The Importance of a Real Estate Lawyer in Pre-Construction Property Purchases When purchasing a pre-construction property, it is essential to be aware of the legal implications that stem from the agreement of purchase and sale. This article highlights the invaluable advice which can be provided by a real estate lawyer prior to embarking on such a transaction. In Ontario, builders are required by law to provide a “cooling period” for purchasers. The right to a cooling period is confirmed by Section 73 of the Condominium Act. This period affords purchasers the opportunity to have their selected counsel review the agreement of purchase and sale and, upon review and discussion with their counsel, to terminate the transaction if they are ultimately not agreeable to the terms posed by the builder, following which, a release of their deposits is provided. Time management can be crucial, as following the cooling period, this opportunity is no longer afforded to the purchaser. The cooling period is mandated at (10) days for condominiums and can vary with respect to freehold properties. Benefits of having a real estate lawyer review the agreement of purchase and sale within the cooling period: Of most significance, real estate counsel can highlight and pinpoint clauses or language that is ultimately not favorable to a prospective purchaser. This would allow for, following a discussion with the purchaser, counsel to conduct negotiations with the builder to eliminate, alter, or add language to the benefit of their client prior to the agreement becoming firm. Highlighted topics of note that can be discussed are warranty implications afforded to the purchaser, restrictions, and obligations of the purchaser as well as the builder, additional costs embedded within the agreement as well as acts or omissions that may place the purchaser in default. A crucial item to assess and discuss with counsel prior to your agreement becoming firm is adjustment costs – builders typically use the term ‘adjustment’ to include any additional charges that a purchaser is to pay in addition to the purchase price. Typical charges will include, but are not limited to: The Tarion enrolment fee Costs associated with utility meters and installation Tree planting fees Levies (charges imposed by the Town and Municipality where the property is located) Increases in existing levies and development charges. Mortgage discharge fees It is of note that HST is payable in addition to these sums, and often, the agreement will not disclose the monetary sum associated with same – an important item that should be addressed with the builder, negotiated, and effectively capped and or deleted, provided the builder permits same. Until recently, these types of charges would be dispersed within the agreement and often overlooked by prospective purchasers. Builders are now required to list all such charges on a Schedule B to the Tarion addendum which forms part of the offer to purchase. This is a costly section of the offer that should be discussed at length with a lawyer, prior to firming up and within the cooling off period, should one be provided. Discussing your agreement of purchase and sale with selected counsel can provide a sense of comfort for a purchaser. Real estate transactions can often feel complex and stressful, and the discussions had with counsel prior to being bound to an offer to purchase allow for a purchaser to feel secure in knowing not only the additional costs to assess, but timelines, restrictions and rights in favor of the builder that can have an effect on the course of the transaction. In conclusion, when purchasing a pre-construction agreement in Ontario, it is highly recommended that purchasers take advantage of the cooling period and have a real estate lawyer review their agreement with sufficient time to discuss the comments issued. A lawyer can identify potential issues, aid in the negotiation of favourable terms, ensure that a purchaser is aware of all the legal implications of the agreement and provide a sense of stability during what can be a complex and nerve-wracking process. Undeniably, the selection of a real estate lawyer prior to embarking on a purchase transaction and engaging in a detailed review of their offer to purchase can save a purchaser from what could be costly oversights down the road, as well as ensure that they are making a fully informed decision about one of the most substantial purchases in their life. If you have any further questions about pre-construction properties, or you would like to speak with someone for further legal real estate inquiries, please contact Woitzik Polsinelli’s lawyer Jonathan Dippolito at jonathan@durhamlawyer.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see or speak to a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiUncategorizedMay 3, 2023July 10, 2023
Assignments of Agreement of Purchase and Sale – An Overview What is an Assignment? The assignment of an agreement of purchase and sale is a legal transaction whereby a party to a contract transfers their rights and obligations in that agreement and associated property, to another party. It is commonly used in Ontario real estate transactions as a means of selling a property before the original purchase agreement is completed. Assignments are often pursued by buyers or investors who wish to purchase a property for a lower price than the original purchase price or who seek to benefit from a changing market or financial circumstances. In an assignment, the original purchaser (the assignor) sells their rights and benefits under the agreement to a third party (the assignee) for a negotiated price. Benefits, Disadvantages, and Uses of an Assignment Transaction There are several benefits to pursuing an assignment. For the assignor, it may provide an opportunity to sell the property at a profit without having to close on the purchase themselves. It may also allow them to avoid closing costs and other fees associated with the purchase. For the assignee, an assignment can offer an opportunity to purchase a property at a lower price than the original purchase price, particularly if the market has changed or the original purchaser is in financial distress. However, there are also potential drawbacks to assignments, such as uncertainty regarding the closing date, tax implications, higher than anticipated closing costs and the potential for disputes between parties. Assignment Process The assignment process typically involves several steps. First, the assignor must find a willing assignee who is willing to purchase their interest in the property. They may need to advertise the property and assignment (provided this is permitted by the original vendor in a pre-construction transaction) and negotiate a price with the assignee. Once an assignee is found, the parties must draft an assignment agreement that outlines the terms of the assignment, including the purchase price, closing date, obligations of each party and other relevant details. The assignment agreement must be signed by both the assignor and assignee and may need to be registered with the relevant authorities, such as the Land Registry Office. Finally, the assignee assumes the rights and benefits of the original agreement and is responsible for completing the purchase on the closing date. Throughout the assignment process, it’s important to seek legal advice and follow the requirements outlined in the original purchase agreement. Fees and Default Assignment agreements generally include an ‘Assignment Fee’ payable by the assignee to the assignor in exchange for the right to acquire the property. It is important to determine when this fee is payable. If any funds are to be released to the assignor prior to the completion of the original transaction, it must be specified. Otherwise, the default is that they are to be held in trust by the assignor’s solicitor, until the completion of the original agreement of purchase and sale. If a seller defaults on the original agreement (i.e. fails to close the transactions), the assignment becomes null and void. The funds are returned to the assignee, and the assignor is not liable for any expenses or losses incurred therefrom by the assignee. The assignor can commence legal proceedings against the seller for failing to close the transaction, however, the assignee has little to no such legal remedy available, even in the face of changing market conditions. Other Considerations On a final note, the tax implications of assignments can be complex, and it’s important for buyers and sellers to seek legal advice before pursuing an assignment. Depending on the circumstances, both the assignor and assignee may be subject to various taxes, such as capital gains tax, HST, or land transfer tax. For example, while the resale of a residential property is naturally not subject to HST and, accordingly, there is no HST payable on the assignment fee, extra steps must be taken to ensure the same result for new-build properties; the assignment agreement must include a provision stating that part of the consideration is attributable to the reimbursement of a deposit paid by the assignee to the builder. As with the Land Transfer Tax, it is payable by the assignment after the completion date of the original transaction, on the aggregate purchase price (including the assignment fee). Conclusion Assignment of agreements of purchase and sale are a common tool used in Ontario real estate transactions to transfer property ownership rights and benefits. They can offer benefits such as flexibility and financial gain but also carry risks and challenges. Understanding the legal, financial, and practical implications of assignments is crucial for anyone considering pursuing this approach. If you have any questions about assignments of agreement of purchase and sale or real estate law generally, please contact Jonathan at 289-220-3229 or jonathan@durhamlawyer.ca By Fauzan SiddiquiUncategorizedApril 24, 2023July 10, 2023
Non-Canadians Will be Prohibited from Buying Canadian Residential Property in 2023 Proposed in the Federal Budget of 2022, and passed in June of 2022, the Government of Canada has enacted the Prohibition on the Purchase of Residential Property by Non-Canadians Act[1] (the “Act”). As is made clear by the title, the Act prohibits the purchase of Canadian residential property by non-Canadians, directly or indirectly. ‘Indirectly’ refers to scenarios where a purchase is attempted through a trust, partnership, or an unincorporated association. Interestingly, the Act overrides section 34 of the Citizenship Act[2], which otherwise explicitly grants this right to non-Canadians. The Act will be enforced for a two-year period beginning January 1, 2023 and does not apply if a non-Canadian becomes liable or assumes liability under an agreement of purchase of sale of residential property before this date.[3] To understand the extent of the application of the Act to potential purchasers, it is important to pay close attention to the Act’s definition of a “non-Canadian”. The definition is as follows: an individual who is not a Canadian citizen, permanent resident of Canada or registered as an Indian under the Indian Act,[4] a corporation that is not incorporated under the laws of Canada or a Canadian province, a private corporation that is incorporated in Canada but that is controlled by a person referred to in paragraph (a) or (b) above. In addition, “purchase” means to acquire or agree conditionally or unconditionally to acquire a legal or equitable interest, or an immovable real right in a residential property. There have been proposals to preclude certain situations under this term, specifically those pertaining to an acquisition resulting from divorce or separation, the rental of a residential dwelling unit, or an acquisition resulting from succession. These proposals are expected to be included in a set of Supporting Regulations (the “Supporting Regulations”) that will be released to provide additional detail regarding the application of the Act. Exemptions As is common to many laws and regulations, the Act provides for certain exemptions. These exemptions include: temporary residents within the meaning of the Immigration and Refugee Protection Act[5] who satisfy prescribed conditions set out in the Supporting Regulations; a refugee; an individual who is a non-Canadian and who purchases residential property in Canada with their spouse or common-law partner if the spouse or common law partner is a Canadian citizen, person registered as an Indian under the Indian Act[6] permanent resident or person referred to in paragraph (a) or (b) above; or, a person of a prescribed class of persons under supporting regulations.[7] Penalties, Enforcement and Liability Under section 6(1) of the Act, anyone who contravenes or counsels, induces, aides or abets a contravention of the Act, or attempts any of the above, is guilty of a summary conviction of a fine of not more than $10,000. Additionally, if the offence is committed by a corporation, then any officer, director, or agent or other authorized individual that “directed, authorized, assented to, acquiesced in or participated in” the commission of the offence is a party and is held equally liable, regardless of whether the corporation was prosecuted.[8] Note that a contravention of the Act will not void a contract to purchase residential property from an innocent vendor. However, if a non-Canadian is convicted of having contravened the Act, a court may order that the property be sold in a prescribed manner and under prescribed conditions. Subsection 8(2) of the Act indicates that when a court orders the sale of residential property bought by a non-Canadian in contravention of the Act, the non-Canadian cannot receive more than the purchase price paid for the property from the proceeds of sale. Given the implications of the Act, individuals who are involved in the real estate industry, such as real estate agents, mortgage brokers and lawyers, should take extra care to ensure that they confirm the residential status of purchasing clients. Real estate professionals should independently verify their clients’ identity, document their clients’ Canadian status, and have the clients confirm their status in writing. Real estate professionals acting for the vendor in a transaction should also be wary about contravening the Act unintentionally. Even though it may not be the direct responsibility of the selling party to verify the Canadian status of the purchaser, do not be quick to conclude liability may not extend that far. It would be good practice to include certain provisions within an Agreement of Purchase and Sale to shield the selling party from potential liability at the outset of the transaction. If you have additional questions or concerns regarding the Prohibition on the purchase of residential property by Non-Canadians Act, please feel free to contact Jason Lane at 289-220-3241 or jason@durhamlawyers.ca. This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with legal advice tailored to your specific situation and needs. [1] SC 2022, c. 10 s. 235 [2] RSC, 1985 c. C-29. [3] Supra note 1, s. 4(5). [emphasis added] [4] RSC 1985 c.I-5. [5] SC 2001 c.27. [6] Supra note 5. [7] Supra note 1, s. 4(2). [8] Ibid, s. 6(2). By Fauzan SiddiquiUncategorizedJanuary 16, 2023June 10, 2023
The Buyer’s Guide to Rural Properties With over 250,000 lakes and vast expanses of countryside, Ontario is home to thousands of cottages and other rural properties. Buying a rural property is often an exciting time for purchasers. However, whether you are looking forward to sipping your morning coffee by the lakeside or are interested in buying an investment property on a large piece of land, purchasing a rural property often involves greater due diligence. Does the property use a well and/or a septic system? While the majority of urban residential properties operate using their respective municipal sewer and water systems, many rural properties do not have this luxury. Often more isolated and less dense, rural municipalities are unable to construct an efficient system to meet all of their residents’ needs. For example, to dispose of waste, these properties frequently operate with a septic system or holding tank. When purchasing a rural property with a septic system, it is crucial to ensure that the system is in good working order prior to closing. Requiring the vendor to provide a warranty in the Agreement of Purchase of Sale that survives upon closing relating to the septic system is recommended. It is also advisable to require that the vendor pump the septic system prior to the transaction closing. Similarly, many rural properties often rely on private wells for their supply of water. To ensure that the water is safe to drink and free from contamination, purchasers should obtain multiple water potability tests from their local Public Health Station. It is also a good idea to make your Agreement of Purchase and Sale conditional upon a satisfactory inspection of the well and related pump prior to closing. Is this a Waterfront Property? When you expect a property to give you access to a body of water, it is important to determine whether the property actually includes the shoreline. If your property does include the shoreline, it comes with a set of rights known as “riparian rights”. This means that you will have the right to access the water, the right to the undisturbed natural flow of the water, and the right to withdraw water for your own use. However, not all rural properties include the shoreline. Many bodies of water in Ontario are surrounded by shoreline reserves, also referred to as “shoreline road allowances.” These are reserves that remain either with the provincial crown in the unincorporated territory or with the municipality in the incorporated territory. If you do not own the shoreline, you do not possess any “riparian rights” and therefore may not have legal access to the water. This further means that any structures that have been built or that you plan to build on this shoreline may not be legal. If the shoreline allowance bordering the property is not owned, it is possible to make an offer to purchase it from the Crown or municipality, pursuant to the Public Lands Act, RSO 1990 C P.43. This can be a lengthy process so it is important to determine whether a property is affected by a shoreline road allowance prior to making a firm offer to purchase the property. Does the Property Have a Legal Road Access? For many urban properties, the road directly leading the property is often a public roadway that is owned by the local municipality. However, for rural properties road access is not always so simple. Many properties are located adjacent to private roadways. If these private roadways are not conveyed with the property, it is vital that your solicitor confirms that you have a legal right of way to access the property through that private roadway by way of ownership or easement. Building and Zoning Implications When purchasing a rural property, prospective buyers often have predetermined plans for the use and enjoyment of the land. These can include installing docks, constructing decks, building structures and removing vegetation. Before committing to the purchase of a property, purchasers are encouraged to view the zoning regulations for the property, which will state the permitted uses for that piece of land. Furthermore, before constructing structures, homeowners should review the municipality’s building rules to see if any permits are required. To ensure the property is in conformance with all building and zoning bylaws prior to closing, your solicitor can obtain and review compliance letters, which can be provided by your local municipality upon request. Property Boundaries It may be difficult to visually inspect the boundaries of a rural property, as there is often vegetation between property lines, with no clear boundaries erected. Rural properties are often not registered on plans of subdivision, and therefore may require some extra investigation to determine the exact location of their boundaries. Maintenance of the Property Finally, rural properties often demand higher levels of maintenance. Whether it be a larger lawn to mow or a longer driveway to shovel, purchasers should be aware of the significant upkeep levels and costs required to maintain the property. Furthermore, since roads leading into the property are often privately owned, purchasers should be diligent in reviewing any private road maintenance agreements that come with the property. A good real estate lawyer, knowledgeable in rural property issues, is essential. If you are looking to purchase a rural property or have any questions, please contact Jason Lane, a lawyer at Woitzik Polsinelli LLP at 905-668-4486 ext. 241 or at jason@durhamlawyer.ca. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” This blog was co-authored by Jaimin Panesar* By Fauzan SiddiquiUncategorizedJuly 19, 2022July 10, 2023
You’ve Found the Perfect Waterfront Property – But Does It Actually Include the Shoreline Itself? Recent statistics suggest that there is a record demand for rural properties in Ontario. This may, in large part, be due to the COVID-19 situation, which has resulted in more people having the option to work remotely and has led to a greater desire to move away from large urban centers. If you have found the perfect cottage or waterfront property and are eager to submit an offer before anyone else does, don’t forget to complete your due diligence. Rural properties are often not registered on plans of subdivision, and therefore may require some extra investigation to determine the exact location of their boundaries. One area of potential concern when buying property bordering most lakes and rivers in Ontario is whether or not the property actually includes the shoreline. Why Does It Matter? If your property does include the shoreline, it will come with a set of rights known as “riparian rights.” This means that you will have the right to access the water, the right to the undisturbed natural flow of the water, and the right to withdraw water for your own use. You can legally enforce these rights against any other persons or government entities. Doesn’t Every Waterfront Property Include The Shoreline? The short answer is no. In order to determine whether or not a particular property includes the shoreline, the property’s history would need to be examined. This may involve reviewing the description of the property in the original crown patent. Many lakes and rivers in Ontario are bordered by shoreline reserves, also referred to as “shoreline road allowances.” These are 66-foot wide reserves that remain either with the provincial crown in unincorporated territory or with the municipality in incorporated territory. Can a Shoreline Road Allowance Be a Problem? If there is a shoreline road allowance between your property and the water, you do not own the shoreline. Therefore you do not receive the riparian rights that come with owning a truly “waterfront” property. A potentially larger problem is that structures on the property, including decks, boathouses or even a cottage itself may be built on land that you do not own. You could be asked to remove any such structures. What is the Solution? It is possible to offer to purchase the shoreline road allowance bordering your property. Under the Public Lands Act, RSO 1990 c P.43, an offer to purchase a shoreline road allowance in unincorporated territory is made directly to the Ontario Ministry of Natural Resources. In incorporated territory, the offer is made to a municipality and the exact process differs somewhat depending on the particular municipality. Often the owners of neighbouring properties will be notified and given opportunities to object prior to a shoreline road allowance being closed. Thus, the process can be lengthy and it is important to determine whether a property is affected by a shoreline road allowance prior to making a firm offer to purchase the property. You may also want to consider including a condition or warranty regarding a shoreline road allowance in your Agreement of Purchase and Sale. A good real estate lawyer, knowledgeable in rural property issues, is essential. If you are purchasing a waterfront property and are not sure whether or not it includes the shoreline, or if you have any further questions about shoreline road allowances or other rural property issues, please contact Jason Lane, lawyer at Woitzik Polsinelli LLP at 905-668-4486 ext. 241 or at jason@durhamlawyer.ca. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiUncategorizedMarch 18, 2021June 10, 2023
THE IMPORTANCE OF ACTING REASONABLY IN REAL ESTATE TRANSACTIONS – BILOTTA V BOOTH, 2020 ONCA 522 The recent Ontario Court of Appeal (ONCA) decision Bilotta v Booth is an excellent example of a case where greed got the better of a purchaser who tried to renegotiate the purchase price after a flood had caused damage to the property shortly before closing the transaction. The purchasers refused to close at the contract purchase price, arguing that the sellers had acted in bad faith. This argument was based upon the fact that the flood occurred 14 days before closing, but the sellers did not provide notice of the flood to the purchasers until less than 24 hours before closing. Nevertheless, the ONCA found that the purchasers’ refusal to close was not reasonable and not permitted under the Agreement of Purchase and Sale (APS). A clause in the APS (Paragraph 14 of the OREA APS) permitted the right to terminate only in the event the damage to the property was ‘substantial’, which was not the case here, as detailed by a report issued by the property insurer. A key consideration of the court was that the sellers had made a reasonable offer to the purchasers in light of the damage, namely to hold back $50,000 in trust to ease any concerns that the insurance proceeds payable to the purchasers would be inadequate to cover the costs of the repairs. The sellers also offered to extend the closing, at no cost to any party for one week to allow the purchasers time to conduct an inspection of their own. They further agreed to pay the cost of storing the purchasers’ belongings that would have been stored in the flooded basement. Despite the sellers’ offer, the purchasers insisted on a reduction of the purchase price in the amount of $50,000, or to purchase the property after the repairs were completed and inspected to the satisfaction of the purchasers. The purchasers also demanded that they be compensated for any extension costs. The sellers did not accept these demands and the ONCA agreed that they were not obliged to do so. The ONCA held that the purchasers repudiated the contract when they failed to accept the reasonable offer of the sellers and refused to close the deal on the proposed terms. As a consequence, the purchasers were required to compensate the sellers for court costs and the $100,000 loss the sellers suffered as a result of having to relist and resell the property one year later. The purchasers’ deposit was credited against the damages they had to pay. The primary lesson to be learned from this decision is that the courts are in favour of fair and reasonable conduct of the parties. If you require assistance with your real estate transaction and your rights and obligations,, contact Paria Katie Rad at 905-640-4242 or 905-668-4486 ext 230 or paria@durhamlawyer.ca or paria@yorkregionlawyer.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiUncategorizedMarch 18, 2021June 10, 2023
WHY EVERYONE NEEDS A WILL The first important message is that you do not make a will for your immediate benefit, but for that of your loved ones. When you are deceased you will only figuratively turn in your grave when a family quarrel arises over what could have been spelled out by your will. Your family, on the other hand, may face very real struggles when left without any guidance as to your intentions. There are of course laws in place that determines what happens to your belongings if you die intestate, that is, without a will. However, that does not mean that disagreements are pre-empted, or that your wishes are given effect. The following are just three examples of issues that can arise when an individual dies without a will. Executor appointment If you die intestate, you forego the opportunity to appoint an executor. The executor is in charge of distributing your assets in accordance with your wishes expressed in your will. Instead, someone first needs to apply to the Ontario Superior Court of Justice to take on this role. This leads to a delay in the distribution of the deceased person’s assets, along with increased legal costs. Under a will that properly appoints an executor, the executor has the power to take action immediately, and even where an application is required, the process is less complex. Not everyone can be appointed the executor of a will. The law sets out an order of preference, ranking first the married spouse or conjugal partner who lived with the deceased immediately before death. Next are the children of the deceased, then the grandchildren, if no children have survived the deceased, and if no grandchild is alive, the great-grandchildren are next. It follows the father and mother of the deceased, but only if there are no descendants, and if the parents have predeceased the deceased person, their siblings are next in rank and so forth. If a person having a prior right to be the executor does not want to take on this role, their consent is still required for a person lower in rank to be appointed the executor. If several persons are standing in the same degree of kinship and more than one is applying for the executor role, the court can select one of them at its discretion. Appointing an executor in one’s will circumvents many potential issues that can arise from a disagreement among family members who should be the executor of the will. If the deceased thought that it would be his or her, business partner or life-long friend who is best suited for the role, there is little chance that this wish can be accommodated in the absence of a will nominating this person as the executor. Another important consideration in the appointment of the executor is that this person will also manage any trust(s), and monies, for minor beneficiaries in the will. Succession Laws If the deceased person dies intestate and was not married to their partner, this partner has no statutory entitlement with respect to the deceased property. The Succession Law Reform Act’s (SLRA) definition of ‘spouse’ only captures married spouses. Under the SLRA, a married spouse is entitled to receive the entire estate, if there are no children. However, if there are children, the surviving spouse will receive a preferential share of $200,000 of the deceased assets, if he or she died intestate. The remainder of the estate, if any, will be distributed equally between the spouse and one child, and if there is more than one child, the spouse receives one-third of the remainder, and the children receive the rest in equal shares. A common-law spouse, again, is not entitled to the preferential share, or in fact to any share of the deceased’s assets upon death. This result may be quite the opposite of what the deceased person would have wanted. Disabilities protection – Henson trust Another scenario where having a will in place is most important is that of a disabled dependant surviving the deceased. A will would often provide for a so-called Henson trust. A Henson trust is a discretionary trust designed to benefit a disabled individual in such a manner as to protect that disabled individual’s entitlement to collect means-tested government benefits, such as benefits payable under the Ontario Disability Support Program. The trustee will have full discretion over the allocation of income and capital to the disabled beneficiary. Without a trust in place for the disabled, it would fall to the court to administer the deceased’s assets for the benefit of the disabled individual. It may be in the interest of the deceased to have a say in who will take on this important responsibility, and not leave it to strangers. Also, if the gift is given outright to a disabled individual, this could disqualify him or her from collecting said government benefits. If you need advice relating to the drafting of your will, contact Vanessa Romanino at 905-668-4486 ext 246 or vanessa@durhamlawyer.ca. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By G63tEGnX1EUncategorizedJanuary 21, 2021June 10, 2023
ADVANTAGES AND DISADVANTAGES OF ONTARIO’S MAIN BUSINESS STRUCTURES One of the first considerations for an entrepreneur before commencing a business is selecting the appropriate type of business vehicle for the endeavour. This article outlines some of the advantages and disadvantages of the main business structures in Ontario: sole proprietorships, general partnerships, limited partnerships, limited liability partnerships and corporations. The most appropriate business vehicle for the individual will, however, always depend on the particular circumstances of the contemplated business. Sole Proprietorship The main advantage of a sole proprietorship is the ease with which the business can be commenced and dissolved. The business is simply formed when one individual starts to carry on business, and it ceases to exist when such individual no longer engages in such business. Nothing more formal is required, except that, depending on the business, you may still need to apply for any required governmental permits or licences. A business name need not be registered if the owner is using his or her own name to conduct the business. Furthermore, by virtue of being a sole proprietor, he or she has complete control over business decisions and is generally not accountable to others, other than by contract and tort exposure. The ease of operating the business as a sole proprietorship also means that there are usually only modest expenses to starting it up. The key disadvantage of sole proprietorships is that there is no legal separation between the individual owner and the business. Therefore, the owner is fully liable for all the debts and obligations of his or her business, regardless of how carefully he or she segregates it from all other activities. Creditors of the business become creditors of the owner personally, leaving the owner’s personal assets exposed to claims by creditors. Securing proper insurance may help to mitigate some of the risks. The owner will also need to declare all revenues and expenses of the business when filing his or her own personal tax returns, which can be disadvantageous from a tax perspective if the business is very profitable (on the other hand, business losses could offset the owner’s other income from employment or other investments, which can be tax-efficient). There is also no continuity of the business if the sole proprietor passes away. The business dies with him or her and cannot be passed on. General Partnership Like the sole proprietorship, a partnership is also simple and relatively inexpensive to form and operate. When two or more individuals or corporations conduct business together with a view to profit, they are typically considered to be operating as a partnership. There are few formalities required, and the partners can have great flexibility in designing the internal managerial structure of the partnership. The capital and resources required to start up the business can be divided among the partners involved. A well-drafted partnership agreement can also provide a useful blueprint for the partners of how to operate the partnership, how business decisions can be made, the respective rights and responsibilities of each partner, how to deal with profit and loss sharing, how to handle the departure of a partner from the business, and can help to limit disputes among the partners. Similar to sole proprietorships, the partners in a partnership also have the ability to deduct losses from the partnership business against their income from other sources for tax purposes, which can be beneficial from a tax perspective. Disadvantages of partnerships as compared to sole proprietorships include the compliance with registration requirements under the Business Names Act for partnerships and the obligation to give notice to creditors under the Partnerships Act if a partner retires. A disadvantage that a partnership shares with a sole proprietorship is the unlimited liability, given that there is no separate legal personality of the partnership. In the case of a partnership, this unlimited liability arises jointly, or jointly and severally for all debts of the partnership, even for those debts incurred by the other partner, since each partner can bind the partnership. Liability can, however, be limited by forming a partnership of two or more corporations, or by forming a limited partnership or limited liability partnership as described in the sections that follow. It should also be noted that a partner may be a creditor or debtor or employee of his or her co-partners, but not of the partnership. In other words, a partner cannot be employed by his or her own firm. Furthermore, any fundamental change to the partnership (e.g., change in nature of the business, expulsion of a partner, variation of default rules) would require unanimous consent of the partners. This disadvantage can be overcome by careful drafting of a partnership agreement. Limited Partnership The limited partnership allows for some partners (limited partners) to have limited liability with respect to the limited partnership. The limited partner’s liability is limited to his or her investment in the limited partnership. The disadvantage from the perspective of the limited partner is that this limited liability status comes at a cost – the limited partner cannot have any managerial control of the partnership or in the direction of the business. There must also be at least one general partner, who has the control and management of the limited partnership but is also liable for all the debts and obligations of the limited partnership. Such liability can be somewhat limited if the partners use a corporation to act as the general partner, but doing so may complicate the business structure and increase the overall costs. Limited partnerships can also provide certain tax advantages and are relatively simple to form. Other than complying with the Business Names Act, the only additional legal requirement is registering the limited partnership under the Limited Partnerships Act. Limited Liability Partnership The limited liability partnership shields a partner from liability for negligent or other wrongful acts of another partner, and it does not curtail the right to be an active partner in the business. It, too, provides certain tax advantages. Nonetheless, the limited liability partnership is only available to certain regulated professions (e.g., doctors, lawyers), and it requires some effort and compliance with registration formalities. Corporation The main advantage of the corporation is that it is a distinct legal entity, separate from its shareholders (i.e., owners), directors, and officers. It can sue and be sued in its own name, it can enter into contracts (even with its own shareholders), it can own property, and it provides for perpetual succession, which means that it can continue to exist notwithstanding any changes to its shareholders or directors. Perhaps most importantly, shareholders are not generally liable for debts or other obligations of the corporation. The corporation alone is liable for its debts and obligations and this liability is limited to the corporation’s own assets (except for a few caveats, such as if the shareholder agreed to pledge its personal assets as collateral to a creditor of the corporation, personally guaranteed a loan given to the corporation, or if the corporation was formed for an improper or illicit purpose). In most cases, the shareholders only stand to lose the investments they made in the corporation. Another significant advantage of operating your business through a corporation is the potential tax benefits. Not only is the business income that is kept in the corporation subject to the lower corporate tax rate (as compared to the individual tax rate), if the corporation’s share structure is organized properly, there could also be income-splitting opportunities with lower-income spouses and adult children. The shareholders may also be able to take advantage of the lifetime capital gains exemption (around $800,000) when they dispose of their qualifying small business shares of the corporation. Consulting with a corporate accountant is always highly recommended to determine if and how one could benefit from these tax advantages provided by a corporation. There are, however, also some key disadvantages that should be considered before choosing to run your business by way of a corporation. For example, the incorporation process can be time-consuming, complex and costly. It involves making certain required government filings, conducting name searches to ensure the proposed corporate or trade name can be used and preparing many corporate documents to comply with corporate laws. In addition to the work involved with incorporating, the maintenance of the corporation, too, is more demanding than in the case of the other business vehicles. The corporation’s directors are required to hold meetings, elect officers, and provide shareholders with information. The shareholders must also hold at least an annual meeting to elect the directors, and deal with other formal corporate matters. These requirements, in the case of one-person and closely held corporations, have been greatly simplified by legislation, but still require the preparation of corporate documentation that must be maintained and recorded in the corporation’s minute book, at least annually. An annual return and corporate tax return must also be filed by the corporation each year. The creation, maintenance and dissolution/winding up of a corporation are all typically more costly than with other business vehicles, especially when you account for professional fees (e.g., legal and accounting). Given all the above considerations when contemplating the right business structure, it is prudent that entrepreneurs involve an experienced business lawyer and accountant in the process. If you require assistance in corporate law, please feel free to contact Stephen Sforza at 905-668-4486 or Stephen@durhamlawyer.ca. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By G63tEGnX1EUncategorizedJanuary 21, 2021June 10, 2023
FROM RECORD LOW TO RECORD HIGH – THE GTA REAL ESTATE MARKET IN 2020, AND WHAT 2021 MAY BRING This past year brought many changes as Canadians learned to navigate the expected and unexpected effects of a global pandemic. We look back at 2020’s GTA real estate market and share some insight into a year that was anything but predictable. Following the lockdowns in early spring and despite a nearly 70% plunge in the Toronto real estate market in April of 2020, numbers managed to climb to a record high in the course of the second half of the year. By June, the market began to make up for the slow spring market, with the end of 2020 boasting sales that exceeded 2019 numbers by 8.4%, and the average selling price for all home types combined was up by 13.3% to $955.615. Reasons Most predictions concerning the Toronto real estate market of 2020 were mistaken. In April, the vast majority of real estate and investment experts anticipated a decline in both property sales and prices. It seemed likely that a drop in pricing and sales would stem from the stagnant demand for housing caused by historic job losses, collapsing equity markets, and stalled immigration. However, low-interest rates and higher savings enabled many first-home buyers to seize the opportunity to enter the market when they had previously not been able to. According to Statistics Canada, while Canadians saved 2-3 percent of their disposable income before the pandemic, that percentage increased to 28.2 percent in the second quarter of 2020. Furthermore, Canadians that generally fall into the home-buying category were least likely to suffer from job losses. Additionally, the market’s rapid recovery and success is partially due to the shared longing for more living space, which led to immense competition for certain property types. Staying at home, working from home, working out at home, and home-schooling put significant strain on those in small living spaces, driving many occupants to look for larger alternatives, often outside of the downtown area. At the same time, condominium units declined in popularity, with this sector of the Toronto real estate market falling by 6.7%. What 2021 May Bring With the COVID-19 vaccine becoming widely distributed and with historically low-interest rates that are likely here to stay, 2021 looks as though it will be a strong year for the Toronto real estate market. Potential home-buyers will again be comfortable to attend viewings and sellers will allow people into their homes for open houses that have often been conducted virtually in the second half of 2020. Moreover, the government is targeting high immigration numbers for 2021 and expects the return of both international students and non-permanent residents, which will bolster the housing demand in the post-pandemic GTA. If you require assistance with your real estate purchase or sale or refinance, please feel free to contact Paria Rad at 905-668-4486 or paria@durhamlawyer.ca. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By G63tEGnX1EUncategorizedJanuary 21, 2021March 18, 2021
THE CRUCIAL BENEFITS OF HAVING YOUR NEW-BUILD AGREEMENT REVIEWED If you have entered into a new-build home agreement, it is strongly advisable that you have your agreement reviewed by a legal professional for the following reasons. TARION Registration Legal counsel will verify that the new home builder is registered with TARION, the corporation that administers the Ontario New Home Warranties Plan Act (the Act), and that the home itself is enrolled under the Act. If they are not so registered or enrolled and there is no applicable exception under the Act disqualifying the home from enrolment, this will deprive the purchaser of the benefits provided under the Act. Accordingly, the purchase agreement would need to be adjusted for homes that do not qualify for enrollment under the Act, because in that case, the purchaser cannot rely on statutory warranties under the Act, but on contractual warranties only. TARION Warranty Coverage A review of the new-build agreement with counsel will ensure that the purchaser is knowledgeable about the filing requirements of and the deadlines up to which a warranty service request or claim can be made. TARION assists with the enforcement of vendor warranties. For example, in the new-build agreement, the vendor will warrant that the home is constructed in accordance with Ontario’s Building Code, is fit for habitation, and is free from defects in workmanship and materials and major structural defects. If a dispute arises concerning such warranties, TARION conducts an assessment of the warranty claim by inspecting the building or by other investigation. Furthermore, if the vendor refuses compensation for violating a warranty, TARION itself will compensate the purchaser out of a guarantee fund it maintains. For these protections to take effect, the purchaser must adhere to strict deadlines that vary with the nature of the discovered deficiency. Deposit TARION insures the purchaser’s deposit up to a limit depending on the purchase price in the event of default of the vendor. Hence, counsel will advise that there should not be a deposit paid by the purchaser in excess of the TARION insurance. Furthermore, if the deposit exceeds 30% of the purchase price, the purchaser will be regarded as a homeowner upon making the payment, and no longer a home purchaser. Consequently, the purchaser may be responsible for any construction lien claims registered after closing against the new home and may be subject to statutory holdback liabilities concerning such claims. HST Rebate Counsel will also advise the purchaser on the requirements to obtain the first-time purchaser HST rebate. New-build home buyers are eligible for this rebate, which can amount to up to $24,000.00, if the home will be utilized as their primary residence, or the primary residence of certain blood-relatives. Modifications Post-Closing Counsel will also draw the purchaser’s attention to the fact that vendors and builders are permitted to substitute certain materials from the plans and specifications for materials of equal quality. It may also be the case that the purchaser is permitted to select certain colors or materials from the vendor’s samples. Upon the purchaser’s failure to make such a selection within a specified timeframe, the vendor may make the selection on the purchaser’s behalf. Substantial Completion Another surprise that may await a purchaser who does not have legal counsel reviewing the purchase agreement can be the obligation to begin occupation of the dwelling upon its “substantial completion”. Substantial completion is reached when the dwelling complies with legislative standards. This can require significantly lower degrees of completion than the purchaser may expect. The building must merely be fit for habitation, have completed structural, mechanical, plumbing, and electrical systems, and comply with safety and health standards. This does not necessarily require that certain luxurious items are installed, or that the exterior of the building is finished. The purchaser may not hold back any part of the purchase price notwithstanding that there may be exterior work to be completed such as painting, driveway, grading, seeding, etc. The vendor shall complete any outstanding details within a reasonable time thereafter. Failure to fully complete these items will not allow the purchaser to refuse to close, nor does it entitle him or her to a reduction of the purchase price. If you are seeking legal advice in relation to your new-build home or other real estate matter contact Jonathan Dippolito at 905-668-4486 ext 229 or jdippolito@durhamlawyer.ca. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By G63tEGnX1EUncategorizedJanuary 21, 2021June 10, 2023