Title Insurance Providers Introduce Increased Protection for Lenders from Super Priority Liens and Deemed Trusts The recent decision of the Federal Court of Appeal in Toronto-Dominion Bank v Canada, 2020 FCA 80 (“TD v Canada”), created a new cause for concern for lenders. The facts of the case are as follows: In 2007 and 2008 the debtor, before becoming a customer of the Toronto-Dominion Bank (“TD”), failed to remit to the Receiver General of Canada over $67,000 worth of GST in relation to his business. In 2010, TD extended a loan and a line of credit to the debtor, both of which were secured against a property owned by the debtor. In 2011 the debtor sold the property in question and repaid the loan and line of credit. TD then discharged all charges registered against the property. Two years later, the Canada Revenue Agency (the “CRA”) commenced a deemed trust claim under Section 222 of the Excise Tax Act, RSC 1985, c E.15 (the “Act”) on the basis that the unremitted GST amounts constituted a deemed trust and the proceeds from the sale of the property should have been paid to the Receiver General before they were paid to anyone else. At trial, the Federal Court (2018 FC 538) held that the unremitted GST amounts were indeed subject to the deemed trust provisions of Section 222 of the Act, and, because the deemed trust existed before TD registered its security interest against the property, the CRA had a super-priority lien on the sale proceeds of the property. TD was therefore obliged to remit the amount of the GST debt to the CRA. The Federal Court of Appeal upheld this decision. Outcome This decision is worrisome to lenders for several reasons. First and foremost, amounts covered by the deemed trust provisions in the Act, as well as other amounts that result in a deemed trust, such as pension deductions that an employer fails to remit under Section 227 of the Income Tax Act, RSC 1985, c1, are not registered on title to a property. Therefore, it is often very difficult to determine if a deemed trust exists at the time a lender seeks to register a security interest against a property. Despite this, if a deemed trust is later found to have existed before a security interest was registered against a debtor’s property, the amount subject to the deemed trust will form a super-priority overpayment made to the lender. This includes payments made from the proceeds of the sale of the secured property. The amounts in question can be significant, and these claims can be brought forward many years after a property has been sold and the security interests discharged. Title Insurance While title insurance has, for some time, offered protection against these types of super-priority claims, there is a caveat. Traditionally, coverage under a lender’s title insurance policy ends once the mortgage to which it applies is discharged and therefore, there was no protection for lenders with respect to super-priority claims made following such discharge. In response to TD v Canada, title insurers have begun to introduce new types of coverage for super-priority claims made up to ten years following the discharge of a mortgage. This coverage, with certain exceptions and limitations, gives lenders peace of mind that they are protected from super-priority claims made against them long after they have discharged their security interests against a property. The new coverage is available for both residential and commercial properties. For more information on title insurance protection for deemed trust amounts and super-priority claims, or on title insurance in general, please contact our Commercial Real Estate Lawyers at Devry Smith Frank LLP, 416-449-1400 or by email at info@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 30, 2020April 22, 2024
Four things you need to know about “Time shall be of the essence” in real estate transactions (especially in a pandemic!) A contract of sale for a piece of real estate property will almost always expressly provide that time is of the essence. This clause means that you and the other parties in the agreement must be punctual and fulfill their obligations promptly. Otherwise, if you fail to perform in a timely fashion, the contract may end and you may be liable for damages. For example, if you change your mind about purchasing the property or cannot attain suitable funding in time for the closing date, you may be in breach and liable to the other parties. In other words, the deadlines are very important; missing them could cost you. You may need to pay for the other parties. Here are four things you need to know: Proceed diligently and in good faith Stay true to your word, secure funding, fulfil your obligations with diligence. Complete your obligations faithfully and do not interfere with the other party’s ability to fulfil their responsibilities. If you are uncertain about your obligations, obtain legal advice. How to rely on the clause If you want to rely on the clause to accuse another party of failing to live up to their obligations, you must demonstrate that you are ready, willing, and able to complete the agreement. In other words, if both parties are not ready to close on a real estate transaction, neither party can rely on the clause to bring an action for specific performance, damages, or termination of the contract. When the clause is negated By waiver. For example, if both parties agree to extend the closing date by two days then there is a waiver. In general, if one party in a contract takes action(s) to make it clear that the strict contractual provisions will not be enforced, the clause is waived in that instance. By-election: For example, if the buyer does not have the requisite financing completed on the closing date, the seller could agree to extend the closing date. In general, when one party breaches the contract and the other parties’ consent, the clause is negated by-election. How the clause is impacted by the Coronavirus pandemic (COVID-19) COVID-19 has disrupted the economy and caused some aspects of the institutions which help real estate transactions move along have temporarily scaled back or suspended their operations. Further, COVID-19 has caused financial hardships which also have the potential to delay real estate transactions. Delays may cause deadlines to be missed, and you do not want to be on the hook due to a delay caused by COVID-19. To ensure that your real estate deal is not held up by the pandemic, obtain legal advice to ensure you either: enter into agreements properly drafted with COVID-19 in mind, or that your existing agreement completes without delays caused by COVID-19. For more information or any other questions regarding real estate transactions, please contact our real estate lawyers today. Don’t delay, time is of the essence. “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, COVID-19, Real EstateAugust 18, 2020June 4, 2021
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
Supreme Court Refuses Leave to Appeal: Toronto Real Estate Agents Must Publish Data On Thursday, August 23 2018, the Supreme Court of Canada (SCC) declined to hear an appeal that has been over seven years in the making. For the last seven years, the Toronto Real Estate Board (TREB) and the Competition Bureau have been litigating over the issue of sales-data policies. It all began when the Competition Bureau brought an action against the TREB, alleging that TREB was harming innovation by restricting Virtual Office Websites (VOWs) – an alternative form of a traditional real estate brokerage office – from accessing large chunks of the data in the Multiple Listing Service (MLS) data feed, including historical sales-price data. Without question, alternate forms of real estate brokerages, like VOWs, were suffering at the hands of the TREB and their restrictive regime. So too were new agents to the scene, who were not a part of TREB. Many brokerages obtain new clients by cold calling residents who live close to a home that just sold. The brokers will share how much the potential clients’ neighbours home sold for, and what kind of offers were placed on the property, in an effort to persuade these clients to also sell their home and to sell it with the realtor on the other end of the cold call. However, only real estate agents who are TREB members have access to sales price information, historic sales and realtor commissions, which meant that other agents and VOWs were at a disadvantage (or at least they used to be!). On February 3, 2014, the Federal Court of Appeal (FCA) set aside the Federal Competition Tribunal’s order dismissing the Commissioner’s Application and the FCA referred the matter back to the Tribunal for reconsideration. At this re-hearing, which took place on April 27, 2016, the Federal Competition Tribunal determined that the sales-data policies were too restrictive, so much so that they contravened the Competition Act. According to the Tribunal, the practices of the TREB were an “abuse of dominance.” In 2017, the FCA agreed, and the court dismissed TREB’s appeal. However, the TREB was not backing down. TREB fought for a total of seven years to keep the information at issue in the hands of Toronto real estate agents, arguing that posting the data more publically would violate consumer privacy. In 2017, the Board sought leave to appeal the Federal Court’s decision to the SCC. For further information or assistance, please contact a Litigation Lawyer. If you would like to contact our office directly, please call (416) 449-1400. “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, Commercial LitigationAugust 30, 2018June 16, 2020
National Housing Strategy On Wednesday, November 23, Justin Trudeau announced the federal government’s 10 year national housing strategy. The federal housing strategy is aimed at ensuring that Canadians have access to affordable homes. The aim is to reduce poverty and homelessness. Trudeau deemed access to adequate housing as a “human right”. The federal government is hoping to make a systematic change that will have lasting effects. The federal government has made a $11.2 billion commitment to social and affordable housing over 10 years, and plans to do some of the following: Build 100,000 new affordable housing units; Repair 300,000 housing units; and Extending housing subsidies that are set to expire. Combined with investments from provincial governments, the total spending could reach as high as $40 billion. The plan relies on the provinces and territories matching funds. Some of the key measures include: A certain number of units will be reserved for Canadians in vulnerable populations, such as people with developmental disabilities, seniors and survivors of family violence; Support for Indigenous people who do not live on reserves and a separate Indigenous housing strategy, which is to be released at a later date; Funding provided directly to low-income families and individuals; Funding to expand and extend the homelessness partnering strategy; Creating new legislation that will require future federal governments to maintain a federal housing strategy; and Creating an advocate for federal housing to help seek solutions to these systemic issues, such as advising the government and the Canada Mortgage and Housing Corporation of possible solutions. The strategy includes a co-investment fund which will provide financial contributions and low interest loans to developers that meet certain criteria. The government will also be transferring federal land to housing providers on a number of conditions. “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 EstateDecember 12, 2017June 17, 2020
Toronto Home Sales Continue to Tank This Fall Data shows that September continued to be a month of decline for the Toronto real estate market, with sales falling between 38 and 45 per cent compared to a year earlier. This marks the fifth month in a row of declining sales, which not too long ago had high home values and crazy sales numbers. Once the government stepped in to try and cool the market with new housing rules, such as the 15-per-cent foreign buyers’ tax, May was the beginning of the decline. In the current market, depending on the value of the home and the neighbourhood, some are selling quickly while some continue to sit there. Lauren Haw, CEO of Zoocasa says that “homes around $500,000 are on fire and selling very quickly,” while things are slower in the higher price ranges in the city. In the current market, Haw suggests, if you “miss the mark with your initial pricing, your house will go stale.” Haw also believes that the next 6 months will continue to be slow in Toronto, with no price collapse in Toronto’s future. Haw sees prices stabilizing, while other analysts see pressure on Toronto’s housing market due to rising interest rates, mortgage rule tightening which would require borrowers who put 20 per cent down or more to go through a “stress test” to see if they can afford their mortgage if rates were to increase by two percentage points. If you are in need of a real estate lawyer, please visit our Real Estate Page and contact one of our Real Estate Lawyers today. For any other legal services or inquiries, please contact Devry Smith Frank LLP directly at 416-449-1400 or visit our website for more information. By: Nicolas Di Nardo “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 EstateOctober 4, 2017June 18, 2020
Toronto Must Figure Out Housing Solutions or Risk Losing Top Young Talent As we are well aware, Toronto’s housing market has been a hot topic for some time now, with the rising prices and record sales. Unfortunately, for those who can’t afford to purchase a home for whatever reason, it leaves them renting within the city, or forces them to move to the suburbs with the hope that they can potentially afford something outside of Toronto. An article released by The Star features a couple, Chris Dunne and his fiancée, both young professionals, who are hoping to get out of their rental and begin their adventure as homeowners, get married, and start a family. Again, the current market is continuing to put a dent in their dream. Dunne and his fiancée, both 28, currently rent a condo in the area of Spadina Rd and Queens Quay. They both have steady jobs, but yet, they are struggling to find a place to call their own and begin a family. They moved to Toronto from Newfoundland 18 months ago with a dream, to live in Toronto. With a wedding planned for next year and plans for children, they want to find a place with a patch of green to call their own. The issue: it comes down to simple supply and demand. With no middle ground when it comes to the Toronto housing supply, it leaves few options for buyers. Before government involvement and the spring market, Toronto’s supply did not line up with demand. Supply was low, while demand was high, leading to high prices on the supply and demand graph. Currently, Toronto’s supply consists of primarily small condos and detached homes. There are few semi-detached and town-homes within Toronto available to current home-buyers. The current government involvement, spring listings, and demand for detached homes still high, sales have begun to decline. This is reflected through listings being active for longer than a weekend, and fewer sales as a result, as stated in our recent real estate update. In April, Toronto’s detached re-sale homes hit $1.6 million on average. To make matters worse, young professionals aged 18-39 say: 32% plan to buy a home in the next year 58% say high prices are why they won’t buy a house in the next year 19% will stay in their current home 17% want a townhouse 51% want a detached house 13% want a semi-detached 17% already own a home *Source: Environics Research for the Toronto Region Board of Trade. Survey-based off 387 people aged 18-39, part of a bigger 1,000 person survey Of the people who expect to buy in the next year, 81% don’t want to live in a condo and 69% want a house with at least 3 bedrooms. The Board of Trade CEO, Jan De Silva is urging the city or province to begin diversifying our supply to meet the needs of all residents and has even suggested they make it legal to add just one laneway house, coach house, or duplex per hectare in detached home zoning areas. This solution would allow individuals priced out of the detached home market, that don’t want to live in condos, to own a home, and would accommodate 45,000 people in Toronto. Unless this situation changes, the region could be compromising its ability to attract talented professionals to the city of Toronto. Without businesses being able to attract and retain young professionals or newcomer talent, our economy will begin to struggle to succeed. If you are currently searching for a property or have a plan to purchase property in the near future, contact our Real Estate Group with any questions or concerns you may have. Browse our Real Estate lawyers page and contact them directly, or, call our office at 416-449-1400 for more information. “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 1, 2017June 24, 2020
Targeting the Few Bad Agents in A Growing Toronto Real Estate Market Toronto’s real estate market is currently facing unprecedented growth. Hefty real estate commissions and a lagging economy in other job areas have attracted many people to the career of a real estate agent. While the majority of agents complete a transaction in the client’s best interest, it is clear that there are not enough legal regulations to protect the public from the few bad apples in the bunch who complete deals for their own financial gain. One example of the perfectly legal but shady practice is a “double-ending deal”— i.e. where the real estate agent represents both the buyer and the seller, collecting a commission from each side. While double-ended deals can be fine if the agent clearly communicates their role, conflicts and what they can and cannot do, these types of transactions expose both sides to a high level of risk that their agent may not be acting ethically. Not only do these transactions give rise to conflicting duties to the client (and it is unclear which client the agent is fully advocating for), they can result in both sides paying more for the transaction, despite the agent’s promise of a lower commission rate. Last November, a CBC Marketplace investigation revealed six real estate agents making promises in clear violation of the Real Estate Council of Ontario’s regulation and Code of Ethics. Captured on hidden cameras, the agents promised open house walk-ins that if they chose to use them (the seller’s agent) to buy the property, they could “control the sale” guaranteeing that the buyers would win the home purchase or that they would use insider information to leverage their offer over others. Another concern is about agents who offer “exclusive listing” sales where the buyer’s agent encourages them not to put their home on the open market but instead sell it within the agent’s pool of potential buyers. The research is clear: higher prices are obtained for homes that are placed on the open market. Usually, the one to two percent savings that the agent offers to buyers willing to go through these transactions is paltry compared to the higher price they would have seen on the open market (see this Huffington Post article). Sellers should always be the ones to decide when the solicitation of offers ends. A buyer should be wary if their agent pushes for “one-and-done” offer rounds or to avoid multiple rounds during a bidding war. If the seller’s agent also represents the buyer they should present their own client’s offer first, not last. Other red flags are poor or non-existent photography in the MLS listing (which makes open house walk-ins the primary way of selling the property) or lack of communication with interested buyers (which dissuades growing interest in the property). While I agree with some commentators’ position that an outright ban on double-ended transactions would offer an easily-enforceable solution, I also believe that more should be done to raise the standards of entry for the profession as a whole. Right now, it only takes 213 hours to become a licensed real estate sales professional and the focus of the model is on individual agents, instead of the brokerage as a whole. Placing more responsibility on the brokerage to oversee their agents’ conduct is also a solution that should be considered. With that being said, the best protection from the few unscrupulous agents in the industry is buyers and sellers who know their rights and how to spot practices that raise red flags. If you are in need of a real estate lawyer, please visit our website and contact one of our real estate lawyers today. If you are in need of any other services or have any questions, you may also contact our Toronto office directly at 416-449-1400. “This article is intended to inform and entertain. 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 SiddiquiUncategorizedMay 11, 2017June 23, 2020
Update: 16 Measures To Cool Down Toronto’s Red-Hot Housing Market Recently, we published a blog post informing the public that on Thursday, today, the Finance Minister would be releasing the measures that all levels of the government will take to help cool a hot housing market. Premier Kathleen Wynne joined Charles Sousa, Finance Minister for this announcement which actually included 16 measures, among them, were the 15 per-cent foreign buyers tax, expanding rent control, the ability to impose a tax on vacant homes, and use surplus lands for affordable housing. Here are the 16 measures: A 15-per-cent non-resident speculation tax to be imposed on buyers in the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations. Expanded rent control that will apply to all private rental units in Ontario, including those built after 1991, which are currently excluded. Updates to the Residential Tenancies Act to include a standard lease agreement, tighter provisions for “landlord’s own use” evictions, and technical changes to the Landlord-Tenant Board meant to make the process fairer, as well as other changes. A program to leverage the value of surplus provincial land assets across the province to develop a mix of market-price housing and affordable housing. Legislation that would allow Toronto and possibly other municipalities to introduce a vacant homes property tax in an effort to encourage property owners to sell unoccupied units or rent them out. A plan to ensure property tax for new apartment buildings is charged at a similar rate as other residential properties. A five-year, $125-million program aimed at encouraging the construction of new rental apartment buildings by rebating a portion of development charges. More flexibility for municipalities when it comes to using property tax tools to encourage development. The creation of a new Housing Supply Team with dedicated provincial employees to identify barriers to specific housing development projects and work with developers and municipalities to find solutions. An effort to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market. A review of the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions. The launch of a housing advisory group which will meet quarterly to provide the government with ongoing advice about the state of the housing market and discuss the impact of the measures and any additional steps that are needed. Education for consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction. A partnership with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario. Set timelines for elevator repairs to be established in consultation with the sector and the Technical Standards & Safety Authority. Provisions that would require municipalities to consider the appropriate range of unit sizes in higher density residential buildings to accommodate a diverse range of household sizes and incomes, among other things. For the full CTV News article, click here. If you are in need of a real estate lawyer, please visit our website and contact one of our real estate lawyers today. If you are in need of any other services or have any questions, you may also contact our Toronto office directly at 416-449-1400. “This article is intended to inform and entertain. 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 20, 2017June 19, 2020
Ten Measures To Be Announced To Help Fix Toronto’s Housing Market On Tuesday, April 18th, 2017 Finance Minister Charles Sousa announced that he is set to unveil 10 measures to help with Toronto’s out of control housing market, which will be released as early as Thursday. These measures will range from rent controls to a new tax on real estate speculators. The release of Charles Sousa’s plan will be about a week ahead of the release of the first balanced budget since 2008. Tuesday for the announcement, Sousa met with Federal Finance Minister Bill Morneau and Toronto Mayor John Tory. They met for an hour to discuss housing issues which included a discussion on current market trends, and what the intentions are with the plan with a focus on rent controls and addressing the current policy that excludes buildings built after 1991 from rent controls. Expectation on Rent Increases From an article released by the Toronto Star, the expectation on rent increases, when the 10 measures are implemented is that the annual increase will be 3.5% which is significantly better than what some condo owners have been subject to, such as having their rental cost double. Housing Speculator Crackdown Part of Charles Sousa’s plan is to place a levy on housing speculators and foreign buyers. This could include a vacancy tax to discourage investors from leaving their properties empty, to either rent them out or move in themselves if possible. All Government Levels Serious With all levels of the government working together to control Toronto’s housing market, they want to make it clear that they are taking the current state of the market seriously and have decided to have quarterly meetings focusing on housing. All of this seems like a step in the right direction, as the Bank of Canada governor recently said the 33% yearly increase that we have seen is deemed as unsustainable. Once the plan is released, the public will have a better idea of what these 10 measures are going to address. The most important thing about this plan is that its goal is to protect buyers and sellers while stabilizing the housing market. Tim Hudak, CEO of the Ontario Real Estate Association, stated that he believes the best solution is to get new homes and the supply of homes up, the amount of supply available in the issue. With higher supply, the hope is to limit the number of bidding wars that occur, in turn, lower the prices that homes go for. His final note was that he likes that all levels of the government are getting involved, it is a good thing they all want to work together to solve the problem. Until the plan is put into action, which is expected to be announced on Thursday we’ll have to put our trust in all levels of the government that they will be able to successfully manage Toronto’s hot housing market. If you are in need of a real estate lawyer for a purchase or sale of a home, please contact one of our real estate lawyers today, or call us directly at 416-449-1400. For more information please visit our website. “This article is intended to inform and entertain. 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 18, 2017June 19, 2020