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Archive for August, 2017

Mortgage rules a major roadblock

MoneyLast year’s mortgage rule changes are clearly impeding young buyers from breaking into the housing market, according to one veteran, but there is an even larger obstacle in the way.

“One of the things that came out of the report was millennials impression that the government’s actions relating to restrictive actions to mortgage insurance was an impediment,” Phil Soper, president of Royal LePage, said. “Yet, I’d say a larger impediment was 20% year-over-year price appreciation.”

According to Royal LePage’s most recent report, 49% of peak millennials believe the federal government’s mortgage regulations have impacted affordability.

As a result, they have been forced to consider lower-priced homes.

“When looking for a home, 53% of peak millennial purchasers across Canada are willing to spend up to $350,000, which would typically buy them a 2.5 bedroom, 1.5 bathroom property nationwide, with 1,272 square feet of living space,” the report reads. “Yet, with 58% of respondents having a annual household income of less than $69,000, and only 34% currently tracking to have a sufficient down payment of over 20 % to qualify for a mortgage in this price range, the actual logistics of homeownership can be quite difficult.”

The study also found 61% of millennials prefer to buy a detached home but only 36% believe that wish is realistic.

“In addition to high home values, peak millennials also face increasingly stringent mortgage stress test regulations, which push potential buyers to the sidelines, electing to either remain in the rental market to save up enough money for a down payment, or move to more affordable regions,” the report reads.

“When asked, 64% of peak millennials currently believe that homes in their area are unaffordable, with a significant proportion of respondents in both British Columbia (83%) and Ontario (72%) asserting that prices are simply too high. Of those that do not believe they will be able to own a home in the next five years, 69% stated that they cannot afford a home in their region or the type of home they want, while roughly a quarter (24%) are unable to qualify for a mortgage.”

 

REP logo good Article written by Justin da Rosa and reproduced from Real Estate Professional Magazine


When is a detached house not detached?

That was the question facing the “Smiths” late last month.

The couple came to see me after they signed an offer to purchase a house in Mississauga for $865,000. It was listed and advertised as a detached house. Visually there is at least one metre of empty space between it and the house next door.

After signing the agreement, my clients checked the records of the City of Mississauga and were shocked to discover that the house is officially listed as a semi-detached dwelling. The municipal property code reveals that it is a link home.

The records of the Municipal Property Assessment Corporation also confirm that the house is a link semi-detached.

The link house style was popular in the 1970s and ’80s. Typically, the attachment that joins two adjacent houses is one or two short rows of underground concrete block footings at right angles to the foundation walls. They are entirely unnecessary for structural reasons.

The only purpose of the attaching footings was to allow builders to construct what looked like detached houses on lots which were designated for semi-detached models.

Looking at the row of 12 neighbouring houses from the street, they all appear to be completely detached, with open spaces on all four sides of the buildings and roughly a metre between each house and its closest neighbour.

Since the Smiths thought they were getting a detached house, as advertised, their position was that they had been misled by the sellers and the listing agent, and they had no intention of closing.

With litigation on the horizon, I referred them to my colleague Michael Carlson to prepare for a possible court case over the purchase agreement and the deposit.

After an in-depth consultation with the Smiths, Carlson wrote to the seller’s lawyer declaring the transaction was void from the outset due to the misrepresentation by the seller and the listing agent, and demanding return of the $10,000 deposit.

Carlson pointed out to the seller’s lawyer that he would be relying on a 1984 decision of the Ontario High Court by Justice Mabel Van Camp in the Bogojevski case. The buyers in that case discovered that the house was a link semi and refused to close.

The seller sued for damages and lost on the basis that there was an innocent misrepresentation of the house as detached. The buyers got their deposit back together with their legal costs.

As to the liability of the listing agent in the Smiths’ case, I had pointed out a 2010 discipline decision of the Real Estate Council of Ontario (RECO) in which an agent was fined $8,000 for incorrectly describing a link house as detached on MLS. The agent admitted to unprofessional conduct for posting false or misleading statements about the house.

My clients may or may not file a RECO complaint in this case.

The Smiths wanted the house but had clearly overpaid based on the misrepresentation that it was detached. The sellers needed to close the transaction so they would have funds for their next purchase.

The sellers had retained their own litigation lawyer and after some discussions, Carlson and the seller’s lawyer negotiated a price reduction of $25,000. It may have been too much for the seller and too little for the buyer but at least the deal will close.

Bob Aaron is a Toronto real estate lawyer. He can be reached at bob@aaron.ca , on his website aaron.ca, and Twitter @bobaaron2.


Land actually belonged to the City…

… despite tax bill and assessment that listed it as the homeowner’s!
The most important thing a real estate lawyer must do for his purchaser clients is to confirm the exact dimensions and location of the property they are buying.Boro Radjevic learned how important this is the hard way when he recently found out that a 2.21-metre strip of land adjacent to his three-storey townhouse doesn’t belong to him — it’s actually owned by the City of Toronto.
When Radjevic bought his property in 2009, both the MLS listing and purchase agreement described the land as Parts 24, 25 and 26 on a surveyor’s reference plan, registered on title to the property. The agreement also showed the frontage as 21.09 feet.But Radjevic’s deed shows that he only owns Parts 24 and 25, with a frontage of just 13.94 feet. The city owns Part 26, which is the concrete-covered strip of property next to his home. Radjevic always thought it was his.But Part 26 on the reference plan is incorrectly listed as belonging to him, both on Radjevic’s tax bill and the records of the Municipal Property Assessment Corporation (MPAC). Unfortunately, it is not on his deed; he doesn’t own it.

He learned about all this earlier this year when Bell Canada was upgrading some equipment on the concrete strip. When Radjevic tried to halt the installation, he was told the city owned the land. He was shown the reference plan to prove it.

City staff later confirmed the mistake on his tax bill, and they are reviewing steps to take “corrective action.”

Several red flags were waving, but missed, before Radjevic’s home purchase deal closed:

  • The agreement of purchase and sale showed the land being bought as Parts 24, 25 and 26 on the registered reference plan. Yet the deed only shows Parts 24 and 25.
  • The registered plan is in fact a survey of the property.
  • The measurements of the land on the purchase agreement show a frontage of 21.09 feet. Yet the width of the land in the deed, Parts 24 and 25, is only 13.94 feet. Comparing these dimensions would have revealed the discrepancy, and could have been used to negotiate a reduction in the purchase price.

In my view, the most critical part of the duty of a real estate lawyer to a purchaser is to examine the old title deeds, any available survey, the plan of subdivision, and the land details in the purchase agreement to determine the exact dimensions and location of the land being purchased. And to verify them with the purchaser before closing.

Radjevic expects to get a property tax refund after overpaying for years on land he doesn’t own, but he also “lost” a valuable piece of land that he believed was his.

Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents. 
He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.


How to keep deals alive in tougher times

Almost every day I receive calls from buyers who are having a tough time closing their real estate deal. It is a combination of either not being able to sell their existing home for what they expected, to the lender re-appraising the property they bought lower than what they paid, resulting in a lower mortgage being approved. Either way, the deal cannot close without further negotiations. Here are five things to remember, whether you are a buyer or a seller.

  1. No situation is the same so there are no automatic solutions

No two buyers are in the same position, as are no two sellers. Sellers who need the money from their sale to close a purchase may not have the same leverage on the buyer who cannot close as a seller who is not buying right away, or who has already purchased with bridge financing. Similarly, when your buyer is a first time buyer with little down payment, a seller’s chances of recovering major damages in a lawsuit are far more remote as when the buyer has assets, including an existing home with lots of equity. You need to understand exactly where you stand before deciding what course of action you want to take

  1. Whenever possible, keep the deal alive

In my experience, keeping a deal alive, no matter what the cost, is still better than cancelling and going to court. It has always been my experience that whenever deals break down and end up in court, only the lawyers win. People just don’t appreciate the time, costs and stress of a real estate lawsuit. It is brutal on everyone, except the lawyers, who always get paid in advance.

  1. Forget about blaming your real estate agent

When deals go bad, it is easy to try and blame your real estate agent for your misfortune. In my experience, this is rarely the case. It is not the agent’s fault a buyer put in an offer without any conditions during the crazy bidding wars we witnessed just a few months ago and now cannot close. In addition, buyers and sellers must remember that while they have to pay for their lawyers, up front, in any lawsuit, the real estate agent has virtually all of their legal fees paid for, through their insurance. This is also important for real estate agents to remember whenever a client threatens to sue you as a result of their troubles. They are just trying to bully you. Once they see the costs of litigation, they almost always back down.

  1. Remember what to ask for in an extension

If you are going to agree to keep a deal alive by extending it, sellers should try and ask for two main terms of any extension. The first is an additional deposit, usually non-refundable, to be paid to the seller immediately and to be credited to the purchase price on closing. This is not a penalty but the seller will be able to use these funds to help pay for unanticipated costs they incur as a result of the extension. Also ask for interest on the balance due on closing, at anywhere from 3-7%. This compensates the seller for not having the use of their closing balance during the extension period and helps pay extra interest the seller may be paying on their own mortgage.

  1. Get lawyers involved early in the process

Sometimes you will have no choice but to put the home back on the market, to try and reduce everyone’s losses, without agreeing to a mutual release. This involves a more complicated agreement, as the parties will not want to place any conditions on the listing, such as the deal being subject to a release of a prior agreement, as this may scare away some of the few buyers in this tougher market.  This is why you need a lawyer to assist who not only understands the legal process, but also understands the MLS listing and selling process.

Anyone can close a real estate deal. When it gets tough, you need someone in your corner who can get the deal done. With my partners at realestatelawyers.ca LLP, I am delighted to offer real estate closing services all across Ontario, through our 32 offices and mobile sign-up services. If you have any questions about a real estate closing, please do not hesitate to contact me at mark@realestatelawyers.ca or toll free at 1-888-876-5529.

MarkWeislederHeadshot

Mark Weisleder is a Partner, author and speaker at the law firm Real Estate Lawyers.ca LLP. Contact him at mark@realestatelawyers.ca or toll free at 1-888-876-5529