Archive for March, 2018
Dozens of purchasers in a Mississauga condominium project are awaiting news of further developments after the project was destroyed by fire earlier this month. But the decision whether to rebuild any development after a fire is complex, from many viewpoints — and it’s not entirely up to the builder.
Ville Condominiums is a project by Forest Green Homes. The four-storey development was sold out in early 2015. Construction was nearing completion and occupancy was scheduled for October this year.
Unfortunately, the entire project was destroyed by fire on March 2. It took 60 firefighters and 15 trucks several hours to contain the three-alarm blaze.
Three days later, the Office of the Fire Marshal and Mississauga Fire and Emergency Services concluded their investigations into the fire. Their reports have not yet been released.
“At this stage we are unable to comment on this unfortunate incident,” said Forest Green Homes’ public relations representative, in an email.
“In the days ahead, we expect to release a statement.”
A clause in the project’s sale agreements states that in the event the building is destroyed before completion, the construction lender may require payment of the insurance proceeds in order to reduce its outstanding loan, rather than to rebuild the building. If that happens, then the purchase agreements will be terminated and the buyers will get their deposits back.
One buyer at the Ville Condominiums project emailed me and said he was willing to wait as long as it takes to rebuild the project. But the decision is now up to the construction lender and not the builder. Some buyers may not be willing to wait, however, and will want to terminate now if they can.
All pre-construction agreements in Ontario have a clause in the Tarion addendum allowing the builder to extend closing due to an unavoidable delay, and a fire is one of the circumstances which can result in a lengthy extension of closing.
This is not the first time a major project under construction in the Greater Toronto Area was destroyed by fire.
In May, 2001, almost 200 condominium townhouses in the Liberty Walk development on Lawrence Ave. W. near Dufferin St., were destroyed in a fire. Immediately after the fire, the developer and its lawyers set up an emergency hotline to provide updates to everyone concerned.
They also notified the purchasers, their lawyers and all the construction trades that the losses and all purchaser deposits were completely protected by insurance and that the project would be rebuilt upon approval by the insurers.
The project was ultimately rebuilt. Some purchasers waited and some did not.
Back in Mississauga, the fate of the Ville Condominium project hangs in the balance.
Bob Aaron is a Toronto real estate lawyer. He can be reached at email@example.com.
Samantha Brookes has been warning Canadians to take a close look at the clauses in their mortgage contracts for years, but her refrain has become a bit more prevalent in recent months.
Since the Office of the Superintendent of Financial Institutions’ mortgage stress test was implemented in January, the founder of the Mortgages of Canada brokerage has seen “a huge influx” of Canadians who fail to qualify for a bank mortgage turning to alternative lenders that range from risky loan sharks to larger, more conventional companies like Home Trust.
While alternative lenders can provide a lifeline for Canadians who have run out of other financing options, Brookes said they come with pitfalls for those who don’t bother looking at the fine print.
“You need to read those contracts,” she said. “(With an alternative lender), the interest rates are higher, the qualifying rate is higher than if you were going with a traditional bank and they are going to charge one per cent of the mortgage amount (as a lender’s fee) for closing, so that means your closing costs increase.”
Alternative lenders tend to offer less wiggle room on their terms, so Brookes said that means you should pay special attention to another dangerous term she’s seen slipped into mortgage contracts: the sale-only clause.
It’s less common, Brookes said, but if left in, it might mean the only way you can break your mortgage is by selling your home. She usually makes sure it’s nixed from her clients’ contracts immediately.
She also advises mortgage-seekers to research a potential lender’s reputation, which can easily be done online. Looking up some lenders will reveal their involvement in growing strings of court cases, she said.
“If they are constantly in court fighting with consumers for money, are you willing to put yourself at risk with that kind of person?” Brookes recommended asking yourself.
Still, she said alternative lenders “that don’t end up in court every two seconds” are out there and can offer a good mortgage, if you do your research.
Broker Ron Alphonso has seen what happens when you don’t look into your lender. He recently heard from a couple who borrowed $100,000 via a paralegal posing as a broker, who then convinced the couple to give the money back to him so he could invest it on their behalf. Instead of investing it, the paralegal disappeared to Sri Lanka with the funds, leaving the couple on the hook for the money and resulting in eviction from their home.
“They got very, very poor advice,” Alphonso said. “Apparently the person that arranged the mortgage was an agent and paralegal that has since been disbarred. If they had a lawyer working for them, at least the lawyer could have said (before they signed the mortgage) maybe this isn’t right.”
Alphonso recommends seeking advice from a broker, who he said should also be questioned about how tolerant a lender will be if you were to default on one of your payments.
Some lenders quickly force their clients into a power-of-sale or foreclosure, while others will find a way to work out an arrangement that will allow them to keep their home.
“If you are already in some kind of financial problem and you go to a lender that is not flexible, you make the situation worse,” Alphonso said. “If you miss one payment, (within) 15 days you can be in power-of-sale.”
When that happens, he often sees people refuse to leave their home and try to fight the power-of-sale or foreclosure. They take the matter to court and end up spending tens of thousands of dollars in legal fees that can eclipse any remaining equity they might have in their home.
If they lose their case, which Alphonso said happens often, they end up with a massive lawyer’s bill, no equity to cover it and no place to live.
That’s part of why he said those seeking financing should have an exit strategy to get out of any mortgages they sign with an alternative or private lender with a higher interest rate.
“Your goal should always be to get to a lower interest rate,” he said. “If they don’t go in with a true goal of how to get out of this private mortgage, there will be a problem down the road.”
Alphonso recommended looking for an open mortgage, where you can prepay any amount at any time without a compensation charge or a prepayment limit that you would often find in a closed mortgage.
Open mortgages come with higher interest rates, but give buyers the option to switch to a cheaper lender if something happens. However, switching does often come with penalties, he said.
Because some agents and brokers don’t give enough information or fully explain penalties and clauses, he said the best way to keep out of trouble when seeking a mortgage is to ask lots of questions and understand what you’re getting into before signing on the dotted line.
The Canadian Press
by Tara Deschamps and reproduced from REP Magazine
Undisclosed Shaughnessy gangland murder quashes deal
The former owner of a mansion in Vancouver’s exclusive Shaughnessy neighbourhood must repay a $300,000 deposit after the sale of the property fell through because she didn’t tell the buyer about a suspected gang-related murder of her son-in-law at the front gate of the home.
In a British Columbia Supreme Court decision issued last week, Justice Paul Pearlman says the would-be purchaser of the six-bedroom, 10 bathroom mansion was the victim of a “fraudulent misrepresentation.”
Feng Yun Shao backed out of an offer to buy the 9,000-square-foot mansion in 2009, just days after she had agreed to pay about $6.1 million for the property after forwarding the deposit.
Court documents show she was told the 84-year-old owner, Mei Zhen Wang, had moved back to Guangzhou, China, and her daughter, who lived in the house, wanted to move to West Vancouver to be closer to her child’s school.
But neither Wang, her daughter Gui Ying Yuan, nor their realtor told Shao about the November 2007 unsolved slaying of Yuan’s husband, Raymond Huang, and Pearlman’s decision says the death was a factor in the decision to sell.
He has ordered Shao’s deposit be returned with interest.
Pearlman also dismissed Wang’s claim that Shao breached the contract and owes, not just the deposit, but a further $338,000 to cover the difference between Shao’s offer and the $5.5 million eventually paid by another purchaser.
Wang was living in China in 2003 when the judgment shows she forwarded funds to her daughter to buy the mansion, and then joined Yuan, Huang and their children in 2004.
The extended family was living in the home in 2007 when Huang was fatally shot by an unknown assailant.
Wang returned to China later that year but Yuan, her children and a sister continued to live at the home until June or July of 2008.
“(Yuan) maintained that she had no concerns for her safety, or the safety of her family following her husband’s death,” writes Pearlman, although he also notes that media reports linking the case to organized crime prompted the private West Point Grey Academy to request Yuan’s pre-teen daughter leave the school.
The girl was accepted at another exclusive private school in West Vancouver. Yuan bought a home there and the mansion was listed for sale in June 2008 but languished in what the court was told was a soft market, before being relisted with new agents in 2009.
Yuan told the court her husband was a businessman whose enterprises included a trucking company and a restaurant. She denied he was involved in any criminal organization.
Both Wang and Yuan testified Wang’s return to China and Yuan’s desire to be near her daughter’s school were key factors in the decision to sell, but Pearlman ruled there was more to it.
“It is entirely consistent with the probabilities of the situation that then existed, that Ms. Wang would fear for the safety of her two adult daughters and her grandchildren while they lived at the location where Raymond Huang met a violent death,” he writes.
“I find that the murder of Raymond Huang was also a reason why the plaintiff wished to sell the property.”
But Pearlman writes Yuan, on her mother’s behalf, didn’t share those concerns with her realtors so when Shao inquired about the reason for sale she was only told about proximity to the new school.
“That representation, while true on its face, was incomplete. It concealed the fact that Ms. Yuan’s daughter changed schools as a result of Mr. Huang’s death, and that the death was a factor in the plaintiff’s decision to sell the property,” writes Pearlman, noting that is one key element of fraudulent misrepresentation.
He says Shao wanted to move to Shaughnessy because she understood it was “prestigious, safe and quiet” but he says she was entitled to an “accurate answer” and “relied on the plaintiff’s representation regarding the reason for selling the property.”
Pearlman says the fraudulent representation sets aside the contract of purchase and in addition to the return of Shao’s deposit and interest, he has also awarded her some of her legal costs.
First published by The Canadian Press and reprinted by REP magazine.
Tim Hudak, former leader of the Ontario Progressive Conservatives and current Ontario Real Estate Association CEO, says 2018 will be a jarring year if the government doesn’t change tack.
“My main wish—and I hope it is an accurate forecast for 2018—is that government will start looking out for the middle-class for a change,” Hudak told REP. “For most of 2017, they were working against the middle-class. A recent OREA survey showed the vast majority of people define ‘middle-class’ as being able to own a home, but, almost universally, people agree homeownership is becoming more difficult with all the government rules, regulations, restrictions and taxes.”
The government’s most recent intervention was in the form of Guideline B-20, which was updated to stringently stress test mortgages. Hudak believes it was an unnecessary piece of regulation that will ultimately put home purchasers at risk.
“I suspect a number of people will go into the grey market to borrow to pay for a home, so more people will be in higher-risk, higher-cost mortgages in the unregulated sector, but I think there’s no doubt the piling on impact of new taxes, higher interest rates and tougher mortgage rules will put homeownership out of reach for even more millennials,” he said. “Secondly, it will cause young families not to upgrade their home when kids come along. There’s no doubt that in 2017 governments were working against the middle-class dream of homeownership.
“I do hope, now that we’re heading towards a provincial election this year, a municipal election this year, and a federal election in 2019, that they’ll get in the corner of Ontario’s middle-class instead of fighting them.”
In spite of criticizing the provincial government, Hudak gave it credit for the Fair Housing Plan—at least parts of it. He’s satisfied that Kathleen Wynne’s Liberal government has doubled the land transfer tax credit and committed to tackling the painstakingly slow approvals process.
“The single most damaging thing with the Fair Housing Plan was the strict rent control regime that looks more like the 1970s than 2017,” he said. “I think fewer mom and pop landlords will get into the business at all. Corporations will likely shift their investments to other states and provinces. You can’t move apartment buildings, but you can certainly move investment dollars by building new. The long-term impact will be a reduction in rental supply and deterioration of existing stock.”
Hudak called 2017 the year promises were made, and 2018 the year rubber needs to hit the road.
Article by Neil Sharma of Real Estate Professional magazine