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Archive for July, 2015

Hidden fees can cost you thousands

Two areas involving builder agreements of purchase and sale that cry out for action by the new homes and provincial watchdog are disclosure of additional costs and unit size.

Recently a buyer came into my office to review a builder purchase agreement for a unit in a smart new condo project. During the negotiation of the deal, both the buyer and the builder were represented by separate real estate agents.

Initially my client was enthusiastic about buying her own place – even if it wasn’t going to be ready for as long as six years. By the time she left my office 90 minutes later, after we went through the offer together in detail, she had changed her mind and decided that she was going to exercise her right to back out of the transaction.

This buyer’s unhappy experience reveals a huge gap in consumer protection that needs to be remedied by Ontario’s Tarion Warranty Corporation. (Full disclosure: I am a past member of its board and Consumer Advisory Council).

As I walked my client through a schedule to the builder agreement which lists the extra charges she would have to pay in addition to the $392,990 purchase price, her enthusiasm for the purchase dropped away. Although the extras are detailed in the agreement, they were never mentioned in the sales office and are effectively buried in the 41-page document.

Despite their obligations as registered real estate agents, neither the builder’s agent, nor her own agent ever mentioned the charges to her.

In total the extras came to about $12,000 which cannot be mortgaged and would have to be paid on closing.

But that’s not all.

Buried in a thick volume of disclosure materials, there is an obligation for each purchaser to contribute proportionately to the purchase of a $744,000 superintendent unit and a $265,000 guest suite. My client’s share would be $1,952 plus interest at the Bank of Canada 10-year bond rate plus 4 per cent, repayable over the next 15 years.

The overall total of undisclosed extras at closing and afterward would be about $16,000.

Although these charges are by law required to be set out in the purchase agreement or the disclosure materials, there is no obligation to mention them in any meaningful way in the sales office or disclose them prominently on the first page of the form.

As a result, buyers who do not have their offers reviewed by their lawyers in the first 10 days after an agreement is signed, often experiences severe sticker shock on closing.

This needs to be remedied both by Tarion and the Real Estate Council of Ontario. Builders and their sales agents should be required to speak up and be transparent about extra charges.

The other area which cries out for Tarion regulation is the failure of most – but not all – condominium builders to include in their purchase agreements floor plans which show linear measurements and the total unit area. Size is perhaps the most important fact in buying a condo and measured floor plans are crucial to buyers.

Bob Aaron is a Toronto real estate lawyer. He can be reached at bob@aaron.ca and on his website aaron.ca.

 

 


Six things to know about real estate deposits.

Here are some answers to common questions about deposits when you are buying a house.

When must a deposit be paid?

In Ontario, the standard real estate contract gives the buyer two choices; you can pay the deposit immediately when you make an offer, or you can agree to pay it within twenty four hours after the seller accepts it. Most buyers prefer the second option. If you are in a bidding war, you will be encouraged to come up with the deposit immediately, to show good faith to the seller.

Can the buyer get out of a deal by refusing to pay the deposit?

No. Once the deal is accepted, you can’t change your mind. If you do, the seller can sell the property again and if he gets less money than you were going to pay the seller can sue you for the difference, plus legal fees.

What happens if the deposit is paid late?

The seller has the right to cancel the deal. This is because all time limits matter in a real estate contract and if you are late, even by a few minutes, the seller can try and cancel. I have seen this happen many times, especially when the seller knows that there is another buyer out there who will pay more money. If you need more time to come up with your deposit, say so in your offer.

How much should a buyer pay as a deposit?

This is a tough question, and will largely depend on where your home is located. In Toronto, deposits are now usually up to 5 per cent of the sale price. In Brampton, it is closer to 2 per cent. In some areas of Ontario, deposits can be as little as a few hundred dollars.

Why does the deposit go to the seller’s real estate agent and not the seller?

If the seller goes bankrupt or disappears with the deposit, the buyer is not protected. When the deposit is held by the real estate brokerage, it is in trust and is also protected by insurance so even if the brokerage goes bankrupt, the buyer can get their money back.

If the buyer is unhappy with their home inspection, can the seller refuse to return the deposit?

This happens more than you think. A deposit cannot be released unless both the buyer and seller agree. If a seller believes the buyer did not act in good faith in trying to satisfy their condition, whether it is a home inspection, financing or a condominium status certificate review, they can refuse to release the deposit. This means it stays in the broker’s trust account until a judge decides who gets it, which can take years. As a precaution, buyers should consider making two deposits in their offer, a small one of say one per cent when the offer is accepted, and a second larger deposit once the condition is satisfied.

Understand the rules about deposits before you sign any real estate contract. It is expensive to change your mind later.

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

 


Five things to remember about boundary rights

There is an expression that good fences make good neighbours. One qualification. Only when the fence happens to be on the correct boundary line.  Here are 5 things to remember when it comes to boundary lines:

Can you still steal someone’s land by possession?

This is called Adverse Possession and is still available today in many parts of Ontario. However, it is getting harder to prove. Since most of the land has been converted into the Land Titles System, it now will take typically at least 20 years to be able to prove that you have taken your neighbour’s land by possession. Sorry, you cannot steal land from the government, so even if you have fenced in some City land or Conservation land for 30 years, you can be asked to move the fence back if they find out.

 

Who owns the tree on the property line?
If the tree is on the boundary line, then both neighbours own the tree. You cannot remove the tree without the permission of both owners. You can trim the branches or the roots of your neighbour’s tree to the property line, as long as you do not harm the tree. You cannot enter your neighbour’s land to do this. If your tree falls and damages your neighbour’s property, then your neighbour will be responsible for the loss and will have to claim from their own insurance policy. Strange result but true.

 

Is there a law that there must be a fence on the boundary line?
Unless you have a swimming pool or your land is backing onto a public highway, there is no law saying you must have a fence. If there are disagreements between neighbours over the type of fence to build, or whether a fence needs to be rebuilt, then each City has a process to decide this. Some cities send out referees to determine who is right. The reasonable solution is just share the cost of a simple fence. If one neighbour wants a more elaborate fence, let them pay the difference.

 

What should you do when an argument erupts over a boundary line?
I have seen neighbours come close to physical violence over arguments about boundary lines. I have seen cases where people just take matters into their own hands, rip up the fence and build it on a different boundary line. Although the best answer is to get a new survey and work it out, that may not always be possible. Make sure you take pictures of where your fence is in advance, so if your neighbour does take it down, you can prove later where the fence should be, if the case goes to court.
Understand your boundary rights and you will be able to get along better with your neighbours.


 

Mark’s Contact Information

Mark Weisleder is a Partner, author and speaker at the law firm Real Estate Lawyers.ca LLP. Contact him at mark@realestatelawyers.ca or 1.888.876.5529


Verify condo units in your offer, deed

Once upon a time not very long ago, there was a court case involving the purchase of a condo townhouse with a third-floor attic conversion that did not comply with the condominium’s declaration.

Ontario’s Court of Appeal found in favour of the new owner, Kelly, who was not shown the condo plans by her lawyer and was not aware that the third-floor loft had been built into space she did not own.

The court awarded Kelly the difference between in value between a two-storey and three-storey unit. As well, an earlier ruling requiring her third floor be closed and restored to vacant attic space was set aside. The damages are payable jointly by the law firm and the condominium corporation.

Two lessons that emerge from this case and the recent experiences of major title insurers are:

Never purchase a new or resale condominium without comparing with your lawyer the numbers on the deed against the surveyor’s floor plans for the condominium levels. They don’t always match.

Registered numbers for parking and locker spaces can and do get mixed up. Always verify unit numbers and location at the time the offer is signed – and again at closing. Larry Ginsler, claims counsel at Stewart Title Guaranty Company in Toronto, expressed his shock about deeds and offers not being thoroughly checked: “I cannot believe how many claims we get related to wrong units being purchased (and) missed parking and/or locker units.” “Clearly”, he noted in an email “lawyers are not receiving status certificates and not obtaining the relevant condominium plans and reviewing them with their clients. It is very frustrating. In one case Stewart Title paid out $38,000 to rectify the purchase of the entirely wrong unit.

It is an easy assumption in a condominium purchase that unit 1201 is legally known as unit 1, level 12. But in many condo corporations the numbering on the door differs from the registered title. This is especially the case for parking and locker units where numbering is random, or where the units are not deeded, but their use os assigned in the condo declaration. It is not unusual, for example, to see a parking or locker space with a painted”99” to be shown on the registered title as Unit 53, Level A. It is also common for parking and locker spaces to be registered as exclusive-use common elements, without any separate title documents.

John Tracy, legal counsel at First Canadian Title, said: “In some instances the lawyers will not review, or properly review, the condo plan… with the client so there is no opportunity for the client to verify if the correct unit is being transferred.”

This is an extract from an item written by Toronto real estate lawyer Bob Aaron. He can be reached at bob@aaron.ca.