they can’t afford to do.  After all, they have to pay their rent, their staff and certainly themselves.  And, I have never heard a lawyer say they have enough staff resources.  However, I was surprised to learn that there are financial benefits to lawyers providing “free” legal services.

But that should never be the reason for anyone providing free legal services to someone who can’t afford it.  The lawyer must have the right ingredients of head and heart to do it responsibly and effectively – for you and the client.

It is like volunteering.  You get into it out of curiosity, friendship or a desire to give back.  But when you get into the actual heavy lifting, you connect with people in a way that expands your vision, your opportunities and your sense of purpose in life.

At some practical level, pro bono work has been proved to improve staff and lawyer moral, which helps retention and productivity.  Interestingly, it is expected by U.S. Federal departments in their R.F.P. forms for law firms bidding on engagement opportunities.  I suspect this will expand into Canada and more and more into private sector organizations.  Many of the big law firms have implemented, from the sophisticated and substantial to the unsophisticated and informal acceptance of pro bono work as a component of their work load.

Smaller law firms and many sole practitioners do pro bono work as well.  They do it because someone’s story touched them in some way or they believe in the cause.  I am sure that many lawyers sometimes agonize over why they ever got themselves involved in a pro bono file, but they soldier on because they believe they are doing the right thing.

Pro bono work can, with public and private support, advance the delivery of legal service not only to those that can’t afford them but also in creating systems – whether technology or structure – which can be used in delivering legal services efficiently to paying clients.

Some lawyers will see the expansion of pro bono work as a threat.  Some lawyers will tolerate and modify the way they do business only to the extent they have to.  And, there will be some lawyers that will take up the challenge and lead in the new economy of law.

I believe that client development in the future (paying clients that is) will demand a strong public service profile with competencies that include specialized knowledge delivered efficiently.   Leading in the area of pro bono work will re-define the legal profession and advance access to justice for those less fortunate.  Love it or hate it, pro bono work is here to stay and, over time, will force lawyers in public and private practice to evolve to stay relevant.  Welcome to the new economy.

Article written by Karmel Sakran

The Housing Market….

Real Estate Lawyer, closing costs

The other day, I heard a report on CBC that housing sales are down an overall 3%, primarily due to the B.C. housing market.  Although this is a very busy time for real estate deals, the number of deals our office is handling is leveling off compared to same time last year.

In my unqualified opinion, housing prices are not declining.  Instead, they are stabilizing which means that the gross competition and bidding wars experienced in recent past is now tailing off.  As an aside, two months ago, I was successful in having CMHC reverse a refusal to extend coverage by presenting them with a 3rd party valuation substantiating the fair market value at $80,000 over list.  This saved the deal and ensured that the client did not lose their $10,000 deposit.

The new reality is that the recent boom and fierce competition has helped many, who held onto their home, to increase their equity intended for retirement.  Good for you and good for the many that got into the housing market before the boom.

Interest rates?  Again, in my unqualified opinion, I don’t see a large shift over the next 24 months.  Interest rates are tied to multiple economic factors but the simplest I see is that our economy is still transitioning to the new reality of high tech – we are not entirely there yet.  In fact, I have a lot to say about this growth area but that is for politicians and economists to solve.  I enjoy leaving this for “nice” dinner conversation.

Happy owning!

Karmel Sakran

GREEN GERMANN SAKRAN CANADA DAY RUN 2016

Thanks to all the runners, donors and volunteers, we raised $2,500 for the YMCA Strong Kids Campaign!

It was a fun way to start Canada Day and everyone had a blast.  The kids did the 1km run first with all adults waiting for the 5km start.

Here is a short video of the action.