Now that the United States-Mexico-Canada Trade Agreement is settled, expect the real estate market to receive a boost.
According to Royal LePage, the USMCA will function as a double-edged sword, but it will mainly be positive and the country’s real estate should bear witness to a 1.5% price gain.
“On the positive side, if you look at the underlying economy in 2018, it was a buoyant place—the best we’ve seen in 40 years,” said Phil Soper, Royal LePage’s CEO. “GDP growth has been strong, household formation is marching along, and yet for large purchases in particular in the housing industry, the number of transactions were down considerably. Our feeling is that the trade friction that existed between Canada and the United States—some of the very unstatesmanlike, aggressive attacks from the American administration aimed directly at Canada, Canadian leaders and business sectors were worrying people considerably to the point where there was actual job insecurity.”
Indeed, President Donald Trump threatened auto tariffs at one point, which could have decimated the industry north of the board. While the new trade agreement has allayed those fears, the psychological impact on the market was real.
“When consumer confidence wanes and there are employment concerns—people worrying about their jobs—it has a direct negative impact on large asset purchases such a buying a home,” said Soper. “That impediment, that drag on the market, was lifted with the US-Mexico-Canada Agreement, therefore, it should be a positive stimulus to consumer confidence and people’s willingness to engage in real estate transactions.”
Employment concerns may have subsided, but the Bank of Canada will almost certainly raise the interest rate—probably by 25 basis points, as it usually does—on Wednesday now that the USMCA has been established. That could result in a temporal decline in activity.
“With the agreement, it clears a path for the Bank of Canada to raise interest rates, which will be a drag on the market. On balance, the two things work against each other. A significant increase in consumer confidence and the drag from a quarter point increase in the interest rate will have a positive impact on the Canadian and American real estate industries. Overall, it’s a good thing, but not without its qualification.”
by Neil Sharma
18 Oct 2018
With the legalization of marijuana next month, landlords, tenants and condominium owners may still be uncertain about their rights to either smoke — or prohibit smoking — in apartments and condominiums.
The starting point of a discussion about the rights of smokers and non-smokers begins with the principle that there is no right enshrined in Canadian law, including the Charter of Rights and Freedoms, to smoke tobacco or marijuana in a rental property. In a 1991 Federal Court decision, the judge wrote: “The smoking habit is far from a legal or constitutional right to which the state must pander.”
Under the 2006 Smoke-Free Ontario Act, smoking is not allowed in indoor common areas of an apartment building or a condominium. That includes elevators, hallways, parking garages, party rooms, lobbies and exercise rooms.
In addition, landlords have the right to impose on their tenants a prohibition against smoking marijuana or tobacco, and there is a separate section of Ontario’s new standard form lease which permits the imposition of a smoking ban.
Landlords cannot, however, change the rules in mid-stream and force existing tenants to stop smoking in their apartments. Tenants who rent condominium units are also bound by any no-smoking rules imposed by the condominium corporation, whether or not there is a prohibition in their individual leases.
But even if tenants are not prohibited from smoking tobacco or cannabis in their leases, they do not have the right to interfere with what the law calls the “reasonable enjoyment” of tenants in neighbouring units.
As well, landlords must use their best efforts to minimize smoke-related disturbance to tenants with sensitivities to cigarette or marijuana smoke.
In a 2013 case that went before the Landlord and Tenant Board, tenants accused the landlord of harassing, coercing and threatening them. They complained that the landlord wrongly accused them of smoking marijuana in the unit. The adjudicator found that the tenants did in fact smoke marijuana in their unit, that there was a strong marijuana smell coming from the apartment, and that the landlord did not substantially interfere with their enjoyment of the unit.
In other cases where landlords were unable or unwilling to stop smoke infiltration into neighbouring units, the LTB ordered rent reductions.
The bottom line is that there are no guaranteed outcomes when landlords and tenants bring their smoking cases to the LTB.
When it comes to tenants with disabilities, the Ontario Human Rights Code overrides the provisions of the Residential Tenancies Act and the Condominium Act. Rental housing providers have a duty to accommodate the Code-related needs of tenants who may have a disability or health problem aggravated by exposure to smoke. No doubt the courts will soon have to deal with conflicts between these tenants, and those who have the right to smoke medical marijuana for health reasons. Both parties are entitled to protections under either the Human Rights Code, or the Residential Tenancies Act, or both.
By BOB AARON Fri., Sept. 28, 2018
Bob Aaron is a Toronto real estate lawyer. He can be reached at firstname.lastname@example.org or on Twitter: @bobaaron2
Interest rates have been expected to rise all year, but ongoing negotiations for a new North American Free Trade Agreement have quashed the latest planned hikes.
“The Bank of Canada indicated that if there were another increase of the interest rate and then there was a collapse of the trading relationship with North American partners, that would significantly negatively impact the economy,” said Tim Hudak, CEO of the Ontario Real Estate Association. “Certainly from our point of view, that’s bad for the housing market, so the Bank wisely took a wait-and-see approach until the trade negotiations are completed.”
Minister of Foreign Affairs Chrystia Freeland has been on the file for the Trudeau government, but working diligently behind the scenes is Canada’s Ambassador to the United States David MacNaughton. While that could abet a favourable outcome for Canada, rising rates in conjunction with the mortgage stress test open up another can of worms.
“Every economist may not agree on the timing, but interest rates are heading up, which means mortgage rates are heading up, and if you add 200 basis points onto every increase, you’re really pushing a lot of first-time homebuyers out of the market and impairing the dreams of move-up buyers who have kids and want a little more space,” added Hudak.
Hudak believes the tribulations surrounding a new NAFTA agreement illuminate a looming problem for Canadians, and that the time is nigh to revisit the Office of the Superintendent of Financial Institution’s B-20 stipulations, notably the mortgage stress test.
“In an era of rising interest rates, whether that rise is stalled by uncertainty in NAFTA or not, we need to drive home the importance of revisiting the stress test. It doesn’t make sense to keep piling up more expensive mortgages on top of rising rates from the Bank of Canada.”
Guideline B-20 was put in place largely to curtail exorbitant price escalation in Toronto and Vancouver, however, it’s chilled the Canadian housing market from coast to coast, with smaller markets bearing the brunt of what Croft Axsen calls restrictive policies.
“I’m not saying they shouldn’t be trying to address housing prices in Toronto and Vancouver, but I think most of that has to do with supply,” said Axsen, owner of Dominion Lending Centres Jencor Mortgage Corporation in Calgary. “There’s this overall restriction throughout the entire economy about who can get a mortgage, how many people can get a mortgage, and how big the mortgage they can get is. I don’t think they understand what they’re doing. It makes me nervous that bureaucrats are making these decisions and not bankers.”
By Neil Sharma
Middle-class families in Ottawa will benefit from 243 new rental units being built in the city with an investment from the federal government.
Two projects will be financed through the CMHC's Rental Construction Financing initiative including $70.8 million for the construction of a twenty-seven storey building with 227 rental housing units. More than 200 will have rents lower than 30% of median household income in the area.
"The project represents a major step forward in sustainable design with ambitious design targets to reduce energy consumption by 50% and reduce carbon emissions by over 75% with an integrated geothermal system for the project,” said Neil Malhotra, Vice President, Claridge Homes who will build the 70 Gloucester development.
The other will be $3.9 million for a passive housing Centretown Citizens Ottawa Corporation project on Arlington Avenue. It will feature 16 rental housing units with rents well below 30% of median household income in the area.
"Through the National Housing Strategy, more middle class Canadians – and those working hard to join it – will find safe, accessible and affordable homes where their families can thrive and have the stability and opportunities they need to succeed. Our Government is committed to increasing the supply of rental units for Canadians through projects like the ones we are announcing today,” added Jean-Yves Duclos, the Minister responsible for Canada Mortgage and Housing Corporation.
by Steve Randall 24 Sep 2018
Construction in the nation’s capital is on fire.
According to Ameera Ameerullah, CEO of Canada Mortgage & Financial Group, the firm has been lending on a lot of construction projects this year.
“We are currently facilitating about $47mln in land development and construction financing in Ottawa presently,” she said. “It ranges from land assembly and construction for single-family detached bungalows to a 76-unit low-rise condominium development in three phases, and land assembly for a retirement facility and golf course.”
Given that Ottawa is an historically stable market, and one that’s growing, Canada Mortgage & Financial Group’s presence there isn’t surprising.
“It’s a growing community in Canada, specifically in Orleans, which is up and coming with a stable job market due to the federal government,” said Ameerullah. “Orleans has one of the strongest household income levels in Canada, and the rental vacancy has been close to 2% over the past 10 years.”
Indeed, by all accounts Ottawa’s real estate market is on fire. According to Chris Allard, a broker with DLC Smart Debt, the growth in new construction is mostly occurring in the city’s east, south and west ends.
However, it’s creating frenzy for borrowers, brokers and lenders.
“We have some clients on waiting lists to even be able to put in an offer with a builder,” said Allard. “A builder only releases X amount of properties for a certain model and there’s already a waiting list. Those aren’t going to multiples, but you hope to be the next guy to actually put an offer in. I have clients who have slept in sleeping bags outside a sales centre just to put their names on a list.
“A lot of people need preapproval letters for builders, as well.”
Ottawa’s resale market is replete with multiple offer situations and, inevitably, broken hearts. Comparing it to what occurred in the Greater Toronto Area a couple of years ago, Allard says it’s ideal for sellers but tough on buyers.
“It means the parties involved are all a bit more stressed,” he said. “The borrowers are stressed because perhaps they did not put any financing conditions on their offer; the mortgage professional is stressed because if the borrower did put in a financing condition, then in a lot of cases the financing condition is very short, which means we need to be quick at getting an approval. That means we add pressure on the lenders to do everything quickly, but when there’s a hot market lenders are busy too, so the pressure goes down the chain from the borrower to the mortgage broker to the lender.”
By Neil Sharma
In defiance of trends in other major metropolitan markets, hopeful home owners (in the average income brackets) in Ottawa are projected to qualify for 90% of active listings this year compared to 95% prior to January 1, according to a new analysis by RateHub.ca.
The current benchmark qualifying rate of 5.34%, which is nearly twice as high as the old 2.79% value, took effect at the beginning of the year.
Criticisms of the stress test by both observers and the general public have seemingly proven prophetic, as the RateHub.ca study found that the new rules – along with BoC’s rate hikes since July 2017 – are preventing a significant fraction of Canadians everywhere (except in Ottawa and a few select markets) from achieving their home ownership dreams.
“When considered together, these changes mean that Canadians can qualify for less home, while also having to pay more per month for their mortgage,” RateHub stated.
RateHub added that those in Toronto and Vancouver would find it especially difficult, as they will qualify for less than half of active home listings in 2018 (20% and 8% of listings, respectively) compared to last year (43% and 20%, respectively).
The situation is more favourable for would-be buyers in Calgary and Montreal. Average earners in Calgary are expected to qualify for 77% of active listings, compared to 89% last year. Those in Montreal will qualify for 78% of home listings using the new stress test value, compared to 87% in 2017.
by Ephraim Vecina
REP magazine www.repmag.ca
The Toronto Real Estate Board is reminding its membership not to compromise sales history.
In light of sold data being opened after the Supreme Court of Canada last week refused to hear TREB’s appeal in its litigation against the Competition Bureau, brokerages began posting sold data within hours. However, according to the Tribunal Order, sold data can only be posted on password-protected virtual office websites.
“This is required by the Tribunal Order,” said Brian Facey, a TREB legal representative. “It applies to VOWs, which are password protected, as defined in the Order.”
The country’s largest real estate board put out a FAQ about how brokerages are to proceed in presenting the public sold data. John Pasalis, president of Realosophy, a VOW that testified against TREB during the seven-year-long litigation, agrees with that a measure of responsibility is necessary in presenting sold data.
“I think you have to have some rules around how it’s being used, so I don’t disagree with TREB clarifying that,” said Pasalis. “We do need some clarity because you can’t have half the brokerages doing whatever they want, posting it without registration, and the others following the rules and requiring sign-ins, so it’s important for them to clarify these issues.”
The real estate board provided its membership with information and compliance guidelines, going so far as to threaten revoking membership and access to its MLS if guidelines are ignored. In a statement, TREB warned non-compliant individuals and service providers that it would pursue legal action against them.
“We are working with our members to ensure TREB is in full compliance with the order. TREB has issued a document to our membership on the decision and what it means,” TREB President Garry Ghaura said in a statement.
In the FAQ, TREB is clear that sold data cannot be “scraped, mined, sold, resold, licensed, reorganized or monetized in any way, including through the sale of derivative products or marketing reports. The data cannot be used for commercial purposes other than to provide residential real estate brokerage services between a realtor and client or customer. Breach of this by either a member or the member’s clients or customers may result in legal action (including damages) against the member and the cancellation of TREB membership and TREB MLS system access.”
By Neil Sharma
REP magazine www.repmag.ca
That’s a question a couple who entered a purchase agreement on a home in Georgian Bay didn’t want to an answer to. After searching for waterfront properties in the region, they thought they found their dream home until it transpired that the seller is wanted by the Federal Bureau of Investigation. In addition to a warrant being out for the seller’s arrest, the FBI intends to freeze his assets, including the Georgian Bay waterfront home.
The outstanding warrant only came to light after title insurers did their due diligence, says the buyers’ sales representative.
“We found the perfect waterfront property and they were going to do renovations,” said Sabrina Staunton of Royal LePage First Contact. “The lawyers tried to contact other title insurers and they all said no.”
The seller is accused of participating in embargoed trading to Iran, but as far as the buyers were concerned, they wanted no part of the deal and walked away. The seller is threatening to sue the buyer for breaking the agreement.
There is no precedent for a case like this, says real estate lawyer Bob Aaron.
“The question was what happens to the money if the money is paid over to the owner,” he said. “Can the FBI then seize the property itself and say this is the proceeds of crime? One of the issue is it’s the seized proceeds of crime. No title insurance company would touch it. If you can’t get title insurance, it means they’re worried about it too.
“Either the FBI, American government or even Canadian government could come along and say you don’t have title because the ownership of the seller was subject to claim by the American or Canadian government because it was bought with the proceeds of crime, therefore, the buyer doesn’t get a clean title.”
Aaron also notes that the seller won’t get very far suing the buyers because he’ll be arrested in court, even by Canadian authorities.
A home doesn’t necessarily need title insurance, but Staunton estimates as many as 95% of properties have it.
Nevertheless, it is essential.
“Title insurance covers you for any defects of ownership for the property, and covers you for number of other things, but in this case it mainly covers you for defects in ownership,” said Aaron. “If there’s a break in the chain of ownership, or if the seller didn’t pay off any creditors, or if there’s an outstanding claimant, like a spouse or estate somewhere lurking in the woods, it would protect the buyer from the claim. Even the widow of a former owner could say, ‘I have a piece of that property, I want to get paid out.’ What’s worrisome is if the title insurance companies won’t touch it, it’s a big red flag.”
by Neil Sharma
While staging is a very beneficial part of real estate sales process, buyers and sellers should always clarify what use will be made of the photos.
When the sellers of a home hire a stager to help market and sell it, who owns the rights to the before and after photographs — the homeowners, the listing agent or the home stager? Can the photos be used without the owners’ permission?
Those were the questions posed to me by my clients when they saw before and after photos of their condominium used without their permission on the website of a popular local magazine.
Last month, their real estate agent hired a professional home stager to help sell their 545-square-foot, one-bedroom, one-bathroom condo in midtown Toronto.
In order to plan the staging, preliminary photos were taken showing the typical clutter of a small unit including the baby’s crib, change table, swing, boxes of baby food and diapers, their dog and other items in the unit. The owners fully expected that the pre-staging photos would never see the light of day and would be used only so the stager could plan furniture layouts, artwork and decor.
After the staging, the unit was sold for more than the asking price in just one day.
A few days later, my clients were shocked to see a number of the before and after photos on the magazine’s website, along with the street address of the building.
Almost immediately the article and photos appeared on a number of other websites.
Although the owners’ names were not used in the article, any real estate agent with access to the MLS system could have easily found out who they were.
The magazine article praised the stager’s skills and appeared critical of the owners’ design choices. It noted that the stager “was forced to use the sellers’ black couch,” and that she “swapped the oversized artwork for a peaceful ocean print.”
She also “added a ton of accessories to the space to channel some personality,” implying that this was something that the owners lacked. The kitchen, too, needed some “cleaning up.”
My clients were angry and upset at the violation of their privacy and asked me to intervene.
At their request, I sent emails to the magazine, the stager and the real estate agent demanding an explanation and an apology.
Within hours after receiving my email, the publisher of the magazine — to his credit — wrote to say that he was not aware that the photos were used without the permission of the homeowners. He added that the story was removed from their website as a gesture of goodwill.
The stager wrote to apologize and say that she was not aware that the couple had not given consent to the post being written.
The listing broker also wrote to apologize for the “very unfortunate occurrence.”
My client’s real estate agent — who listed the property — apologized to my clients in writing and by phone. She admitted that she and the stager often share photos with each other, and wrote that the stager had not provided the pre-staging photos to the magazine.
While staging is a very beneficial part of real estate sales process, the lesson to be learned from this true story is that buyers and sellers should always clarify what use will be made of the staging and pre-staging photos.
Bob Aaron is a real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at email@example.com, phone 416-364-9366 or fax 416-364-3818.
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A new report from Royal LePage suggests the real estate market is going to get crowded in about five years’ time.
According to The Royal LePage Boomer Trends Survey, 1.4 million baby boomers are expected to buy and sell homes in the next half-decade. However, 9% of boomer parents don’t expect their children to move out before they turn 35—a number that nearly triples in B.C.—and 32% of home-buying boomers will likely opt for a condominium.
“One other thing that stood out in the report to me is 56% of baby boomers believe that where they live today, their local neighbourhood is unaffordable for them for retirement purposes,” said Royal LePage’s President and CEO Phil Soper. “Part of the trigger sending so many baby boomers back into the market is relocation. They’ve indicated that they will relocate from single-family homes to condominiums, to suburban neighbourhoods, and to recreational areas. They’re clearly saying ‘The place that I lived to earn a living and raise children is not the optimal place for semi-retirement or retirement as an empty nester.’”
If boomers do, indeed, flock to condominiums and to the suburbs over the coming years, expect that their interest will be reflected in price points.
“What it will probably do is put price pressure on condominiums and suburban areas with a recreational feel that are within a couple of hours of where they live today, which is within a couple of hours of big cities,” said Soper. “A significant portion wants to live within an hour of where they live today and the next largest group wants to live about two hours away.”
Royal LePage has previously studied what it calls peak millennials, who are between the ages of 25 and 30, and it reckons they’re one the largest demographical cohorts to enter the housing market in Canadian history. Coupled with boomers, there should be no shortage of activity in the real estate market over the next decade.
“We are starting to see the millennials enter the market in a big way. The last few years they’ve been a factor to the point that they are the largest buying demographic now in transactional terms. One of the other interesting pieces from the report, a significant number of baby boomer parents is going to be helping their kids in real estate. I’m a late boomer and I can tell you it was rare when I was in my 20s for parents to play a significant role in kids getting homes, but what we found in this study is 47% are going to subsidize their kids’ home purchases.”
by Neil Sharma
13 Aug 2018