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Archive for December, 2019

When agents face heat for illegal income apartments

How does an interested buyer know if a home's basement apartment is legal? And, what about information about basement apartments must real estate agents provide to buyers?

Mohamed came to my office with an agreement to purchase a two-unit house in Kitchener. The agents involved told him the basement apartment alone could rent for $1,200 a month.

Although the purchase agreement contained no reference to the legality of the basement apartment, the MLS listing described it as an "in-law suite" and an "accessory apartment" – industry code words for illegal unit.

After signing the agreement, Mohamed approached the City of Kitchener and was told that the home's basement apartment did not have the necessary approvals and was illegal. He wanted out of the deal.

I told him about three cases before discipline panels of the Real Estate Council of Ontario (RECO), the industry regulator.

In 2010, a real estate agent was charged by RECO with breaches of its code of ethics. The agent described a property in a  listing as, "magnificent house… with two apartments in the basement ($1,150 income)…Seller and and Agent do not warrant the retrofit status of basement apartment."

The agent told the buyer it would be an excellent investment property, but took no steps to ensure the buyer was informed of its legality and suitability for investment purposes.

After the deal closed, the municipality issued an order against the property because the basement apartment was in violation of the Buidling Code Act. The tenants stopped paying rent, and the owner eventually filed for bankruptcy.

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, phone 416-364-9366 or fax 416-364-3818.

Homeownership hampers millennials’ retirement plans

Homeownership is becoming a distant dream for many Canadian millennials, according to a study from KPMG.

Around two in three are worried that if they buy a house and delay their savings, they will not have enough saved for their retirement. In fact, only 54% of millennials expect they will be able to afford a home in the future.

These findings highlight how different millennials' financial circumstances are from those of the previous generations, said Martin Joyce, partner and national leader for human and social services at KPMG.

"They face unique challenges when it comes to building wealth despite having more education and income, primarily because of housing unaffordability," he said.

Roughly 42% of millennials are putting their retirement savings on hold to focus on paying off their mortgages. Joyce said this could indicate that the millennial population is facing a choice today that their parents' generation did not.

"They either buy a home or focus on saving for retirement. Buying a home involves taking on considerable debt because house prices are so high in relation to incomes, and that limits millennials' ability to save," he said.

Furthermore, millennials are highly indebted, making saving for a house even harder. Figures from Statistics Canada show that their debt-to-income ratio of 216% is considerably higher than what Gen-Xers and baby boomers had at their age.

The higher costs of living, particularly rents, are also squeezing the younger generation's ability to save for retirement.

"We're concerned that millennials will not be in the same position to retire as the generations that preceded them were. A variety of factors is hampering their ability to accumulate more wealth and prompting calls for government reform," Joyce said.

by Gerv Tacadena

18 Dec 2019


Are Canadians drowning in debt?

Around two in five Canadians are becoming increasingly hopeless about escaping debts in their lifetime, according to the latest findings from Manulife Bank Debt Survey.

The majority of the survey respondents think that the average Canadian household is in serious debt. The study found that there has been an increase in the number of Canadians who have considerable non-mortgage-related debts, from 46% last year to 55% this year.

"There is a financial wellness crisis, and it's affecting Canadians of all demographics," said Rick Lunny, president and CEO of Manulife Bank.

Spending continues to be a huge burden for many Canadians, with the average spending-to-income ratio trending negatively from 33% to 45%. Only around one in 10 Canadians said their incomes are rising faster than their expenses.

Furthermore, around one in three Canadians said debts hinder them from doing things in life that they could enjoy.

Baby boomers said they are in better financial shape than their Generation X and millennial counterparts. Roughly 60% of baby boomers said they are better off financially than their parents were at the same age, compared to just under half of Gen-Xers and millennials.

Of the three, Gen-Xers perceive themselves to be in the most debt. They are also most likely to report that their expenses are outpacing their incomes. This generation is also the most sceptical about ever being debt-free in their lifetime.

Millennials, on the other hand, are most likely to report stronger incomes than spending. They also feel more in control of their financial situation through the help of technology. The study found that three in four millennials think it is essential to have access to financial plans online, preferably through an app.

by Gerv Tacadena04 Dec 2019

Homeownership becomes a distant dream for millennials

Skyrocketing house prices and ballooning debt are making it a struggle for Canadian millennials to break into the housing market, a new study by KPMG found.

While around three in four millennials still have homeownership as one of their goals, close to half said it would likely remain as a "pipedream" due to several reasons.

Even millennials with good-paying jobs are struggling to afford a home, said Martin Joyce, KPMG partner and national leader for human and social services.

"The combination of rising house prices, high levels of personal debt and annual incomes that are just a fraction of the cost of buying a home compared with their parents' generation, is pushing the dream of homeownership out of reach for many millennials," he said.

The indebtedness of millennials was due to high levels of student debt, according to the study. Furthermore, millennials who were able to enter the housing market have taken on larger mortgages relative to their incomes.

Household debt has been on an upward trend for the past 30 years and recently reached record highs, making homeownership even more unaffordable, especially in tight markets. In fact, the debt-to-disposable income ratio in Canada has risen considerably, from 87% in 1990 to 175% at the end of 2018.

And while millennials are willing to take on higher levels of debt to attain homeownership, they are less optimistic about the payoffs.

On average, it would take 13 years for millennials to save for a 20% home-loan deposit. It took their parents just about five years in 1976.

"That's eight fewer years that millennials might have for saving more for their retirement. If they do manage to save up and buy a house now and delay retirement savings, our poll finds 65% of millennials fear they won't have enough saved for retirement," Joyce said.

The millennials surveyed in the study cited several measures the federal government can do to help ease the housing affordability concerns. Some of these measures include making it easier to use Registered Retirement Savings Plan (RRSPs) for down payments, raising Tax-Free Savings Account (TFSA) limits, and implementing a new registered savings system.

"It seems pretty clear that millennials are in a unique situation in terms of their ability to purchase a home — which has historically been a foundation for retirement stability — and most Canadians agree that the government has a role to play in making it a more achievable dream for many of them," Joyce said.

by Gerv Tacadena

11 Dec 2019