Tag Archives: real estate law

What to To Do With Your Pending Real Estate Deal

(THIS IS NOT LEGAL ADVICE – the discussion is just one lawyer’s observations and views intended for a general audience)

The concern for buyers is that they may be laid off and not have the financial resources to carry a mortgage for an indefinite time after closing until their financial circumstances go back to normal.

It is a real dilemma.

A quick review of the standard OREA purchase and sale agreement shows that it does not contain a “Force Majeure” clause.

Force Majeure is a very unique legal concept that can relieve parties from their contractual obligations – like closing on a real estate transaction - on the narrow and high threshold exception where something not reasonably expected interferes and makes closing impossible or impracticable.

The legal principle is important because it can be used by a buyer who fails or refuses to close on a deal to be released from the contractual obligation to close and secure return of their deposit.

Presently, the virus is a worldwide pandemic that no one could have reasonably expected resulting in such great economic decline, particularly of non-essential products and services – with massive layoffs, financial uncertainty and massive number of EI applications. (See Wikipedia definition of force majeure https://en.wikipedia.org/wiki/Force_majeure)

Even if a buyer is not laid off work, the response to the pandemic has necessitated an economic slowdown so great that most industries are affected resulting in widespread economic uncertainty.

Clearly the State of Emergency called by Cities and Provinces and the looming imposition of the Federal War Measures Act – all speak loudly to the application of a “force majeure”.

Beware, the legal principle of force majeure is not an automatic right. The burden remains on a buyer to argue the application of a force majeure in a court of law if a seller refuses let the buyer out of the binding agreement and/or return of the buyer’s deposit.

Although our office has not yet had a buyer failing or refusing to close, this is a risk as time passes. As we see deals not closing, litigation may follow the end of the pandemic and economic recovery.

So, what should realtors do in the meantime to protect themselves and their clients?

There are two clauses you should advise your clients to include in purchase offers or counter-offers, namely:

  1. A force majeure clause and;
  2. An employment clause that allows your client to be released from the deal and return of deposit if they are laid off or terminated from employment prior to closing.

I understand that such clauses could jeopardize acceptance by a seller. Nevertheless, realtors should advise their clients to include such clauses and document your advice by sending the client an email.

We, at GGS, would be happy to assist in drafting these clauses to include in offers and counter-offers on behalf of your clients.

Regards,
Karmel Sakran
Managing Lawyer

GREEN GERMANN SAKRAN
411 Guelph Line, P.O. Box 400
Burlington, ON L7R 3Y3

T: 905-639-1222
F: 905-632-6977

What does Trump have to do with Real Estate and homeownership in the GTA?

Real Estate and Homeownership 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 homeownership.

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 homeownership, 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.

Real Estate Lawyers for your homeownership purchase or sale »

Article by Real Estate Lawyer Karmel Sakran »

The Principle Residence Exemption is under attack – flipping homes

The Principle Residence Exemption and flipping homes

Principle 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 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 homeownership.  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 homeownership 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 »

If you are selling your home privately…

Selling your home privately?
Resources from a Real Estate Lawyers

Then you should know that there are resources out there that can help you get your home ready and in tip-top shape to get the best possible selling price. Selling your home privately requires the assistance of professionals to reach your’e asking.

Realtors typically know all kinds of people and businesses from roofers, and home inspectors to home stagers to prepare your home for sale.  But do you?

I was at a Realtor’s event recently and met some incredible people who can help you prepare your home when trying to sell it privately.  Buyers may also be interested in some of these services like home inspectors, moving boxes and environmental remediation people.

PICTURES & FLOOR PLAN LAYOUT – Brian Brown from Snapd iGuide has a remarkable business that comes into your home and takes professional photos – but the remarkable part is that his photo technology actually measures the dimensions of each room and maps out a floor plan layout of your home.  The floor plan layout can be posted on the internet and viewers can click on every room and they will get a virtual view of the entire area.  It looks amazing and professionally done for a very low cost.  Only $250 for homes up to 2500 sq ft.   To me that is a remarkable price for what you are getting.  Check out their website at www.snapdiguide.com or just contact Brian at brian@snapdiguide.com / 519-831-7322. www.snapdiguide.com.

HOME STAGING – And you must meet Jill Ackerman and Shardie Stevenson from Stage Right. Jill and Shardie are remarkable individuals.  Jill reminds me of the famous actress Maude.  Strong, bright and that golden white main is stunning.   Jill will come to your home and, regardless of whether you have moved out or not, she will stage your home for viewings so that it makes the best possible impression on potential buyers.  How can you go wrong with that kind of assistance?  Just call Jill at 289-880-0500 / jill@stageright2sell.ca or check out her website at www.stageright2sell.ca.

 

Jill & Shardie of Stage RightLeft to Right:  Jill Ackerman, Karmel Sakran and Shardie Stevenson

SIGN POST & PACKING BOXES – And then there is Jim Osborne who thought he had retired and ended up buying a couple of businesses.  One is Smartposts which manufactures lawn signs that advertise your home for sale.  They look professional like any other realtor sign.  Smartboxes is Jim’s other business which provides a variety of eco-friendly green moving boxes you can rent for packing your belongings.  They are strong and easily stackable.  You can call Jim at 905-960-1021 or sales@postinstallers.com – or check out his 2 websites:  www.smartboxes.ca and www.postinstallers.com.

UNWANTED STUFF – Of course, there may be stuff you don’t want to take with you and that is when you want to call my friend, Chris Wade of Goodwill Amity to donate those items.  If memory serves me correct, Chris’ team will come out to your home to pick up those generously donated items.  You can reach Chris at 905-526-8482 or cwade@goodwillonline.ca.

MOULD REMOVAL – I had a great time chatting with two wonderful people, Richard Hughes and Kerry MacMullin.  Richard is a bright and engaging fellow who owns and operates HIP (“Home Improvement Professionals”) Mould Pros.  Richard’s business is to remove mould from your home.  Kerry makes Richard look good by providing him with all the back end support while he`s is on the road.  Richard explained that there are a variety of ways to remove mould from homes and he swears by his technique which he says is fully insured, fully guaranteed and certified by a professional engineer.  Richard took the time to explain the various methods used and why his method is second to none.  Check him out at www.H-I-P.ca or call him at 519-766-2042 or richard@H-I-P.ca.

richard and Kerry of HIPLeft to Right:  Kerry MacMullin, Karmel Sakran and Richard Hughes

HOME INSPECTION & ENVIRONMENTAL REMEDIATION – There were several other professionals with whom I did not really get a chance to chat with for very long….but here they are:

  1. Henry Kwasniak of Healthy Environmental.ca seems to focus more on Commercial/Industrial buildings.  His information shows that he is an MOL certified trained technician for Abatement and MOE licenced disposal for mould and asbestos.  You can reach Henry at 1-855-666-6853 or henry@healthyenvironments.ca / www.healthyenvironmental.ca;
  2. John Hansen of HouseMaster serves Hamilton, Burlington & Surrounding Areas and he can provide a WETT Certificate for fireplaces. John provides 20% discount for all veterans and can be reached at 905-966-7378 or hansen@housemaster.ca / www.housemaster.ca;
  3. Ed Iwanchuk and Dan Davies of TeamOne are certified in the use of Infrared Camera technology. A realtor was at their booth and swore by them.  Ed and Dan can be reached at 905-745-9250 or teamonehomeinspections@gmail.com / teamonehomeinspections.com; and,
  4. Dan Kern of HomeWorks Inspection Services Ltd. is a registered home inspector who also serves the Burlington, Hamilton & Brantford areas. Dan can be reached at 905-630-8775 or dan@homeworksinspections.ca / homeworksinspections.ca.

CMHC – Cathy Aquilina, Account Manager with Canada Mortgage and Housing Corporation provided me with some very helpful information for homebuyers who are putting down less than 20% towards the purchase of a home.  Keep in mind that CMHC does not deal directly with homebuyers.   CMHC deals directly with the mortgage brokers and lenders.  Lending institutions submit the application for CMHC coverage on behalf of the buyers.  However, Cathy told me that she regularly speaks at homebuyer seminars and there is great information on the CMHC website.  And best of all, there is an APP that can be downloaded by homebuyers called “Ready Set Home”!   Visit their website at www.cmhc.ca.

 NOTICE TO READER:  GGS does not assume any liability of having introduced readers to the individuals and/or businesses referenced above.  The individuals and/or businesses referenced above are presented for the readers reading pleasure and the reader is solely responsible for exercising their own due diligence and good judgment on whether to engage their services or not.

Article written by Karmel Sakran

Readers may contact Karmel Sakran at 905-639-1222 ext. 224

Selling your home privately?  Talk to a Real Estate Lawyer »

Burlington, Hamilton, Milton, Mississauga, Guelph

The real estate market is going crazy and it is frightening because…

Buying Selling in the Real Estate Market from a lawyers perspective

Homes are selling incredibly fast and often selling above list price. The reason seems clear…low inventory of homes for sale and many more buyers. Bidding wars are now the norm.

I have heard from many realtors that the strategy is to list the home on Friday, schedule a Sunday open house and accept offers on Monday.

People knowingly present an offer they feel will beat other offers. I have one client that is frustrated for being out bid on 4 different homes. Yet, I have a seller client that received 18 offers on her home and accepted an offer $70,000.00 over list price with offers still coming in.

And because of the bidding wars, banks are now insisting on obtaining an appraisal of the property where in the past they relied on the Purchase and Sale Agreement as satisfactory proof of the fair market price. After all, banks want to verify the fair market value of the property as part of their due diligence and determining what they perceive as the true loan to value ratio.

If the lender bank determines that the property requires insurance from the Canada Mortgage and Housing Corporation, the lender bank will submit the lending application to CMHC who, in turn, will review the application for approval.  If CMHC has any concern, CMHC will request their own appraisal to satisfy themselves as to the overall risk.  CMHC performs this on a case by case basis and their underwriter will ultimately decide whether to extend CMHC insurance coverage.

I have two simple questions. Are the current bidding wars a self-correcting mechanism to adjust home prices up to their true fair market value? Or, are home buyers going to regret overpaying for their new homes?

Home ownership is great, but at what cost?

Article written by Karmel Sakran

Readers may contact Karmel Sakran at 905-639-1222 ext. 224

Buying or selling a home? Talk to a Real Estate Lawyer »

Burlington, Hamilton, Milton, Mississauga, Guelph