5 Tips to Keep in Mind When Buying your First Home or Condo Congratulations, you have decided to purchase your first home. Although this milestone can be very exciting, the home-buying process can also be a daunting experience. Mapping out the journey beforehand can help a great deal. It is essential that you retain a lawyer who specializes in real estate and who can guide you throughout the process. YOU WILL NEED TO PAY CLOSING COSTS Remember, upon the closing of your property, a buyer is required to pay certain closing costs. You must be able to access sufficient funds to pay these closing costs. Closing costs include: Legal fees and disbursements; Land Transfer Tax (Municipal and Provincial Land Transfer Tax); Title Insurance; Property and Fire Insurance; Home inspection costs; Appraisals; Interest adjustments; and Other adjustment costs. MORTGAGE PRE-APPROVAL If you intend to fund your new purchase with a loan from a mortgage lender, ensure you obtain preapproval before or during the home-buying process. An agreement of purchase and sale can be conditional on a buyer obtaining satisfactory mortgage funds to complete the transaction. Failure to pay the purchase price on closing can result in the vendor terminating the transaction, seek forfeiture of the deposit monies and commence an action for damages suffered. YOU MAY BE ELIGIBLE FOR THE FIRST-TIME HOME BUYER INCENTIVE The First-Time Home Buyer Incentive enables first time home buyers the opportunity to reduce their monthly mortgage payment without increasing their deposit. You must meet the following criteria to qualify: must meet the minimum down payment requirements; your income cannot be more than $120,000 your total borrowing is limited to four times the qualifying income IF YOU ARE A NON-RESIDENT OF CANADA, DON’T FORGET THE NON-RESIDENT SPECULATION TAX Non-residents of Canada that purchase property are subject to a 15% Non-Resident Speculation Tax (“NRST”) on the purchase of a residential property if they live in the Greater Golden Horseshoe Region. This includes the City of Toronto, York Region, and Peel Region, in addition to other regions in Ontario. There are exceptions for some non-residents, where they would be exempt from paying the NRST. If the non-resident is not eligible for an exemption to the NRST, there are also rebates for which some non-residents can apply. However, obtain legal advice first to ensure you are staying compliant. FIND A REAL ESTATE LAWYER THAT YOU TRUST TO DECREASE THE RISK OF POTENTIAL PROBLEMS Retaining the services of a real estate lawyer will help reduce the risk of potential problems on closing. Among other things, a real estate lawyer will clarify your obligations as expressed in the agreement of purchase and sale, search title to the property for any unwanted encumbrances and explain the contents of all documentation to be signed on closing. Ultimately, lawyers who specialize in real estate can offer you peace of mind during the home buying process. If you would like more information or legal advice regarding the home buying process, please contact real estate lawyer, Louis Gasbarre at 416.446.3318 or louis.gasbarre@devrylaw.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateMarch 11, 2020July 5, 2023
I’m Interested in Purchasing My First Property. What Are Some of The Common Reasons Real Estate Deals Fall Through? The process of buying your first home can be both an exciting and overwhelming experience. Often, it is the largest investment a person will make in their lifetime and a transaction that can come with a lot of legal and financial risk. With that being said, with good communication, meticulousness and compliance with the process, a real estate deal should proceed without any drawbacks along the way. Nevertheless, it is best to be prepared for the worst-case scenario should it transpire. Many buyers and sellers may be taken aback when they learn a transaction falls through between signing the Agreement of Purchase and Sale and the closing date. Here are some of the possible reasons why: HOME INSPECTION CONCERN ARISES Obtaining a home inspection from a reputable company is a must-do during the home buying process. If the existing survey is outdated and/or you plan to make some major changes to the home, hiring a qualified surveyor to complete an updated survey is recommended. Unexpected discoveries about the condition of the property can impact the sale or rather the non-sale of the property in question. The best-case scenario is the buyer is able to negotiate a discount off the price, and worst-case scenario, the buyer withdraws their initial offer completely if the offer was conditional upon a home inspection. THE BUYER UNEXPECTEDLY CANNOT SECURE FINANCING A pre-approval from the bank does not always guarantee financing. This situation can go one of two ways. At best, there will be a delay or extension of the closing date until finance is secured. Alternatively, and maybe the most straightforward remedy, is the seller to accept the breach of contract, terminate the agreement and keeps the deposit. As the seller, you then have the benefit of walking away and selling to another buyer. THE BUYER CHANGES THEIR MIND It is common to have second thoughts when purchasing what you thought was your dream home. However, once an Agreement of Purchase of Sale has been signed with no conditions, the situation can get complicated. Check your Agreement – for pre-construction condominiums, often there is a 10 day “cooling off period” clause where buyers can walk away from the deal within that time period. In other circumstances, you are legally bound to follow through with the transaction or be subject to a penalty. If you are a buyer or a seller in the sale of a property in Ontario and have questions regarding the transaction, contact real estate lawyer Jennifer Hetherington a 416-446-5838 or jennifer.hetherington@devrylaw.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateSeptember 27, 2019June 25, 2023
The Home Inspectors Act to Provide more Protection for Homebuyers This blog is co-written by our former articling student, Janet Son. The weather is cooling down but the Toronto housing market saw double digit growth this past month. During the frenzy of home buying, due diligence is necessary and hiring the right home inspector could be forgotten from the long list of to-dos. This can be a costly mistake as a negligently conducted home inspection could cost the buyer thousands of dollars in unexpected repairs. The Ontario Association of Home Inspectors does regulate its approximate 500 members, however membership is voluntary. In total, there are approximately 1500 home inspectors in Ontario; however anyone can call themselves a home inspector and buyers could rely on them to make the biggest financial purchase of their lives. Ontario has recently passed the Home Inspection Act, 2017 (the “Act”) to regulate home inspectors and is predicted to come into force in 2020 after the regulations have been drafted and proclaimed. The Act will create minimum standards when it comes to the licensing and regulation of home inspectors in Ontario. Once in effect, individuals cannot conduct home inspections without a registered license and liability insurance. Requirements will include education, training and adherence to a code of ethics. Formal contracts with the buyer or seller will also be required prior to conducting a home inspection. And once the inspection is concluded, a report must also be provided. The Act also provides for a complaints and disciplinary mechanism so that clients can report a negligent licensee. The registrar will have the authority to mediate in order to resolve complaints, provide written warnings, require licensees to take further educational courses or refer the matter to a discipline committee. Once at the discipline committee stage, the licensing body will have further powers to impose a maximum fine of $25,000 if a licensee has failed to comply with the code of ethics. As a home buyer, once you have the building inspector’s report, it is advisable to bring it to a real estate lawyer for review. If there is a leaky basement, there are a number of different courses of action that can be taken. You can insist that the repairs be made before closing, negotiate an abatement, prepare a repair fund in advance, or move on to the next home. If you would like more information on how to protect yourself as a home-purchaser, please contact Jennifer Hetherington at 416-446-5838 or at jennifer.hetherington@devrylaw.ca. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateSeptember 27, 2019July 5, 2023
What happens when a party to a real estate transaction fails to close? The Agreement of Purchase and Sale (APS) has been signed and any conditions waived or fulfilled. All that remains is for the closing itself to take place. What happens when a party to a firm APS fails to close the deal? This may happen, for example, if the buyers find out that they are unable to obtain financing for the property, as was common around the Greater Toronto Area (GTA) two years ago during the market correction. The answer will obviously depend on the particular circumstances, however case law provides us with some generalizations: 1) SELLER FAILS TO CLOSE If the buyer is ready to close, and for whatever reason the seller has a last minute change of mind and refuses to close, the buyer may be entitled to damages and/or specific performance forcing the seller to close. In Semelhago v Paramadevan [1996] 2 SCR 415, the Supreme Court of Canada held that whether or not a buyer is entitled to specific performance depends on how “unique” the property in question is. Courts will take into account both objective and subjective factors when determining whether the test for uniqueness is met (see, for example, Marvost v Stokes, 2011 ONSC 4827, aff’d 2012 ONCA 74). 2) BUYER FAILS TO CLOSE This was a common situation following the market correction in areas around the GTA that resulted from the introduction of Ontario’s Fair Housing Plan (Ontario Ministry of Finance, 20 April 2017). Unless the seller can sell the property for an amount greater or equal to what the buyer had agreed to pay, the seller will be entitled to damages, amounting to the difference between the agreed upon price for the property in the failed APS and the amount that the seller ultimately sold the property for. 3) REALTOR LIABILITY Occasionally we are asked whether a realtor can be held liable for a failed APS, particularly if, for example, a realtor did not advise an inexperienced buyer to make an offer conditional on financing. Case law on this topic is somewhat mixed. There is a line of cases in which buyers were successful in third party claims against realtors who failed to advise the buyers about the risks of not making their offers conditional on financing or another event taking place, such as a satisfactory home inspection (see, for example, Krawchuk v Scherbak, 2011 ONCA 352 and Pitter v Ha, 2005 CarswellOnt 10310 (Sup Ct J), aff’d 2007 CarswellOnt 4271 (Sup Ct J (Div Ct)). On the other hand, there are cases in which courts have determined that the parties to an APS were experienced in trading in real estate and should have been aware of the risks of making an unconditional offer to purchase a property, and therefore third party claims against the realtors did not succeed (see, for example, Shields v Broderick, 1984 CarswellOnt 1251 (H Ct J). 4) RETURN OF DEPOSIT One final item to consider regarding a failed APS is what happens with the buyer’s deposit. A deposit will only be refunded if the buyer and seller agree to execute a mutual release or if one of the parties obtains a court order. If you have further questions about failed real Agreements of Purchase and Sale and your legal rights, please contact Christopher Statham at Christopher.statham@devrylaw.ca or 416.446.5839 “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateAugust 2, 2019September 30, 2020
The House I Recently Purchased Was Used to Manufacture Illegal Substances: What Now? You’ve just signed an agreement of purchase and sale, and you’ve discovered that drugs were illegally manufactured on the property years before the seller bought it. Can you get your deposit back? A recent Ontario Court of Appeal decision dealing with an “Illegal Substances Clause” in an Agreement of Purchase and Sale (“APS”) says: ‘it depends.’ ILLEGAL SUBSTANCES CLAUSES In Beatty v Wei 2018 ONCA 479, the parties had entered into a standard form APS under which the purchaser agreed to purchase a residential property in Scarborough for the purchase price of $916,000. The Purchaser submitted a deposit of $30,000. The purchaser discovered prior to closing that the property has been used as an illegal marijuana grow-op before the sellers had acquired it. The purchaser stated he was entitled to terminate the agreement prior to closing and get his deposit back; the sellers disagreed. Instead, they sued the purchaser claiming forfeiture of the deposit to them, and damages for any loss they might suffer as a result of the delayed re-sale of the property. The main analysis centred around the Illegal Substances Clause, which stated, in part (emphasis added): The Seller represents and warrants that during the time the Seller has owned the property, the use of the property and the buildings and structures thereon has not been for the growth or manufacture of any illegal substances, and that to the best of the Seller’s knowledge and belief, the use of the property and the buildings and structures thereon has never been for the growth or manufacture of illegal substances… Upon interpretation of the Illegal Substances Clause, the court found that the Sellers’ representation and warranty that the use of the property had never been for the manufacture of illegal substances was limited to their knowledge as it existed when they executed the APS. Since the seller did not know at the time of executing the APS that their house was formerly a grow-op, the court found for the sellers rather than the purchaser. In essence, the Court of Appeal concluded the sellers had to know at the date the APS was signed that illegal substances were previously manufactured on the property. If the sellers found out one day later, the APS would still be valid, and it would accordingly be a breach of contract for the purchaser to terminate the agreement. Since the purchaser unilaterally terminated the APS well after both parties signed it, the purchaser was found to have breached the contract. WHAT DOES THIS MEAN FOR ME AS A HOME PURCHASER? This case tells us that home purchasers should be careful to negotiate agreements of purchase and sale on terms that are favourable to them. If a significant desire of a home purchaser is to ensure their new house was never used to manufacture illicit substances, then the agreement should reflect that desire as closely as possible. If you would like more information on how to protect yourself as a home-purchaser, please contact Jennifer Hetherington at 416-446-5838 or at jennifer.hetherington@devrylaw.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateJuly 9, 2019September 30, 2020
Does every home purchase and sale in Ontario require a lawyer? Parties to a real estate Agreement of Purchase and Sale occasionally ask whether they actually need a lawyer to close the deal. The answer to that question is a resounding yes. Historically, closing a real estate transaction in Ontario would involve lawyers attending at a Land Registry Office (LRO) to conduct title searches. On the day of completion, lawyers from both parties would meet at the LRO to exchange documents and keys and register the transfer. Today, with electronic registration, everything from title searches to transfers of land are completed with specialized software. Only lawyers and law firms can gain access to this software, and the switch to electronic registration does not remove the requirement that a lawyer must sign the transfer of land. When choosing a lawyer to help you complete your real estate transaction, it is important to find a lawyer experienced with real estate. Experienced real estate lawyers will understand where complications with home sales tend to arise, and will make sure that their clients’ interests are protected. Having an experienced real estate lawyer review an Agreement of Purchase and sale before it becomes firm is also a good idea, as a lawyer will often catch potential issues that a layperson will miss. In a standard resale agreement you should consider including a clause that the agreement is subject to your lawyer’s review, and for a pre-construction condo you should have your lawyer review the contract within the statutory ten-day cooling off period. Devry Smith Frank LLP has a dedicated real estate department, combining years of experience in real estate law to ensure that your next real estate deal goes smoothly. For further information or assistance please contact Jennifer Hetherington at 416-446-5838 or Jennifer.hetherington@devrylaw.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateJuly 2, 2019July 5, 2023
Buying a Condo? Make Sure You Review the Status Certificate Before Making a Firm Offer The past decade has seen a considerable increase in the number of condominium developments in Southern Ontario. As the population continues to grow, condos are a great way to efficiently use scarce land in major cities. The price point of condos is often much lower than that of detached homes, which makes them a popular choice among first-time homebuyers. Condos have also become common among more experienced homebuyers who are looking to downsize or perhaps are spending more time abroad and prefer the added security and included maintenance of a condominium. Many buying a condo for the first time may question if the buying process and condo ownership is different from that of a detached home. The answer to that is yes, and there are a few items in particular that a condo buyer should be aware of. In today’s post we will focus on the importance of reviewing a condo’s status certificate.As per the Condominium Act, 1998, SO 1998 c. 19, when a condominium development is registered in Ontario, a special type of corporation is created – one without share capital. The objects of the corporation are to manage the property and assets of the corporation on behalf of the unit owners. The unit owners elect a board of directors, which is responsible for making the decisions of the corporation. The board’s authority ranges from making decisions on capital upgrades and financial expenditures to the creation or amendment of the rules that the unit owners must follow.As a unit owner, you own your particular unit, and have an interest in the property’s common elements. Therefore, you share an interest in the assets and liabilities of the corporation. Before buying a condo, it is important to make yourself aware of the financial standing of the condo corporation and whether or not any legal action is pending against the corporation. You can find this information on your condominium’s status certificate. In addition to providing you with information on whether there are any outstanding common expense fees owing on a particular unit, a status certificate will provide information on the corporation’s reserve fund, whether the corporation expects any upcoming special assessments or increases in common expenses, whether there are any outstanding judgments against the corporation and provides a copy of the current rules and bylaws of the corporation that all unit owners must comply with.A condo corporation must provide a status certificate within 10 days of one being ordered. If it fails to provide the certificate then it is deemed that there is no default in common expenses by the current unit owner, that there is no planned increase in common expenses and that there are no planned special assessments. The corporation can charge a prescribed fee of $100 for ordering a status certificate. As a general rule, you should never make a firm offer on a condominium without you or your lawyer first reviewing the condo’s status certificate. A typical agreement for the purchase of a condo contains a provision that the offer is conditional upon the review of the status certificate by the buyer’s lawyer.If you have any questions about status certificates and why you need one when buying a condo, please contact Robert Adourian at 416-446-3303 or Robert.adourian@devrylaw.ca“This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateJune 27, 2019December 17, 2020
Buying or Selling a Resale Home? What You Need to Know About the Disclosure of Defects You have recently closed the deal on what you thought was your perfect dream home. After moving in you discover that the house is in need of many more significant repairs than you expected. Had you known about some of the issues, you would not have offered the price that you did, or perhaps you would not have made an offer on that particular property at all. Did the seller have an obligation to disclose the defects to you? If the seller failed to disclose, do you have any recourse against them? The answer depends on the nature of the defect, and whether or not it is something you could have discovered on your own with reasonable efforts. The principle of caveat emptor, or “let the buyer beware,” applies to patent defects. For example, roof shingles in need of repair, aging HVAC equipment and water damage in the basement are items that a prospective buyer should be able to discover before an Agreement of Purchase and Sale becomes firm. The seller has no obligation to disclose these types of defects. The buyer is responsible for being duly diligent and performing any necessary inspections of the property. On the other hand, the seller must not actively attempt to conceal defects, for example by installing paneling over water damage (see, for example, McQueen v Kelly, [1999] OJ No 2481 (Sup Ct J)). The seller must also alert the buyer to any material latent defects that the seller is aware of. A material latent defect is a defect that (1) is not easily discoverable by a buyer in the timeframe of a home purchase transaction and (2) renders a property uninhabitable, dangerous or potentially dangerous (see, for example, Krawchuk v Scherbak, 2011 ONCA 352). Such a defect may not even be discoverable through a normal professional home inspection. There are disclosure rules that apply to Realtors as well. A seller’s agent that is aware of material latent defects must disclose them to the buyer or buyer’s agent. The duties of a buyer’s agent toward a buyer are more comprehensive. According to the Real Estate and Business Brokers Act (SO 2002, c 30, Schedule C) Code of Ethics (O Reg 580/05) at s21: (1) A broker or salesperson who has a client in respect of the acquisition or disposition of a particular interest in real estate shall take reasonable steps to determine the material facts relating to the acquisition or disposition and, at the earliest practicable opportunity, shall disclose the material facts to the client. A material fact is defined in Section 1 of the Code of Ethics as “a fact that would affect a reasonable person’s decision to acquire or dispose of [an] interest [in real property].” Therefore, a buyer’s agent should alert a prospective buyer client to anything that the agent is aware of that may affect the client’s decision to purchase the property. If you have further questions about the disclosure of defects in real property transactions or for experienced assistance with both commercial and residential real estate, please contact: Louis Gasbarre at 416-446-3318 or by email at louis.gasbarre@devrylaw.ca or Robert Adourian at 416-446-3303 or by email at robert.adourian@devrylaw.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateJune 5, 2019September 30, 2020
What happens if I default on my Mortgage? A mortgage on your home will most likely be the most significant debt you will incur in your lifetime. A commitment in which you will be obligated to pay for a considerable amount of time – in the majority of cases anywhere between 10-30 years. That said, when a borrower defaults on their loan and from their obligations in the mortgage agreement, the lender has two possible remedies. Power of sale This is the most frequently used remedy. Pursuant to Ontario’s Mortgage Act upon a mortgage default the lender is entitled to determine that the mortgaged property in question should be sold to a third party. This remedy, if you will, is by far the least complicated and permits the lender to recoup the balance remaining. The lender however, must give the borrower written notice by registered mail 45 days after default. The lender does have a legal obligation to sell the property at the fair market. If there is equity in the property, the remaining balance will go to the borrower after the mortgage balance and any other associated fees such as legal fees have been paid. If the sale does not cover the balance of what is owed, the borrower is still liable for the remaining balance. This process can only be prevented by the borrower paying the arrears and the lenders legal fees or by payment of the remaining balance of the defaulted loan in its entirety. Foreclosure Foreclosures is a legal proceeding initiated by the lender to obtain the full legal title to the asset outlined in the mortgage agreement. If the value of the asset is less than what is owed, the lender cannot pursue the borrower for the remainder. Should there be equity in the property or proceeds remaining from a subsequent sale, the lender is under no obligation to account the borrower for the equity, or the proceeds. Contact Robert Adourian, of Devry Smith Frank LLP, for experienced assistance with both commercial and residential real estate. robert.adourian@devrylaw.ca or 416-446-3303 “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateApril 12, 2019July 5, 2023
I’m preparing to Close on My Residential Mortgage. What Identification Will I Need? Buying a home is possibly one of the most significant and costly purchases in one’s lifetime. Finding that picture – perfect home and probably feeling, to some extent, a little overwhelmed is common. However, getting to the stage of closing and what to expect is often a thought that goes overlooked. A question to ask yourself is, how prepared are you for that day? After all, this is the time when you will legally commit to your mortgage loan. All the more reason for you to be prepared in advance, before the day approaches. That said, familiarity with your closing team, is also fundamental. There are a number of people you will encounter throughout the closing process and although closing methods may differ your team will likely consist of: – Real estate agents representing both buyer and seller – Your lawyer – The seller’s lawyer – A representative from your lender Lawyers and mortgage lenders are required to obtain identification documents from you, thus having the appropriate identification is an additional legal requirement for you to consider. When the time comes to sign your real estate documents, two forms of identification must be provided. One must be government issued photo I.D. such as an Ontario drivers licence or a Canadian passport. The other piece, can be a credit card or social insurance card. Your lawyer will document the details from the required I.D., as well as your occupation. If the need for review should arise, identity verification of the persons buying or selling property in Canada is easily obtained. At the same time, remember to take all the time you need and ask all the questions that are on your mind. Purchasing a home, is a long-term financial commitment and essentially you want ensure you are content with all aspects of the transaction. At Devry Smith Frank LLP, we are well equipped to handle a vast range of matters pertaining to real estate and property transactions. We aim to provide promptness, precision and understanding to all our clients, engaging with you from the beginning stages of your purchasing journey to the closing of your dream property. Communicating any vague or unclear legal terminology encountered along the way, in simple terms. Our aim is to make the course of your property buying experience a stress-free process. Contact Robert Adourian, of Devry Smith Frank LLP, for experienced assistance with both commercial and residential real estate. Robert.Adourian@devrylaw.ca or 416-446-3303 “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateJanuary 18, 2019July 5, 2023