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Archive for November, 2012

Matrimonial home, or not? A $500,000 question

By Robert Hof

In some circumstances a cottage can be considered a matrimonial home in the event of divorce.

A matrimonial home is recognized as a very special asset by the law in Ontario. That means that if the home is sold, it will usually be divided equally between the married couple, regardless who paid for it. Even if only the husband or the wife is on title to the property, it will take both of them to agree in writing to sell it.

In 1993, David Smith bought a cottage in Oro township, near Barrie as an investment. It was a 10,000 square foot cottage on 5 and a half acres of lakefront property. He bought it through his company of which he was the only shareholder. A year later, in 1994, he married Miriam Smith. They had been living together for seven years and had a child together in 1989.

The couple separated in 1995 and started fighting over property rights and support. They did not sign a marriage contract when they married and the cottage which was worth $840,000 at the time of their marriage was worth $1 million at the time of separation.

If the cottage was an investment property, then Miriam could have claimed up to 50 per cent of the gain in value of the cottage during their marriage, or 50 per cent of $160,000, which was $80,000. However, if the cottage was a matrimonial home, then Miriam could claim up to 50 per cent of the entire $1 million value or $500,000.

It was clear from court documents that the couple used the cottage year round.

In a decision dated September 5, 2006, the Ontario Court of Appeal confirmed that even though the property was owned by a company, since David controlled the company, he in fact owned the cottage. As a result, Miriam was able to collect $500,000, since the property was used as a matrimonial home at the time they separated.

If David had wanted to protect himself, he should have asked Miriam to sign a marriage contract before they married. In it, she could have agreed not to make a claim on the cottage, or limit any claim to the increased value after the marriage.

A couple can have more than one home considered as a matrimonial home, as long as they use it with their family during the year. So if you have a home in the city, a summer home and a chalet for skiing, all three can be considered matrimonial homes and the same rules apply to each property.

However, let’s say you bought a home and then got married. On the date you got married, the house was worth $300,000. You lived in it for five years as your matrimonial home, but then you bought a second house that you moved into together. The first house is now used as a rental. It is still in your name.

While you will own the second home together as a matrimonial home, the first house will no longer be considered a matrimonial home. Therefore, if you later split, you will still be able to get credit for the full $300,000 that your house was worth on the date of the marriage, and you will only have to split the gain with your spouse.

When it comes to selling a house after the parties have separated, similar rules apply. Even if the house is registered in only the wife’s name, the husband will have to give permission to the sale, even if he moved out a long time ago, if at the time of separation it was their matrimonial home and they are still not divorced or have not signed a separation agreement.

These rules do not apply if you are not married. If you are living in a common-law relationship and only one person is on title, then that is the only person who needs to sign to sell the home. You must get your name on title to protect your interest in any property if you are not married.

If you are not sure who has to sign for the sale of your home, always get legal advice first so that all proper parties sign your agreement. It will save a lot of stress later.

– Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com


Must you disclose noisy neighbours when you sell?

By Robert Hof

Peterborough’s Anne Langdon says the basketball playing of her neighbour’s teenage son is a disturbance. So, too, is the wooden panel they created at the edge of her driveway. She has taken her complaint to Ontario’s environment commissioner.

Lance Anderson//Peterborough This Week

A teenager playing basketball on his family driveway in Peterborough made national news when the neighbour complained about the noise. A backyard hockey rink can create the same amount of noise. Should a seller be required to disclose these types of situations when they sell a home?

A British study found that one of the top 10 reasons people move is because they want to get away from problem neighbours, either those who are aggressive, or those who are noisy or messy. Real estate agents say the top reasons people move in Ontario has more to do with upsizing, downsizing, getting closer to good schools, jobs or their families.

It has been demonstrated that in some cases, the nuisance caused by noise or smell can affect real estate values. In a 1983 Vancouver case, Sharon Kenney bought a condo that was above two restaurants. Before buying, she made sure that these restaurants only served light meals and no foods were cooked or deep fried. In 1987, one of the restaurants installed an exhaust fan directly below her patio.

The noise from the fan and the smell were a constant nuisance and she sold her condo as a result. It took seven months to sell and though she listed it for $119,000, she eventually dropped the price and sold it for $105,000. An appraiser gave evidence that the nuisance caused at least a $10,000 reduction in the value of her unit.

Related:Who pays if a tree falls in your yard?

In 1990, B.C. judge Bruce Cohen ruled that the fan interfered with Kenney’s enjoyment of her condo and reduced her resale value. The judge said the test was whether the use of the land by the neighbour interfered substantially with the enjoyment of the other unit and was the interference unreasonable.

He also said that “Not every smell, whiff of smoke, sound of machinery or music will entitle the affected person to recover. It is impossible to lay down precise standards, but the invasion must be substantial and serious.”

In this case, he awarded Kenney $25,557 based on $10,000 for the loss of value of her unit, $7,500 for the gross interference with her comfort and enjoyment of her condominium and repayment of the real estate commission of $8,057 that she had to pay.

Most lawyers will tell you that neighbourhood conditions do not need to be disclosed to potential buyers. However, sellers do have to respond truthfully if you ask them direct questions.

Related:What to do when 14 students move in next door?

Sellers should first try and settle things amicably. Taking the time to get to know them could lead to an effective resolution. You may also suggest a mediator to try and reach a reasonable solution. If all else fails, you can report the noise to the local bylaw enforcement department at city hall or if more serious, to the police. Suing for damages should be a last resort, but then again, no one should be forced to move because of a problem neighbour.

Buyers should walk around any neighbourhood that interests them and talk to the neighbours. Come around at different times of the day or night and see and listen for yourself. Also ask the sellers point blank if they know of any neighbourhood conditions that could affect the market value.

Being prepared in advance is the best way to avoid a problem later.

– Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com


When can you walk away from a house deal?

By Robert Hof

Mark’s follow-up to the earlier piece about the 3.3. million deal that went wrong. Robert.

Be sure you fully understand the details before closing a real estate deal.

By Mark Weisleder |

Putting your home up for sale can be a tough decision, but once made and the ball is rolling, you may not be able to change your mind. Last week’s column about a $3.3 million home sale that went wrong for the seller prompted several related questions from readers.

Here they are:

Is there a buyer’s remorse period in Ontario?

If you are buying a new condominium from a builder, you have 10 days to change your mind. You do not need a reason. This does not apply if you buy a new house from a builder and does not apply if you are buying a resale home or condominium. Why condos only? The clause is included in the Condominium Act.

Can a buyer sign an offer and then walk away?

The Ontario real estate contract gives a buyer 24 hours to pay the deposit, once the offer is accepted by the seller. The buyer cannot just change their mind or they can be sued.

For example, the buyer offers $300,000 for a house which is accepted. The buyer changes his mind and doesn’t pay the deposit and walks away from the deal. The seller resells the property for $275,000. They can still sue the first buyer for the difference, or $25,000.

Can buyers use conditional clauses as escape hatches?

Most real estate contracts are conditional on the buyer being able to get a mortgage and being satisfied with a home inspection. Other conditions include being satisfied with a condominium status certificate when buying a resale condo.

Many buyers think these conditions give them the right to just change their minds. It is not that easy. The case law has demonstrated that buyers must try and satisfy any condition in good faith. This means that you need a legitimate reason why you found the home inspection report or condominium status certificate unsatisfactory.

Who gets the deposit when buyers change their mind?

In most cases, the deposit is held by the seller’s real estate brokerage, in trust. Under the law, when a deal breaks down, the brokerage cannot pay the deposit to anyone without either a mutual release or direction signed by both the buyer and the seller, or an order of the court. As such, when deals do not close, if there is no agreement, the deposit can be locked up for a long time, and the buyer will not have access to it to make an offer on another property.

Is there a “legal” way for a buyer to get out of a deal?

It depends. If for example, there was a right on your title for the City to access 20 per cent of your property for any reason, known as an easement, and that was not disclosed to the buyer, they can usually cancel the agreement without penalty. However, there have been other cases that indicate if there is a problem with a city work order or title problem for which the seller can obtain title insurance to protect the buyer, then the buyer cannot refuse to close. A buyer can also cancel if there has been substantial damage to the property before closing, such as a flood that was not repaired. You can’t refuse to close if the oven is not working.

The better answer in all of these situations is to be very careful and serious before you make any decision to buy a home. Changing your mind later can be very expensive.


9 cm error turns dream home into nightmare for couple

By Robert Hof

 A cautionary tale from CBC News  back in the summer. Robert.

A couple’s dream home is turning into a nightmare, all because of nine centimetres.

The Conception Bay South town council in eastern Newfoundland says Steven Boyd and Karen Bursey built their house too close to their neighbour’s property. The home is supposed to be 1.5 metres from the property line. Instead, it is 1.26 metres away. The couple was given an exemption by the council of up to 1.35 metres.

The difference — nine centimetres. That’s about the length of a poker-sized playing card.

The couple discovered the problem after the foundation was laid. Because of where it’s located on the cul de sac, the property shape isn’t a typical plot of land — it’s more curved than straight.

When an inspector picked up on it, the council issued a stop-work order.

“We’re devastated, obviously,” Bursey said. “We have thousands of dollars invested in a home that we can’t proceed with.”

C.B.S. Coun. Ken McDonald disagrees with the town, and supports the couple.

“They want them to tear down a wall, tear down a concrete wall, and patch it back in to suit three and a half inches?” McDonald said. “To me it’s ludicrous, it’s ridiculous.”

Bursey says tearing down that wall would cost $25,000. That’s the same amount their neighbours want for the nine centimetres of land.

Now Bursey says they’re between a rock and a hard place.

“Our only other avenue of appeal is to go through the municipal appeals board, which right now at this point in time there’s a wait list of well over a year,” Bursey said.

Bursey says they don’t have the time or the money to wait that long for a decision.


First-time homeowners expected to drive demand for lower-priced condos

By Robert Hof

Good article from The Citizen – Robert

By NECO COCKBURN, Ottawa Citizen

November 9, 2012

First-time homebuyers will be fuelling the market for condos and possibly townhouses, rather than more expensive detached homes, for the next couple of years, according to a senior market analyst with Canada Housing and Mortgage Corporation.

OTTAWA — First-time homebuyers are expected to stabilize the housing market and drive demand for lower-priced condominiums downtown and in urban parts of the city’s west and southeast areas over the next couple of years, says a senior market analyst with the Canada Mortgage and Housing Corp.

“Rather than first-time homebuyers going for singles, they’ll be going for condos and possibly townhouses,” which are typically cheaper, said Abdul Kargbo at a CMHC housing outlook conference on Thursday.

“We’ll definitely see an increase in demand in downtown, but what we are equally going to see is the shift,” Kargbo said.

Because of tighter mortgage rules introduced by the federal government and a relatively flat economic environment, he said, “we are not going to see a continuation of higher-priced condos in the downtown being purchased. We’ll see a shift from higher-priced condos into less-expensive condos, and this will be driven by the first-time homebuyers.”

Demand for townhouses will similarly be strong in urban parts of the city’s east side, where they’re affordable, said Kargbo.

He added he doesn’t think there are too many condo projects on the go in the city. The number of completions is trending downward to a sustainable level, he said, while the inventory of unsold condos remains flat.

The downtown along with urban areas in the east, west and southeast are among those that have the greatest proportions of 25- to 34-year-olds, an age group that has moved to the city more than others, and with an average household income of $79,900 will push the home-buying trend, Kargbo said.

Overall, Ottawa’s housing market should continue to be “relatively stable” over the next two years, he said.

“We’re still seeing positive growth, except that the growth rate is not going to be as brisk as we’ve seen in the previous years.”

The city’s economy is expected to remain even despite public-sector cuts, according to the CMHC. It’s generally expected that the resale market will slow “just gradually”, but prices are expected to remain “positive”, senior market analyst Sandra Pérez-Torres told the conference.

A report issued by CMHC this week said new home construction and resale activity in Ottawa is expected to slow into the first half of next year before improving during the second half.

“In the immediate term, modest job growth and tighter mortgage market conditions will exert downward pressure on housing demand. While new mortgage rules introduced in July will have a stabilizing effect on the housing market longer term, the new rules will moderate sales slightly in the short run,” it states.

“Tighter mortgage rules combined with high home prices will continue to limit first time buyer demand. While some buyers will be able to substitute into a lower priced home, others will likely postpone their home purchase decision. However, a gradual improvement in job and income growth during the latter part of next year, combined with modest price increases should support Ottawa resale activity by the second half of 2013.”

The CMHC also released statistics Thursday indicating that housing starts in the city fell in October. The seasonally adjusted annualized rate of starts was 3,519 units last month, down from 6,220 units in September.

“Housing starts moderated largely due to the expected slowdown in apartment construction,” Pérez Torres stated in a press release. Cumberland had almost half of all housing construction in the city in October, according to the report.

In Gatineau, housing starts increased to 3,691 units in October from 1,847 in September, mainly because of multi-unit starts, particularly rental apartments.

ncockburn@ottawacitizen.com


$3.3m sale went wrong for the seller

By Robert Hof

Mark’s article this week deals with an instance that it is well to be aware although it happens rarely. I have made some minor edits to protect the privacy of the buyer.

By Mark Weisleder – from Moneyville magazine

Putting your home up for sale can be a very emotional decision, because the house is associated with the memories of all the things that happened within its walls. But beware: once you do decide to sell the house, put up a For Sale sign and accept an offer, you may not be able to change your mind later.

Here’s a case that illustrates the point. Some time ago, Mr. M. and his wife started looking for a house in a prestigious Toronto neighbourhood. They wanted a home that had six important features.

The home had to back onto a ravine and have a lot that was 100 feet wide. It had to be in move-in condition, with five bedrooms as well as have a nanny suite on a separate level. The asking price had to be less than $3.5 million and it had to be near St. Andrew’s Junior High School.

The couple found such a house. They made an offer of $3.325 million on the day they first saw it — which was accepted, and the sale was to close two months later.

A few weeks later, the sellers advised Mr. and Mrs. M. that for personal reasons, specifically the family history associated with the home, they had had a change of heart and decided not to close the deal.

When sellers change their minds about selling property, buyers have a choice. They can try and find a similar house and if they end up spending more money they can usually get the difference from the sellers. Or, they can ask a judge to require the sellers to complete the contract that they originally signed. This is called specific performance. To win the latter kind of case, you need to be able to demonstrate that the house you bought was in many ways unique, and that no suitable replacement can be found.

The M’s chose the second option and decided to sue for specific performance.

The sellers argued that the house was not unique, and that the M’s could find a similar property in the area that suited their needs. They noted that the property next door was for sale for $3.7 million and met the buyers’ criteria. The sellers also would probably have paid for any costs that the buyers incurred had they bought a similar property.

The advertisement for the home they had contracted to buy described the property this way: “Exquisite Residence backing onto a park. Unique architectural design and beautifully updated. The stunning two-storey floor-to-ceiling stone walls at the entrance is the first hint that you are entering into a ‘one of a kind’ prestigious home.”

The buying couple argued in court that the home reminded them of their home in Tehran. They said the house next door was of a different style, both outside and inside; it was also on a corner lot with a smaller backyard, and the children’s bedrooms were in a separate wing of the house.

Ontario Superior Court Justice J. Backhouse noted that the buyers had made an offer on the day they first viewed the house. He found that on a subjective and objective basis the house was unique, and ordered the sale to go ahead.

In all cases, whenever your deal has been stopped from closing, get legal advice in order to understand the alternatives available to you and, importantly, how much it may cost you to sue.

And remember to be very careful in making a decision to sell your home. You may not be able to change your mind later.

Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com


The Financial Consumers Agency of Canada

By Robert Hof
I have recently discovered The Financial Consumers Agency of Canada and highly recommend that you take a look. It is interesting and informative on everything from choosing a credit card, managing debt, setting a budget and very much more.
November is Financial Literacy Month (FLM) in Canada, and there are events and activities happening almost every day through the month. Because financial literacy means having the knowledge, skills and confidence to make responsible financial decisions, FLM brings together the resources, information, products and services developed by organizations across the country that help Canadians strengthen their financial literacy.