Articles

An Open Letter to Clients

Posted by on Nov 12, 2018 in Articles | Comments Off on An Open Letter to Clients

Who am I? I am a residential real estate lawyer in my 30 th year practicing in Markham. What do I do? I hire, fire, train, and supervise staff that perform title and off-title searches, serve clients and manage the vast amount of paper in a typical residential real estate file. I deal with mistakes and problems on files, which are inevitable. As soon as a new client or deal comes through our door, I meet the client or agent involved and try to sniff out any possible problems. I perform certain tasks which we are not allowed to delegate to non-lawyers including title opinions, completing “statements of law” on title documents, and trust account banking. I conduct “lawyer to lawyer” calls when needed. I attend (and sometimes give) lectures to keep current in real estate law many more hours than the mandatory twenty-for (24) hours per year required by our regulator, the Law Society of Ontario (LSO). This is over and above file-specific research such as review of agreements, internet searches, review of title and off title searches, searches against particular addresses, realtors, and parties to a transaction. I am motivated by the pleasure of meeting people at that most exciting and hopeful of times and a desire not to be the subject of legal claims or complaints over sloppy bookkeeping, delayed reporting etc. Fees Unlike family lawyers or realtors, for example, who can do half the job for half the fee (unbundled services), real estate lawyers can do little to limit their liability. They have a monopoly on the transfer of land and handle all deal monies thereby assuming personal responsibility for payment of banks, agents, and government taxes on deals. The suggested fee in 2007 to do the 135 steps in a condo purchase (see link below) Master Chart PDF is at Fees PDF On a simple $1M purchase with a bank mortgage the suggested fee (excluding HST and certain listed disbursements that typically are about $1000) is $3,600. This fee will never be seen by a residential real estate lawyer in my lifetime. As the number of lawyers in the GTA will soon exceed the number of homes for sale, market forces have seen fees (in real terms) steadily decline and (at least in Markham) are currently about $1000. Agents have likewise seen fees decrease but they are still typically 10 times what the lawyer (with comparable risk and insurance cost) will see. It hasn’t all been good news for clients. Inadequately paid lawyers have foisted some of their insurance costs (title insurance) on clients – where it belongs. Typically, about $500/deal. Prior to title insurance lawyers only charged $50 (LawPro Levy) to clients. Regulations Fortunately, dear client, the LSO has of late focused the heavy hand of regulation on us unscrupulous residential real estate lawyers. First they regulated advertising to address lawyers that advertise very low fees only to increase disbursements and other charges. That makes sense. If asked, I tell “tire kickers” to get 3 quotes and accept the highest if they want the best chance of getting an honest and competent lawyer. LSO now intends to end “kickbacks” or “incentives” (required to be disclosed to clients) by title insurers to lawyers that in one case pay the lawyer $100 for their efforts in preparing and printing the policy. The suggestion is that lawyers who fail to disclose or pass on this “saving” or other incentives (volume rebates) are dishonest or unprofessional. That makes no sense. The takeaway is that every time LSO receives a complaint, or one of their 40 directors (37 of whom, by my count, have never seen the inside of a residential real estate practice or walked a mile in...

Read More

Surveys

Posted by on Feb 14, 2014 in Articles | Comments Off on Surveys

A land survey has been called the single most important document in a Real Estate transaction by noted practitioner Bob Aaron. I agree. The current standard Ontario Real Estate Association (OREA) standard Purchase Agreement calls for the Seller to produce any title documents (including surveys) in its control. The Purchaser never, in fact, receives a survey. We recommend to our clients as follows; Firstly, as a Seller, a diligent effort should be made to locate the survey from either your previous lawyer or from your reporting letter or from your own records. If you are aware that a survey was done, copies are kept by law, by the original surveyor and can be cheaply obtained. If you don’t know the name of the surveyor, there are online search resources that can with your legal description entered advise you who the surveyor is and a copy can be provided to you online, usually for a cost of about $100.00. Currently our favorite site for this is a company called Land Survey Records at www.landsurveyrecords.com . When acting for purchasers we would like to see the OREA clause modified to say that any survey dated while the seller owned the property will result in the seller being liable for the purchaser’s cost in obtaining same. Why the big deal about surveys? In addition to verifying lot size the survey will show many other useful bits of information. Survey markers greatly assist dealing with a dispute with a neighbour. It is said good fences make good neighbours, but where do you site the fence? A dated survey will indicate the date of any build outs of the property so as to establish legal non-conforming uses or indicate possible zoning by-law infractions that could result in serious cost of the new owner. Zoning infractions may not come to light until years later when the owner is applying for a minor variance or a dispute arises with the neighbour. As the cost of a new survey is normally about $2,000.00 for a single family home, find the existing survey instead. As a seller we always recommend that a copy of the survey highlighting any issues be attached to the Agreement of Purchase and Sale and initialled by the purchaser. This happens far too infrequently. Many agents and even some lawyers tell clients that a survey is not necessary with title insurance. The majority in the real estate bar and the title insurer’s themselves would certainly not agree with this statement. The reasons for this are the subject of a separate article. The take away is that you should ignore doing a “survey search” when buying at your peril, not...

Read More

Builder’s Business Ethics

Posted by on Sep 11, 2013 in Articles | Comments Off on Builder’s Business Ethics

The conduct of builders is varied and worth noting. A decade ago , when the builder of Liberty Walk (David Hirsh) was faced with rebuilding his low-rise residential development that was destroyed by fire, a colleague of mine (Bob Aaron) properly noted that although entitled to sell the units to new purchasers at higher current prices, he honoured his contracts with all the original purchasers. On the other side of business ethics, I was recently approached by a buyer client who received a cheque of about $1,400.00 and a letter indicating this was a pay-out from a class action against the builder Remington Group Inc. (owned by the Bratty family) with regard to a condominium at 57 Upper Duke Cres, Markham. Just prior to his purchase agreement being signed in 2006 the developer pre-paid development levies to the Town of Markham in return for protection against any future increases in the charges. Subsequently, the Town of Markham in fact did increase its development charges to builders and these were billed out to the purchasers (including my client), notwithstanding these increases were never paid by the builder. As is the practice, the company that the builder used to do business with the purchasers (Rouge Residences Inc.) was a judgment proof shell and even after multiple complaints and small claims actions from purchasers, the unfair charges were not repaid. At great risk and expense to one such buyer (Mr. Sa’d), a lawyer (Sean Grayson, with whom my client and I spoke) commenced a class action proceeding including not just the shell companies but the parent company Remington Group Inc. The action was brought on behalf of approximately 400 buyers. The decision is reported as Sa’d vs. Remington Group Inc [2013] O.J. No.978. The parent company was succesfully joined in a class action and finally consented to pay $578 000.00 into a settlement fund representing a recovery of about seventy cents on the dollar. There was a serious concern about the ability to “pierce the corporate veil” and get at the entity with the money, not just the shell companies used in the agreements with buyers. After legal fees, the buyers got about half the unfair charges refunded. The Bratty family companies are members of the Building Industry and Land Development Association (BILD), Tarion registrants (all have codes of conduct) and major supporters of Villa Colombo Charity. One can only hope that such questionable business ethics by builders remain the exception. Subsequently, Tarion (a builder controlled group that regulates, you guessed it – builders) has since outlawed this practice. The new regulation (507/10) now reads that “ In connection with any Agreement of Purchase and Sale of a home signed on or after Janaury1, 2011 the registrant shall not charge… any amount as reimbursement for a sum paid or payable by the registrant to a third party unless the sum is ultimately paid to the third party. If the registrant charges an amount to the owner in contravention of this paragraph, the registrant shall forthwith readjust with the owner”. Mr. Grayson commented that this law killed other similar proposed class actions against builders. How about a law that no builder should profit from blatantly deceptive or unauthorized charges to buyers by employing the use of “shell” companies in their...

Read More

HST NEW HOMES CALCULATIONS

Posted by on Sep 11, 2013 in Articles | Comments Off on HST NEW HOMES CALCULATIONS

HST NEW HOMES CALCULATIONS Provincial Rebate = 75% of 8% (6%) x price (w/o hst) to a max of 400K ($24,000 rebate). Federal Rebate = 36% of 5% x price (w/o hst) to a max of 350K ($6,300 rebate)  For the $350,000-$450,000 range, I found this worksheet PDF from Canada Revenue Agency, which has an example of calculating the federal rebate for homes in phase-out range: $6300 * ($450,000 – purchase_price)/$100,000 After playing trial & error with numbers in a spreadsheet, I arrived at the following:      Original purchase price:      378,067.08      Ontario part of HST (8%):      30,245.37      Ontario part of HST rebate:   (22,684.03)      Federal part of HST (5%):      18,903.35      Federal part of HST rebate:    (4,531.77)                                   ===========      Total:                        400,000.00 So, assuming the HST less rebates are both baked into a $400,000 new Ontario condo sale price, then the price without HST is likely $378,067.08....

Read More

HST LIABILITY

Posted by on Sep 11, 2013 in Articles | Comments Off on HST LIABILITY

This is not legal or tax advice, but merely a recounting of some (rather scary) experiences of some of our clients. With HST rebates of about $30,000 per unit, the CRA and their collection agents (the new home sellers) have (we are told) hired additional staff to “crack down” on tax fraud where the Ministry of Finance (Land Transfer Tax) reports multiple transactions from the same person(s). Buyers mostly fall into one of 3 categories: Moving In – No problem. Renting- You pay the full HST (rebates are added back to the purchase price) to builder and will likely recover all the rebates 3-6 weeks later upon application to CRA: http://www.cra-arc.gc.ca/E/pbg/gf/gst524/README.html Flipping-Big problem. Like Renting, no principal residence exception to capital gains tax. Worse if CRA deems the flipping as income from a business (where profits are taxed as income not capital gains) if flips are frequent and form a substantial part of taxpayers income. Also NO HST REBATE. Also figure about 10% of the tax owed for penalty and 4% over TBill rate for interest see http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/bspsbch/rtrns/pnlts-eng.html CRA and builders are increasingly asking for drivers licenses, utility bills (in addition to the usual sworn statements) linking buyer(s) name(s) to the new address. Also, please don’t ask us to swear your false or misleading statements so that your tax problem also becomes our ethical problem. If you can’t cover the tax and transactional costs on the flips, get out of the game and the CRA will have to look elsewhere for its money. You definitely need specialized tax/legal advice. We can refer or there’s always those tax lawyer guys advertising on 680 News and...

Read More

HOW MUCH TO BUY OR SELL MY HOUSE?

Posted by on Sep 11, 2013 in Articles | Comments Off on HOW MUCH TO BUY OR SELL MY HOUSE?

HOW MUCH TO BUY OR SELL MY HOUSE? I am often asked how much to buy or sell my house? Most clients pay about $1,000.00 for a sale and about $1,800.00 for a purchase all inclusive. I would want to know much more about your deal before giving a more accurate estimate or quote. Can you do any better? I’m cheap too, but at least I’m smart about it. Firstly, we sell a service, not a commodity like a car or an appliance (even there, I would pay a large premium for after sales service!). I don’t use the cheapest dentist or accountant in town, do you? We are a one office, two lawyer, 2-3 law clerk operation. Our clerks are very experienced in real estate transactions. The lawyer/staff ratio allows us to closely supervise our staff and have a lawyer return your call if needed. We are not a “mill”. Secondly, it amazes me that the same clients that haggle over a hundred dollars or so in fees do not even care about the value received for their money. Most lawyers charge little or nothing extra to review the agreement BEFORE it is signed, potentially saving the client from a huge mistake. The “hagglers” often call just before closing when the lawyer can do the least amount of good. Thirdly, no two deals are the same. A single person selling a “cookie cutter” home in a subdivision comes close, but add in estate considerations (for elderly clients), tax readjustments (for recently built homes), complex documentation review (all condos and new homes), title repair (often owners who have lived at the same house forever), tier B and private mortgagees (each with unique requirements), last minute negotiations for property damage or financing issues, and it is easy to see that some deals require greater effort and attention, the very thing lawyers charge for. Finally, I have seen many lawyer’s bills in my career. I am convinced that our clients get excellent value for their money in a business that is so competitive that rates charged do not reflect the cost and risk involved in acting on a transaction. Why do we continue to offer residential real estate services to individuals (many firms got out of the business)? Our services include many things besides real estate. We want clients, not deals. That is he mindset of who you are haggling with. Who should not use our services? People who can’t communicate in English or Mandarin – our small staff means that we can only offer services in these languages. Hagglers – see above. Fraudsters – We cooperate with police / RCMP investigations where it is apparent that fraud has occurred. Client’s who want us to do half the job – ie. “Don’t check adjacent properties for inconsistent descriptions, Don’t ask too many questions….” Who should (we hope) use us? We value referrals from realtors (they control the business, after all) but we put the clients interest ahead of protecting the agent’s commission (and repeat referrals) in the rare instance the two are at odds. Check our website for any upcoming free breakfast seminars on topics of interest to real estate professionals. Our preferred client is a small business owner who may avail themselves of other services such as Wills, Family Law and Litigation services. It bears repeating that we want clients, not...

Read More