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Archive for February, 2014

CMHC to Increase Mortgage Insurance Premiums

By Robert Hof

News from CMHC that will affect some of us. It’s best to be aware.

OTTAWA, February 28, 2014 — Following the annual review of its insurance products and capital requirements, CMHC will increase its mortgage loan insurance premiums for homeowner and 1 – 4 unit rental properties effective May 1, 2014.

The increase applies to mortgage loan insurance premiums for owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinance premiums. This does not apply to mortgages currently insured by CMHC.

CMHC’s capital management framework is consistent with international practices and Canadian guidelines for mortgage insurers. Increased capital targets are consistent with Canadian and international industry trends and makes the financial system more stable and resilient.

“The higher premiums reflect CMHC’s higher capital targets” said Steven Mennill, CMHC’s Vice-President, Insurance Operations. “CMHC’s capital holdings reduce Canadian taxpayers’ exposure to the housing market and contribute to the long term stability of the financial system.”

For the average Canadian homebuyer requiring CMHC insured financing, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment. This is not expected to have a material impact on the housing market.

Effective May 1st, CMHC Purchase (owner occupied 1 – 4 unit) mortgage insurance premiums will increase by approximately 15%, on average, for all loan-to-value ranges.

Loan-to-Value Ratio

Standard Premium (Current)

Standard Premium (Effective May 1st, 2014)

Up to and including 65% 0.50% 0.60%
Up to and including 75% 0.65% 0.75%
Up to and including 80% 1.00% 1.25%
Up to and including 85% 1.75% 1.80%
Up to and including 90% 2.00% 2.40%
Up to and including 95% 2.75% 3.15%
90.01% to 95% – Non-Traditional Down Payment 2.90% 3.35%

CMHC reviews its premiums on an annual basis and, going forward, plans to announce decisions on premiums in the first quarter of each year. The homeowner premium increase follows changes CMHC made to its portfolio insurance product earlier this year.

As Canada’s national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of quality, environmentally sustainable, and affordable housing solutions that will continue to create vibrant and healthy communities and cities across the country.

For additional highlights please see attached backgrounder and key fact sheet.


  • Mortgage loan insurance helps protect lenders against mortgage default and enables consumers to purchase homes with a minimum down payment of 5% with interest rates comparable to those with a 20% down payment. Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price.
  • CMHC mortgage loan insurance premium is calculated as a percentage of the loan based on the loan-to-value ratio. The premium can be paid in a single lump sum but more frequently is added to the mortgage principal and amortized over the life of the mortgage as part of regular mortgage payments.
  • CMHC reviews its premiums on an annual basis and has adjusted them several times since being commercialized in 1998. Adjustments have included both increases and decreases to the premiums.
  • CMHC’s new premium rates will be effective for new mortgage loan insurance requests submitted on or after May 1, 2014. The current mortgage loan insurance premiums will apply for applications submitted to CMHC prior to May 1, 2014, regardless of the closing date. As is normal practice, complete borrower and property details must be submitted to CMHC when requesting mortgage loan insurance.
  • The increase applies to mortgage loan insurance premiums for residential housing of 1-to-4 units. This includes owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinance premiums.
  • In 2013, the average CMHC insured loan at 95% loan-to-value was $248,000. Using these figures, the higher premium will result in an increase of approximately $5 to the monthly mortgage payment for the average Canadian homebuyer. This is not expected to have a material impact on the housing market.

95% Loan-to-Value

Loan Amount $150,000 $250,000 $350,000 $450,000
Current Premium $4,125 $6,875 $9,625 $12,375
New Premium $4,725 $7,875 $11,025 $14,175
Additional Premium $600 $1,000 $1,400 $1,800
Increase to Monthly Mortgage Payment $3.00 $4.98 $6.99 $8.98

Based on a 5 year term @ 3.49% and a 25 year amortization

*Premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax — the sales tax cannot be added to the loan amount.

85% Loan-to-Value

Loan Amount $150,000 $250,000 $350,000 $450,000
Current Premium $2,625 $4,375 $6,125 $7,875
New Premium $2,700 $4,500 $6,300 $8,100
Additional Premium $75 $125 $175 $225
Increase to Monthly Mortgage Payment $0.37 $0.62 $0.87 $1.12

Based on a 5 year term @ 3.49% and a 25 year amortization

*Premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax — the sales tax cannot be added to the loan amount.

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Ottawa’s resale market lands softly in January’s deep freeze

Members of the Ottawa Real Estate Board sold 589 residential properties in January through the Board’s Multiple Listing Service® system, compared with 594 in January 2013.

“Residential sales this January were virtually identical to January 2013. Our members sold five more freehold residential properties and ten fewer residential condominiums. Statistically the difference is less than one per cent,” says President of the Ottawa Real Estate Board, Randy Oickle. “The market activity is encouraging for homeowners considering the deep freeze Ottawa experienced this past month – people being more apt to stay warm inside instead of venturing out to search for a home.”

The average sale price of all residential properties, including condominiums, sold in January in the Ottawa area was $346,744, an increase of 1 per cent over January  2013. The average sale price for a condominium property was $265,775, a decrease of 1.1 per cent over January  2013. The average sale price for a residential property was $368,779, an increase of 0.9 per cent over January  2013.

“The number of properties listed in January more than doubled the amount from the previous month – a normal occurrence at the beginning of the year when people begin to plan for the year ahead,” explains Oickle. “Interest rates continue to be low with some whisperings of rates decreasing, not increasing as had been predicted in the last half of 2013. The Ottawa resale market has remained steady. There have been no major increases or decreases in sales or prices, notwithstanding the government’s intervention in mortgage rules over a year ago.”

Single level condominium apartments, January’s figures showed 75 sales for the month, compared with 65 in January 2013. The average price in January 2013 was $290,935, a decrease of 6.9 per cent over the previous year’s January.

Two-storey condominium townhomes, January’s figures showed 40 sales for the month, compared with 64 in January 2013. The average price in January 2013 was $220,965 an increase of 1.5 per cent over the previous year’s January.

The market is gearing up for spring and I look forward to being really busy.  Call me for specific information on your own property.

Think Carefully Before Suing your Neighbour

By Robert Hof

Many times what starts off as an innocent disagreement can escalate into something major, if you are not careful. It can be an argument about noise, boundary issues, trees or fences. But if you are considering suing your neighbour about any issue, think about the following first:

  • Whatever hard feelings exist now, they will get much worse if you start a lawsuit.
  • Try to settle it as diplomatically and amicably as possible. Remember, the worst settlement, is in my opinion, better than the best lawsuit.
  • Consider checking the title of your neighbour’s property first, to see if they have any equity in it should you win your case;
  • Maybe it is better to just move away from the neighbour than start a fight. You don’t know how the person may react to a lawsuit.

Here’s an illustration of why you want to avoid a suit at all costs, since in most cases, even when you win, you lose.

In 2007, David Fitzpatrick, a homeowner in Pickering, Ontario, was involved with a boundary issue with his neighbour, William and Anna Squires. The dispute quickly escalated. Then on November 12, 2007, the Squires walked out their front door, only to find the carcass of a dead, bloody coyote on the hood of their pickup truck.

The Squires’ pressed charges against Mr. Fitzpatrick, but the case was later thrown out by the police. They could not prove that Mr. Fitzpatrick did the act as the video camera installed by the Squires had been disabled the night before.

Fitzpatrick then decided to sue the Squires for malicious prosecution and also sued his sister, Shelley Orwin, who he alleged was conspiring with the Squires against him. In a decision dated June 18, 2012, Justice David Stinson of the Ontario Superior Court dismissed Fitzpatrick’s case, and awarded the Squires damages of almost $340,000 for among other things, mental distress, legal costs, and punitive damages. He awarded Ms. Orwin almost $70,000 in legal costs. The judge found as a fact that, based on all the evidence, it was Mr. Fitzpatrick who either placed the coyote or caused someone else to place the coyote on the Squires’ truck. Fitzpatrick recently appealed the decision against the Squires and lost.

In an interview, the Squires indicated that while they are glad they won the case, they may never see any money. I assume that this is due to the fact that even though Fitzpatrick may own his home, there may be mortgages registered against it and he may have little equity left. It could take years for them to collect anything. In the meantime, the Squires had to pay their lawyers all their legal costs.

This was a difficult situation, since the Squires did not start this lawsuit. They had to defend one started by their neighbour.

A related issue is whether a seller needs to disclose to a buyer about a neighbour who is peculiar. Most lawyers will say no. For example, I have seen streets closed down on Halloween when someone puts up this huge ghoulish display for weeks, bringing onlookers from all over the City. Do you want to live next door to that house?

This is another reason why you need to do some research before you buy any home to make sure there are no odd neighbours on the street. Go and knock on the doors and ask people. For example, check to see if any neighbour has very sophisticated video surveillance equipment near their front door. This is not usual. Do the right research before you buy and avoid surprises after closing.

Article courtesy of real estate lawyer Mark Weisleder

Check the Status Certificate Before Buying or Selling a Condominium

By Robert Hof

Very, very important advice from Mark Weisleder. Robert.

When buying or selling a re-sale condominium, the most important document in the deal is the status certificate. It answers important questions that matter to most buyers, such as:

  • Do I own the parking or locker unit?
  • Are pets permitted in the building?
  • When is the pool open for swimming?
  • How much money is in the reserve fund to look after future repairs?
  • Are there any special assessments being charged because there is not enough money to pay for needed repairs right now?
  • Is anyone suing the condominium and is there enough insurance to pay for it? For example, someone slipped on the ice that was not properly cleared
  • Who is the property manager, providing guidance to the board of directors?

Most condominium deals are conditional upon the buyer’s lawyer being satisfied after reviewing all of the condominium documents, including the status certificate, the declaration, by laws, rules, most recent budget and reserve fund study completed by the condominium corporation. Even though lawyers are not accountants or engineers, they are asked to provide an opinion to the buyers as to the financial well being of the building.

In my experience, there are no easy rules to provide guidance. A reserve fund may have over a million dollars in it, but the building may need over 2 million in repairs. Another building may only have $200,000 in the reserve fund, but they may have completed all necessary repairs that may be needed for years to come. You get the picture.

There have been stories recently about how CMHC had labelled some condominium buildings as having questionable financial statements, and would not provide mortgage insurance to anyone buying in those buildings. Buyers who are applying for an insured mortgage must make sure that they do not waive any financial condition regarding a condominium re-sale purchase until they know for sure that the insurance company is satisfied with the building.

In other cases, there may be no option for a board of directors but to go out and borrow money to complete necessary repairs when there is not enough money in the reserve fund. The owners can then pay it back over time through increases in the maintenance fees. This does not necessarily mean that the building is being badly managed. As long as there is a plan to get it to financial stability.

If you are selling a unit and there is a low reserve fund, or a potential for a special assessment to pay for needed repairs, either adjust the sale price to reflect for this, or negotiate a holdback on closing for 1-3 years, so that if a special assessment is levied later, it would come out of the holdback amount. If it is not levied, then the holdback would go to the seller at the end of the holdback period.

Although it is not mandatory for a board of directors to use a management company to assist them, I am suspicious if there is no management company. Board members are generally unqualified to make these types of decisions or handle large budgets. But be careful who you hire. The story of Channel Property Management and Manzoor Khan, the property manager who allegedly defrauded several condominium corporations out of millions of dollars in 2011 continues to haunt the owners in the affected buildings, who are still having difficulty selling their units today.

In general, townhouse condominiums do not require as large a reserve fund as a highrise condominium, because they will not have as many future repair requirements, other than the repair or replacement of the roof. The unit owners are responsible for everything inside their units. It is thus important for everyone buying a townhouse to also include a condition for a home inspection, to check everything inside the home before you commit to buy. I know many buyers who also conduct a home inspection in a highrise condominium, not only to look for problems with the HVAC or other system inside the unit that the buyer will be responsible for, but in some cases to also inspect the building as a whole to determine if it is also being carefully maintained.

Sellers, find out what your status certificate will say before you put your unit up for sale. Buyers, ask what is in the status certificate because this will form the basis of your continued enjoyment of your home after closing.

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Canadian home sales moderate further in January

According to statistics released today by The Canadian Real Estate Association (CREA), national home sales activity posted its fifth consecutive month-over-month decline in January 2014. View PDF.

How to find out if a murder happened in your home

By Robert Hof

Unless you ask a seller point blank, you are unlikely to find out whether their home was the scene of a murder, suicide, grow house operation, or whether they experienced water damage or flooding in the past.

Most would agree that this type of information would definitely affect the value of the property if known. An example  in Toronto took 16 months and multiple listing agents before it sold in one of the hottest real estate markets. The property was the site of a murder on March 3, 2011. A suspect was arrested in 2012 and was charged with first-degree murder. The property was originally listed eight months after the murder for $973,000 and finally sold for $900,000 in 2013.

If a real estate agent knows about a murder, they are obligated to disclose this under the Code of Ethics as this would be considered a material fact and they have an ethical obligation to disclose material facts to unwary buyers. The problem is, if the agent doesn’t know about it, there is nothing to disclose.

More and more people are turning to the internet to try and find the answers right now.

Tenants are checking to make sure the building they are interested in has not been reported as having a bedbug problem. Buyers and real estate agents are going to and to see whether a property was ever listed as a grow house or meth lab and whether a prior owner had made an insurance claim on the property for fire or water damage, or sewage backup.

A new website developed by Toronto based brothers Robert and Albert Armieri is called, where visitors can just enter a property address and see whether a murder or crime was committed on the property, including whether it was a grow house. The brothers claim they got the idea while checking the bed bug registry online while apartment hunting.

The website also shows famous people who lived at properties. For example, Carrie Underwood and Mike Fisher used to live at a premium address in Ottawa, presumably when Fisher played for the Senators. The website claims to have a database of over 2,000 properties and it is growing every day. The website invites other parties to share information about properties as well. They then try to verify everything through newspaper reports.

Users should beware that some of the information may not be accurate and should be independently verified. Realtor Barry Lebow, who has also been an expert witness on the subject of stigma, and confirms that a past murder will affect property values, recommends that buyers should conduct their own Google, Safari and Yahoo searches to verify anything they see on this site.

In addition, I recommend buyers should insert a clause into any agreement stating that the seller is unaware of any issues relating to murder, suicide, grow ops or insurance claims about their property. Speak to the neighbours as well. You are likely to hear from someone if there was a problem in the past affecting the property.

A real estate agent called me the other day and told me that the husband of a client died recently and his wife sprinkled his ashes in the back yard. She asked if she needed to disclose this to potential buyers. I asked her whether it had been windy that day.

With more and more information becoming available on the internet, I encourage sellers and real estate agents to disclose these types of property stigmas. It will come out eventually. Who needs to go to court to fight about it later?

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Who pays if a neighbour’s tree damages your home?

By Robert Hof

During a recent ice storm, your neighbour’s tree fell and damaged your house. Who pays?

For most people, this should be covered under your homeowner insurance policy, whether the branches were from your own trees or your neighbour’s trees. However, most policies have $500 deductibles, so you need to decide whether it is worth reporting the claim. If you have all perils coverage, you may also claim for any damages caused to your car by the branches.

The main question asked by readers is whether you can sue your neighbour if their tree fell and damaged your home. The answer is not that easy. Here’s why:

Ted and Janet were neighbours. Janet owned a Lombardi Poplar tree that was 60 feet tall and was situate 5 feet from the boundary fence. On November 30, 1991, Janet’s tree snapped off in a wind storm. The tree fell and damaged the fence, a snowmobile trailer and a motor home owned by Ted. Ted sued for damages.

It was determined by an arborist that the tree broke because of internal decay. You could not notice this from just looking at the tree, even though it did have some dead branches. In a decision dated September 27, 1996, Justice George Valin of the Ontario Superior Court ruled that Janet was not responsible for the damages. He explained the duty of a tree owner as follows:

“A property owner must take steps to ensure that trees located on his/her property are not hazardous to others. It would seem to me that a property owner can be held liable in negligence for failing to maintain a tree in circumstances where the exterior of the tree provides sufficient warning signals. The warning signals would include general deterioration, a scarred trunk, discoloured bark, and a large amount of defoliation or dead branches.”

He found that since Janet was unaware of any exterior signs of trouble, she was not responsible.

The judge also noted a prior decision which stated that at common law, a person who allows land to remain in its natural state is under no obligation to his neighbour in respect of what is standing or growing on it. The court went on to say that the neighbour must protect himself if he/she can, or suffer the consequences.

Judge Valin then stated that Janet was not liable for damage to the plaintiff’s property since the growing of a tree is a natural use of land that does not attract liability in nuisance

Yet the judge also quoted a decision of the BC Court of Appeal in Hayes v. Davis from 1991, where Davis’ tree fell during a windstorm and damaged Hayes property. In this case, Davis had been warned by Hayes that their tree was dangerous and she did nothing to fix it. The court in this case said Hayes was responsible for the loss because she was aware of the potential threat posed by the trees and did nothing.

Some related questions are as follows:

What if branches fall down in my yard but do not damage anything. Who pays to remove them?

You will have to clean this up yourself, at your cost, even if it is your neighbour’s tree branches that fall into your yard. Most insurance policies do not pay for this type of damage.

Can I just cut down or trim my neighbour’s tree if I think it is dangerous?

If you think the branches of your neighbour’s tree are too close to your home, you can cut them back to the property line, as long as you do not injure the tree. You cannot cut down the tree or enter your neighbour’s land to trim branches without permission.

The lessons are as follows:

  • If you are suspicious that a tree is sick or dying, get the advice from an arborist before doing anything or warning your neighbour. You can find an arborist at
  • If your tree branches fall into your neighbour’s yard, in my opinion, you should be a good neighbor and assist in their removal;
  • Check your insurance policy to make sure you are covered, should this ever happen again

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