Obligation to Advise – Septic Systems

As a real estate agent it is important to understand, on behalf of your clients, what information they require for their lender to properly assist them. Recently I was reviewing the solicitor instructions that are provided to me by one of the many institutions that regularly fund mortgages for my clients. I was surprised to be honest to find the following clause:

Septic Systems
Applicable only to properties not serviced by municipal sewage systems: If the funds used to construct a dwelling or to purchase a newly constructed dwelling, obtain a certificate or letter from a municipality or other regulatory authority regarding the installation and/or use of a septic system in accordance with relevant standards. If the funds will be secured by a mortgage on a previously occupied dwelling, we require either such a certificate or letter, or confirmation from the Mortgagors that to the best of their knowledge the septic system is operating satisfactorily. The confirmation from the Mortgagors may be given by way of statutory declaration or other evidence satisfactory to you. For refinancing transactions, we require a certificate, a statutory declaration, or a septic system endorsement from a title insurer approved by us. The certificates and confirmations are to be retained in your file.

The fact that this is required by some lenders has changed my standard practice to add this clause to the statutory declaration that I have each purchaser sign. I have attached my standard declaration for your information.

The reason I raise this for you is that as real estate agents you are best positioned to ensure the seller warranties and represents that the septic system is operating satisfactorily. By inserting the standard warranty in all agreements with a septic system you have provided your client with the information that they require to sign the declaration that their solicitor will request. Also by understanding the importance of this clause you can defend the need for this warranty to be inserted when the agreement is being negotiated.

STATUTORY DECLARATION

IN THE MATTER OF a mortgage (charge) from ** in favour of ** on the premises municipally known as **.

We, SOLEMNLY DECLARE that:
1. We are the purchasers/mortgagors of the above-mentioned property and have knowledge of the matters hereinafter deposed to.
2. There is not currently and nor has there been within the past 45 days, any construction, alterations, renovations improvements or building materials supplied to the subject property.
3. The proceeds of this mortgage will not be used to finance any construction, alterations, renovations or improvements to the subject property or to repay a mortgage which was taken out for this purpose.
4. We have carefully examined the survey prepared by (insert surveyor) and dated **, a copy of which is attached hereto, and have compared our knowledge of the buildings situate on the subject property with those shown on the said survey.
5. The survey accurately describes the property and buildings on the subject property as they exist today and there are no other buildings, additions, decks, swimming pools, outbuildings or any other structures not shown on such survey, except as referred to below:
6. Within the meaning of the Family Law Act (Ontario):
We are spouses of one another.
7. The residence will be owner occupied.
8. The down payment funds are not borrowed.
9. To the best of our knowledge and belief, the septic system is operating satisfactorily.

AND we make this solemn Declaration conscientiously believing it to be true, and knowing that it is of the same force and effect as if made under oath.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

Condo Life Part II – Headache Free Living or NOT?

In a recent decision out of the Ontario Superior Court of Justice, a condominium unit owner was awarded the sum of $59,825.78 to be paid by the condominium corporation as a result of their failure to satisfy their duty to ensure that unit owners complied with the by-laws and rules. The decision, Dyke v. Metropolitan Toronto Condo. Corp. No 972, was released on January 18, 2013 and shed light on the fact that condominium corporations are responsible for taking the necessary steps to ensure that rules are enforced in a balanced way so that all owners/tenants are able to enjoy their respective units.

In this particular case, the Applicant (Elizabeth Dyke) had lived in her unit since 1994 and up until 2007, experienced no issues in relation to noise. In 2007, the owners of the unit above her replaced the carpeted flooring with hardwood flooring (resulting in more noise) and subsequently sold the unit to new owners in 2010. One of the new owners was a “professional dancer” and explained to the Applicant that she would be using her residence as a “dance practice area”. On a number of occasions the Applicant called the new owners to ask them to minimize the noise, however, the noise just continued to escalate.

By the summer of 2011, the Applicant was informed that the unit above her was being used as a full time dance studio. As a result, she reported this as a nuisance to the police and began complaining about excessive noise to the Respondents (Metropolitan Toronto Condo. Corp No. 972) property management office.  No action was taken at this time so the Applicant continued to complain to the management and/or security desk. There are numerous security reports confirming the excessive noise emanating from the unit above her and describing it as “similar to the constant banging of a hammer.”

Despite the fact that the residential condominium had been turned into a professional dance studio the owners were never sent a letter from the property manager requesting that they cease making excessive noise. In fact, it was the Applicant who began receiving letters from the property management requesting that she remove her two small dogs from the building, and that she must cease to continue her small law practice within the unit that she had been operating for the past 17 years. The only letter the Applicant received in relation to the noise issue was as a result of a letter she sent to the unit owners above her stating that she would be holding the Respondent legally responsible. The Respondent then replied in a letter indicating that they “had been unable to independently verify the intensity of the disturbing noise” even though security personnel had verified this on several occasions.

Due to the “detrimental health effects from the noise and related stress” the Applicant testified that she was forced to move out of her condo in December 2011. The Applicant requested an order from the Court that the Respondent be required to enforce its by-laws and regulations and also sought out an award of special damages to compensate for the costs that she had incurred associated with moving out and arranging alternative accommodation.

To determine the duty that the Respondent owed to the Applicant the Court looked at the Rules of the Respondent as well as Section 17(3) of the Condominium Act, 1998, S.O. 1998, c. 19. This section of the Act pertains to “ensuring compliance” and reads as follows:

The corporation has a duty to take all reasonable steps to ensure that the owners, the occupiers of units, the lessees of the common elements and the agents and employees of the corporation comply with this Act, the declaration, the by-laws and the rules.

The Court did not believe that the Respondent had satisfied this duty and stated that the Respondent had “acted in unfair disregard of the Applicant’s interests”. As a result, the Court ordered the Respondent to pay special damages to the Applicant for the costs associated with moving, a total of $40,325.78, as well as costs associated with the Application which amounted to $19,500.00 including disbursements and HST.

The Respondent also submitted a claim requesting further compensation for “pain and suffering, mental anguish and distress, loss of income and loss of comfort and quiet enjoyment”. However, the Court decided to defer this claim to a later hearing date which will be scheduled with the court.

The full decision can be accessed at the following link http://canlii.ca/t/fvsg1

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

Condo Life – Headache Free Living or NOT?

Real estate agents and clients are aware that when you purchase a condo it is customary to request and review the status certificate. While this part is well known, it is surprising how few agents have ever actually reviewed a status certificate. The content in the status certificate is governed by the Condominium Act, 1998, S.O. 1998, c. 19.

There is one section included on all status certificates that all agents should be aware of. The section usually reads something like this:

It is the purchaser’s responsibility to review the declaration and description pertaining to the unit including any exclusive use common element area, to determine whether or not the vendor or any previous owner has carried out a structural change to the unit or has modified the common elements in circumstances where the Board has not given its prior written consent. As this unit and any appurtenant exclusive use common element (if applicable) has not been inspected prior to the making and execution of this certificate, the Condominium Corporation cannot comment upon matters of non-compliance which may be revealed by an inspection of the unit, and the Corporation reserves its right to enforce any matters of non-compliance notwithstanding that they may have existed prior to the issuance of this certificate.

This clause makes it the responsibility of the purchaser to determine if the unit and/or any exclusive use common elements have been modified or replaced. The reason for this is that if they are modified or replaced by the owner, and not the corporation, those items will become the responsibility of the new owners going forward.

When I review the status certificate with clients I require them to make enquires to determine if anything has been changed or modified. In addition, I have a standard acknowledgement that I require the vendor to sign to confirm that neither he nor any past owner to his knowledge has made any additions, alterations, betterments or improvements to the unit. In order to be entitled to this acknowledgement I include the following clause in my requisition letter:

Required: On or before closing a declaration to be provided by the Vendor confirming that the Vendor, or any previous owner or occupant of the unit, has not carried out any structural change to the unit or modified the common elements without the prior written consent of the Board of Directors.

This past summer when this question was asked of the listing agent on behalf of one of my clients, the answer was that the owner had replaced all doors, windows and screens. As a result, going forward these items would no longer be something the condo corporation would be responsible for, but rather, any future repairs or replacements would be the responsibility of the owner. There were other similar units available in the same building so this offer was terminated and a new offer made.

I recently acted for a client purchasing a condo unit where even though the enquiries were made, and there was no disclosure of changes, when it was time to close the deal and I requested the acknowledgement it was refused. In the end I was able to force the signing of this document. The fact is that if I was unable to have this document signed I would not have had grounds to demand it. Even more important is that even if when it was time to sign this acknowledgement a change or modification were revealed, there would equally not be grounds to terminate the agreement. If this issue is not raised when the agreement is drafted there is no way to predict what remedy can be obtained for the purchaser. The worst case scenario is that the transaction needs to be completed and the purchaser will be left with a small claims court action to attempt to obtain compensation. This is clearly an example where the purchaser will have little or no recourse and will be unhappy with all involved for not protecting the purchaser who only wanted to have a low maintenance residence.

In reviewing this matter I have decided since this matter can go to the centre of why someone purchases a condo I am going to address this in the agreement. I will be inserting the following clause in the future and would recommend it to agents:

The vendor confirms that the vendor has not, nor to his knowledge has a prior owner or occupant of the unit, carried out any structural changes to the unit or modified the common elements.

If the vendor is unable to provide this representation because there have been some changes or modifications the following clause can be used:

The vendor confirms that he or a prior owner or occupant has carried out the following (insert structural changes or modifications) but that prior written consent was obtained from the Board of Directors.

If when reviewing this matter while drafting the agreement a change or modification is revealed for which consent has not been obtained, the vendor should be required to seek that approval prior to the completion of the agreement or an abatement in the price should be negotiated for the negative impact.

Of course this article cannot assume to cover all specific fact situations. This information is included for the purposes of bringing this issue to real estate agents’ attention. The exact clauses and negotiations that might occur will be fact specific and legal advice should be sought for specific transactions.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

Client Identification Requirements: What you need to know

Client identification has been an important aspect of every real estate transaction in recent years. Each party involved in a real estate transaction from the realtor to the lender to the lawyer have legislation requirements to fulfill with regards to verifying the client/ customer’s identity.

Agent Requirements:

As a real estate agent you are subject to abide by certain legislation and regulations with respect to confirming your client/customer’s identity and personal identification information. Since June 23, 2008, real estate agents have been required to collect personal identification information from buyers and sellers, and to complete a report on all funds that are received throughout the course of the transaction, even those less than $10,000.

The main requirements that are applicable to real estate agents under this legislation include:
– documentation of personal information and proof of identity of clients in each and every transaction, including occupation;
– if the client is located in another city, province or country, and a face-to-face meeting is not possible, realtors are required to use an agent in that city, province or country, in order to identify third parties and verify the accuracy of their personal information;
– when a buyer/seller is conducting a private transaction, in which a real estate agent is representing the other party involved, the realtor is required by law to verify the private buyer/seller’s information;
– if there is a third party involved in the transaction, a realtor must obtain their identification information;
– any time that funds are deposited or exchanged in a transaction a realtor must complete a report outlining the amount that was received and how it was obtained, no matter what the monetary amount is; and
– in relation to clients who are corporations, realtors must obtain the corporation’s confirmation of existence, the corporation name, the corporation address, the names of the directors, and any other relevant corporate documentation in order to complete an accurate Client Information Record.

What are acceptable forms of identification?

For a document to be acceptable for identification purposes, it must be a valid original document, have a unique identifier number, have been issued by a provincial, territorial or federal government, and it cannot be expired. Acceptable forms of identification verification include but are not limited to a driver’s licence, passport, residency card etc. A realtor only requires the information from one government issued card.

To comply with law, realtors can either make a photocopy of the identification card, or they can simply write down all factual data that is contained on the card, both of which are acceptable. Note: realtors should NOT accept a Social Insurance (SIN) Card as identification. To read more on client identification for real estate access Guideline 6B here.

All of these requirements are to be met for every single transaction that a realtor is involved with, whether they are representing the clients directly or acting for the other side involved in a private transaction. Realtors are required by law to keep this information on record for a period of five years at their brokerage office. This information is collected only to comply with the federal legislation, and is not to be used in any commercial way or given out to anyone else.

Lender Requirements:

When clients are required to sign mortgage documents with their lawyer the lenders require the lawyer to confirm the client’s identity by obtaining a photocopy of two pieces of identification in order to comply with Canada’s Proceed’s of Crime (Money Laundering) and Terrorist Financing Act. Lawyers are also required to sign a form certifying that the lawyer has taken steps to personally examine the identification documents.

Essentially all lenders outline in their mortgage instructions the types of identification that are considered valid. There are both primary and secondary forms of identification and lawyers are required to obtain either two primary pieces, or one primary and one secondary. Note that one piece of identification must be from the list of primary documents. If the required documentation is not received, the lender will not release mortgage funds. The table outlined below is a list of the primary and secondary documents which are commonly considered acceptable:

Primary Identification:
– valid driver’s license issued in Canada;
– a current Canadian passport;
– a federally issued Firearms Licence;
– a Certificate of Canadian Citizenship or Certification of Naturalization;
– a Permanent Resident card or Citizenship and Immigration Canada Form IMM1000 or IMM1442;
– a Certificate of Indian Status issued by the Government of Canada;
– a document or card with your signature and photograph on it issued by any of the following:
– Insurance Corporation of British Columbia
– Alberta registries
– Saskatchewan Government Insurance
– Department of Transportation and Public Works of Prince Edward island
– Service New Brunswick
– Department of Government Services and Lands of the province of Newfoundland and Labrador
– Department of Transportation of the Northwest Territories
– Department of Community Government and Transportation of the Territory of Nunavut

Secondary Identification:
– an employee identity card with a photograph from an employer well known in the community;
– a signed automatic banking machine (ABM) card, client card, or credit card issued by a member of the Canadian Payments Association (a major Canadian bank) showing the individuals name along with their signature;
– a signed Canadian Institute for the Blind (CNIB) client card with a photograph;
– a birth certificate issued in Canada;
– a Social Insurance Number (SIN) card issued by the Government of Canada; and
– an Old Age Security Card issued by the government of Canada.

Lawyers Requirements:

Lawyers must comply with law society requirements that pertain to client identification and verification as outlined in By-Law 7.1 which came out in December 2008. In order to comply with this By-Law, lawyers are not required to obtain photo identification unless they suspect fraudulent activity, dishonesty or illegal conduct is taking place. Lawyers are only required to obtain one piece of identification from the client, and SIN cards are considered an acceptable form. The lawyer must ensure that they obtain and keep a record (for a period of six years) of the following client information:

– full legal name;
– home address and telephone number;
– occupation; and
– business address and telephone number (if applicable).

Although complying with the By-Law can be achieved without obtaining photo identification, you must obtain at least one ID at the outset that contains a photo, as this information is required by mortgage companies/lenders as discussed above. To learn more about the law society requirements pertaining to client identification and verification requirements for lawyers click here.

What if my client does not have photo identification?

If a client does not have an acceptable form of photo identification you should suggest that they apply for an Ontario Photo Card which is government-issued photo identification that allows people who don’t drive and are 16 years of age or over to access government, financial or business services that require proof of identity. Outlined below is some of the important information that the client will require to obtain the card.

How do I apply for an Ontario Photo Card?

Applications for an Ontario Photo Card can be made at your local Service Ontario office. You can also obtain a copy of the application by downloading it from the Service Ontario website. This card can be obtained if:

• you do not drive;
• you are a resident of Ontario; and
• you are 16 years of age or older.

For fraud prevention reasons, an individual is not allowed to hold both a driver’s licence and an Ontario Photo Card at the same time. If you have a driver’s license and want to get an Ontario Photo Card, you have to forfeit your driver’s license. Your driver’s license will be cancelled when you apply for your Photo Card.

What are the costs associated with an Ontario Photo Card?

• Order an Ontario Photo Card: $35
• Renew an Ontario Photo Card: $35
• Replace a lost, stolen or damaged Ontario Photo Card: $10
• Retake a photo for an Ontario Photo Card: $10
• Add or remove an age identifier: $10
• Change information on a Ontario Photo Card: Free

Payments can be made by credit card, debit, cash or certified cheque. Once you have paid for your card you should expect to receive it within approximately 4-6 weeks by mail. The card will expire after five years unless you decide to renew it. To renew the card, you must obtain and fill out a renewal form which must be dropped off at a Service Ontario centre.

For more information on Ontario Photo Cards visit the Service Canada Website by clicking here.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

Offers in Trust and Assignments

An agreement of purchase and sale can be executed “in trust” by one individual on behalf of another. However, simply inserting the words “in trust” into the agreement, without including any sort of clause or provision, is not sufficient enough to remove personal liability for the trustee who signs the document. When a trustee signs an agreement of purchase and sale they will be considered liable for all obligations under the agreement, even though they are only signing “in trust”.

It is possible for the trustee to assign the offer to a third party, referred to as the “assignee”. In these circumstances, the trustee who is currently holding the property in trust (referred to as the “assignor”) would transfer the obligations under the agreement to the assignee. However, when this occurs, the assignor is not automatically relieved of liability when the agreement is transferred to the assignee. As a result, the assignor should ensure that the agreement contains a clause which allows for an assignment and removes all obligations and personal liability on the part of the assignor. Here is an example of a clause to insert:

The offer is made by [assignor name] in trust, with the right to assign, and without personal liability. Upon assignment by the assignor to the assignee, and upon the assignee accepting the obligations herein, the assignor shall be relieved of all liability under the agreement of purchase and sale.

Also note that specific issues can arise in assignment-of-agreement transactions. Realtors should be aware of these issues so that they can advise their client in the early stages of the transaction. For instance, the assignor may retain the services of a home inspector or other type of consultant. It is important to ensure that if any documents/ reports are required for the transaction that the person obtaining them indicates that another individual (the assignee) is involved with the transaction, and should therefore be identified within the documents that are obtained so that the assignee can rely upon these documents if necessary.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

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Wasted Dreams

Municipalities exhaled a sigh of relief when the Ontario Court of Appeal overturned the January 2011 decision of the Superior Court of Justice in the case Biskey v. Chatham-Kent (Municipality) on November 21, 2012. This case involved a couple (the Biskey’s) who were determined to build their dream-home on a newly purchased property, however, they purchased a former dump-site.

The Biskey’s (respondents), purchased a property from a couple (the Kaminskis) which was formerly owned by the appellant, Chatham-Kent Municipality. The property was zoned for agricultural use and sold by the municipality to the Kaminskis in early 2002 for a purchase price of $35,000. Subsequently, the respondents purchased the property for $80,000 and intended to construct a new home.

At the time of purchase, the respondents were unaware that the property had previously been used as a dump and that an environmental site assessment and report was conducted on behalf of the municipality (the Jagger Hims Report) prior to the sale to the Kaminskis. The municipality disclosed the report to the Kaminskis but when the respondents purchased the property this report was never disclosed to them by the sellers or the municipality.

The respondents then applied for a building permit in 2003 and their contractor discovered that there were problematic soil conditions as a result of the properties history. They obtained a copy of the Jagger Hims Report, the Golder Report which was produced in relation to the respondents building permit application, and they also had their own engineering report produced to support this application. All of these documents contained detailed information pertaining to the previous use of the property and its appropriateness as a site to build on.

Prior to the building permit being issued by the municipality the respondents filed a claim against the municipality, the vendor, and the real estate agent for $350,000 in damages related to negligence, nuisance and negligent misrepresentation and another $100,000 for aggravated, exemplary and punitive damages. This claim was later amended to include causes of action associated with breach of contract and breach of the Environmental Protection Act, R.S.O. 1990, c. E-19 and increased to $2 million. This amount was based on environmental assessment costs, clean-up costs, and increased costs associated with construction and the diminution in property value as a result of the “stigma” associated with the property because of its prior use as a dump.

After this claim was brought forth, the respondents also received an offer from the previous owners to buy back the property for the original purchase price ($80,000). They refused this offer and instead proceeded with construction.

Prior to trial a settlement was reached with the vendors and the real estate agent. At trial, the municipality was ordered to pay damages in the amount of $386,142.82 which accounted for the additional construction costs, environmentally related costs, the reduction in value due to the stigma associated with the property, and miscellaneous costs. Chatham-Kent municipality appealed this decision and the Court of Appeal focused on the damages that were awarded.

The Court of Appeal began by noting that the respondents were fully aware that the property had previously been used as a dump prior to building. A significant amount of information (reports) was disclosed to the respondents pertaining to the fact that there would undoubtedly be additional costs associated with construction and environmental issues, and that the value of a home on such a property would be diminished due to the stigma associated with its prior use. Additionally, the respondents filed a statement of claim prior to construction which revealed that they were fully aware of these additional costs and the reduction in value. They also refused to accept the offer from the previous owners (Kaminskis) for a full refund of the original purchase price, at which point they had estimated that they had only incurred 25,000 in damages. The respondents proceeded with construction regardless.

This led the Court to agree with the municipality’s submission that the trial judge had erred in relation to the damages that were awarded for the additional costs related to construction, the environmental issues, and the reduction in value. The Court stated that:

“When the [respondents] decided to reject the Kaminski offer and to proceed with construction in the knowledge that they were building on a dump site and that they would incur added costs, any causal link with the alleged negligence of Chatham-Kent was broken… from that point forward, the [respondents] were on their own.”

Legally, the Court did not think that the respondents had any enforceable right to require the municipality to compensate them when they decided to take on the substantial risk of constructing a home on a property they knew to be contaminated as a result of its prior use. The appeal was allowed, the trial judgement was set aside, and the action was dismissed. Furthermore, the municipality was entitled to the costs associated with launching an appeal and the costs of trial. You can access the Court of Appeal decision by clicking here.

It is important as a real estate agent or vendor to note that while the settlement has not been reported, no doubt a payment was made by both the vendor and agent. In each jurisdiction across Ontario there will be a source to determine the location of landfills both closed and open. In the County of Simcoe both the Barrie District Ministry of Environment and the Corporation of the County of Simcoe have a compiled list of all landfills open/closed, private and municipal.

You should also obtain a copy of the Official Plan for the municipality in question. If you are an agent who intends to represent a vendor or purchaser of rural properties you should determine who the source of the information is and become familiar. If proper diligence is not done by the agents it is possible more than the commission on the specific property will be in jeopardy.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

Can I Sign an Offer on Behalf of My Clients?

Sometimes situations are encountered in real estate transactions where clients are unavailable to sign the required legal documentation. A recent question was posed by an agent in relation to whether or not a real estate agent would be authorized to sign an offer on behalf of a purchaser if they have a letter signed by the purchaser specifying that they can sign the document on their behalf? The short answer, in my opinion, would be NO.

In this specific situation the agent had a letter from their client which said that the agent had the right to sign the client’s name based on this letter. I contacted RECO about this matter and they have advised that taking this action would be considered ‘improper conduct’.  It is my belief that this agent would need a power of attorney to do this or sign the offer in trust for this person which is a not a recommended way to proceed without understanding your own personal liability.

A Power of Attorney for property refers to a written legal document which authorizes one person (the “attorney”) to make legal decisions regarding another person’s financial affairs and property. A specific power or attorney relates to a specific piece of property and/or period of time for which the named attorney can act on behalf of the other person. In this document, the conditions and parameters of the attorney’s powers are set out. In the context of a real estate transaction, the document will note that the attorney has the power to execute certain documents necessary to complete the purchase or sale of real property (usually a specific piece of property).

Given the amount of power and various legal aspects relating to this sort of document, you as real estate agent should never be asked to prepare this document on behalf of your client, nor should you agree to do it. For more information on powers of attorney read one of my previous articles which can be accessed by clicking here.

It is also possible for a trustee to assign the offer to a third party, referred to as the “assignee”. In these circumstances, the trustee who is currently holding the property in trust (referred to as the “assignor”) would transfer the obligations under the agreement to the assignee. However, when this occurs, the assignor is not automatically relieved of liability when the agreement is transferred to the assignee. As a result, the assignor should ensure that the agreement contains a clause which allows for an assignment and removes all obligations and personal liability on the part of the assignor. Here is an example of a clause that can be inserted:

The offer is made by [assignor name] in trust, with the right to assign, and without personal liability. Upon assignment by the assignor to the assignee, and upon the assignee accepting the obligations herein, the assignor shall be relieved of all liability under the agreement of purchase and sale.

It is interesting to note that both British Columbia and Manitoba have rules pertaining to signing on behalf of clients. The Real Estate Council of British Columbia has a rule pertaining to ‘signing agreements on behalf of clients’, Rule 5-3 under Part 5 – Relationships with Principals and Parties. This rule states the following:

5-3 (1) Before signing a contract on behalf of a client, the licensee must have obtained written authorization for this from the client or an authorized agent of the client.

(2) For certainty, the authorization required by subsection (1) may be provided by a service agreement or separately.

The Manitoba Securities Commission issued a notice in 1997 to all registered real estate brokers, authorized officials and salespersons which stated the following information:

Clearly there could be cases, although rarely, where it may be necessary and permissible for a registrant to sign on behalf of another person. For this to be done properly, there are some factors to take into account:

1. The registrant must have the other person’s permission to sign on their behalf. This is best done by obtaining written authorization to that effect, including a description of the type of document(s) which the registrant may sign;

2. The signature of the agent must be affixed in such a way so as to clearly show that you are signing on behalf of someone else; it may be a criminal offence to do otherwise.

Although British Columbia and Manitoba outline information pertaining to obtaining written authorization and signing on behalf of clients, RECO does not have any specific information pertaining to this. And as previously noted they have advised that this is ‘improper conduct’.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

Writs of Execution

What is a Writ?

A writ of execution is a court order or other statutory authority that permits a creditor to instruct a sheriff to seize and sell assets/property of a debtor to satisfy an unpaid judgment. The act of filing a writ of execution (Writ) is the first step toward instructing the enforcement office to seize and sell the debtor’s property. A variety of Federal and Provincial statutes, regulations or an order of the court may act as the authority for the issuance of a Writ.

A creditor may file a Writ against a debtor in one or more of the 49 counties or districts (sheriff/enforcement offices) in Ontario. From the time it is filed and becomes effective, a Writ may encumber any land or interest in land presently owned or land that may be purchased in the future by the debtor in the county or district in which a Writ has been filed.

The effect of a Writ is limited to the jurisdiction in which it is filed. For example, a Writ filed with the Sheriff of the City of Toronto does not have any effect on real or personal property located within the jurisdiction of the Sheriff of the Region of Peel. If a Writ is to be enforced or have effect in more than one location, then separate Writs must be filed with each applicable sheriff/enforcement office. The sheriff is required by section 10(1) of the Execution Act to enter all filed and renewed Writs into an electronic database that is to be maintained by the sheriff as an index of Writs.

How Does A Writ Get Registered Against An Individual or Property?

Often a Writ results from bringing a small claims court action against another person and that person ignores it. If you do not defend a money claim made against you in a small claims court, the party bringing the action will be granted a default judgement. That judgement can be filed with the Sheriff and form a Writ. This Writ can be filed against a person’s name with no further notice to them. Statutory orders related to federal or provincial tax enforcement as well as family support enforcement can also be registered without prior consent.

If a debtor owns property, a creditor is entitled to file an application to the Land and Property Information Office to file a Writ on the title to all real property owned by the debtor. The Writ once registered on title is active for up to six years, and prevents the Debtor from selling the property unless the debt is paid. Each time a Writ is renewed, it becomes active for a further six years. A Writ may be renewed before its expiration date by filing a Request to Renew (Form 60 E which can be accessed by clicking here.)

How Is The Real Estate Agent Affected?

In the case Re Grant, it is affirmed that Real estate agents and brokers are entrusted with significant sums of money and this role carries the expectation that persons working in the real estate industry appreciate the responsibilities they have and will act accordingly.

It is not uncommon for agents to be unaware of a Writs registered against a property and to be utterly surprised when these show up during title search, which is often a week before closing. This timeframe is often inadequate to satisfy the settlement timelines of some Writs or negotiate a settlement between multiple debtors if there is going to be a shortfall. As a result, this could jeopardize the closing deadline since you cannot sell property without paying a Writ if it is registered; neither can you obtain mortgage funds. This should be factored in as early as possible to avoid a short sale or failed transaction and to protect the real estate commission.

Listing Agents are advised to run the names that are on title for the nominal fee of $11.00 per person to see whether these names are clear. Of course a Writ can be registered any day and it could happen after you run it. In most cases, however, they are in place for a longer period and should have been disclosed and discovered earlier.

In the case Lograsso v Kuchar, a client advanced negligence claims when a real estate transaction was closed even though a Writ was filed against the property. This case shows the importance of making the necessary investigations and acting accordingly.  Failure to act in a timely manner could result in costly remedial action on the part of the agent and/or solicitor.

What Does It Mean to “Run Clients’ Names” and How Is This Done?

This is where an execution search is performed against the exact name of the registered owner. The Land Titles Act provides that if a Writ is filed under a different name other than that under which the owner is registered, the Writ has no effect. This search determines whether a person, corporation or other legal entity has a Writ filed against them which affects all lands owned by such person, corporation or other legal entity within the jurisdiction of the Sheriff’s office and/or the land titles office where such Writs are filed.

It is recommended that agents run an execution search since this is vital to determining if there is going to be sufficient funds on closing. Ideally this should be run when the property is listed to confirm there are no liens, and hopefully there is no change in status prior to closing. Lenders also require clearance before funds are advanced. Therefore, if purchasers appear to be in a situation where money is tight and they might have had a situation in the past which could be a cause for concern, the agent should probably have their names checked. This is the only way to ensure there are no outstanding judgments that may affect the transaction, whether a sale or purchase.

Land Registry Office Search

Writ searches can be performed by visiting the local land registry office and performing a Writ search.  The process is simple and inexpensive. These searches are performed at designated Teranet terminals within the land transfer office at a cost of $11.00 per name plus $6.00 per Writ.

Remote Search

Lawyers can also conduct remote searches on the Teranet eXpress website.  This system provides flexible remote access to search Writs filed and entered into the Ontario Writs System.  This allows lawyers to retrieve Writs details online and print Writs detail reports.  The Teranet eXpress system is available weekdays 8 am to 8 pm.

What Information Do I Need To Perform A Writ Search?

If you know the exact spelling of the owner’s name and the city in which they reside, you can perform a search. An execution number if available can also be used to search a client’s name.

It is important to note however that an execution search can yield a match even though actual identities differ. Should this occur, it is advisable to have your clients contact their real estate lawyer to apply for clearance.

Searching for Writs is a necessary part of all real estate transactions. Despite how complicated the execution process may sound, the actual running of a client’s name is fairly quick and inexpensive. If there is a Writ that will impact the sale or purchase of a property the sooner the information is known, the more likely a solution can be reached.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

Electronic Signatures in Real Estate Transactions

Are Electronic Signatures Legal on Land Transfer Agreements in Ontario?

In Ontario, real estate transactions, specifically agreements of purchase and sale, are deliberately exempted from the protections of the Electronic Commerce Act 2000, S.O. 2000, c. 17 (ECA).

This is currently under review by way of Private Members Bill 28 (formerly Bill 69) which passed the second reading on March 21, 2013 and is now being further studied in committee before third and final reading. While other Canadian provinces, the United States and Europe have been using e-signatures for a while, Ontario realtors will continue using paper because of provincial regulations that prohibit the use of electronic signatures on agreements of purchase and sale.

The practice of manually signing a paper document, scanning it, and faxing a copy has been allowed in Ontario since the ECA was passed in 2000, but that aspect of electronic authorization is not an issue. The issue involves an electronically generated and applied signature which does not require a realtor to carry a paper copy of a document with a manual signature on it. The entire process is electronic, thereby allowing convenience and faster deal processing.

The purpose of the bill is to facilitate the use of electronic signatures in real estate transactions by removing the exception in the Act which prohibits land transfer documents from being signed by an electronically generated signature. The bill proposed that these land transfer documents would be subject to the reliability requirements contained in section 11(3) of the ECA. These requirements are intended to ensure that an electronic signature is reliable to identify the person signing and reliable to associate the electronic signature with the relevant electronic document.

The proposed bill will delete an exemption of electronic agreements of purchase and sale from the Act and grant the agreements legal protection. Currently, electronic agreements of purchase and sale are exempt from legal protections of the ECA. If passed, the amendment means realtors and consumers will have the confidence to use electronic handling of agreements where consumers amend and sign using their computers or tablets.

Likelihood of Success: Electronic Commerce Amendment Act, 2013

Given the fact that Private Members Bills rarely become law, there is concern as to whether Bill 28 formerly Bill 96 will actually become law and therefore grant protection for the use of electronic signatures in land transfer agreements.

A government which wants to support a Bill will prefer to sponsor it itself, rather than allow a Private Member to do so. The chances of a Private Member’s Bill going through all stages remain very slim, unless there is unanimous consent to it.

In this instance, the proposed amendment came from Private Members Bill tabled in May 2012 but later died on the order paper as a result of the October 2012 prorogation. Interestingly, it was reintroduced earlier this spring and passed second reading with overwhelming support of all three parties. This unanimous consent in both first and second readings seems promising and as described by Todd Smith “a victory” for the real estate industry.

Minister Sousa and Premier Wynne have also included this proposed amendment in the 2013 Ontario Budget, hence it is likely this Bill could actually become law.

Despite the optimism, there are concerns that this Bill could become another statistic. Removing exclusions from the Act is entirely consistent with modern real estate practice however, without addressing the details of requirements to ensure reliability of signatures, the amended Act will subsequently default to whatever systems are implemented by realtors to process real estate agreements. In response to introduction of the Bill, the Ontario Real Estate Association (OREA) has indicated that realtors and their clients would access agreements of purchase and sale through a central portal. No details have yet been provided by the OREA as to the requirements for acquisition and processing of electronic signatures and documents within this system, nor of the applicable security standards or access and privacy policies.

Without appropriate policies and procedures being implemented there is some risk that e-signatures will be held invalid for insufficient reliability. Despite the foregoing, if Ontario is one of the last provinces to recognize the validity of electronic signatures in land transfer agreements, surely most of the work has been done by other provinces to ensure safeguards are in place, as a result the OREA would have other systems to model.

This is already permitted in 30 European countries, the United States and all but two Canadian provinces. When the ECA was originally passed in 2000, there were concerns about the security of electronic signatures. However, since then technology has improved exponentially. This was the central reason to move Bill 28 to the committee stage. It only makes sense that the use of electronic signatures is worthy of consideration.

If all goes well and Bill 28 passes third reading, it is highly likely this amendment will receive Royal Assent and therefore legitimize the application of electronic signatures on land transfer agreements in Ontario.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

Choose your words wisely…

Sample Clauses for:

1.    Vermiculite Insulation (Asbestos)

2.    Surveys

3.    Warranties and Representations

4.    Lawyers Approval

5.    Hot Water Tank Rentals

6.    Status Certificates

7.    Septic Systems

8.    Water Potability

1. Vermiculite Insulation – Asbestos

With the consent of the vendor, samples can and should be taken if vermiculite insulation is discovered. Clauses that can be inserted in the APS to ensure that the buyer’s agent is able to control who takes the samples if vermiculite insulation is suspected are as follows:

This offer is conditional upon the Buyer’s agent investigating the subject property for the presence of asbestos in the vermiculite insulation within the house located on the property at the Buyer’s own expense, and the obtaining of a report satisfactory to the Buyer in the Buyer’s sole and absolute discretion.

The Buyer’s agent shall be authorized to obtain and submit samples taken in accordance with the vermiculite sampling procedure and chain of custody guidelines.

If the Buyer has not provided written confirmation that a report that is satisfactory to the Buyer, in the Buyer’s absolute discretion, has been obtained within 10 days from the acceptance date of this offer this offer will be deemed void and the deposit shall be returned without interest or deduction.

What if Asbestos is present?

If vermiculite insulation that contains asbestos is discovered, it is contained solely in the attic AND your client wants to proceed with the offer, I would recommend the following clauses:

The vendor warrants that to the best of the vendor’s knowledge the vermiculite insulation that is impacted by asbestos is restricted to the attic.

The vendor agrees to discount the purchase price by 50% of the estimate provided for the removal and reinstatement of the insulation in the attic by a qualified environmental consultant chosen by the purchaser.

2. Surveys

Oftentimes, vendors think they have a survey, but what they really have is just a photocopy of the registered plan of subdivision showing no buildings. Prior to drafting the APS, it is important to determine whether or not the vendor does in fact have a legal survey, and if not, you can avoid your vendor promising to produce a document they do not have.

If the Vendor has a survey a clause in the APS which requires the vendor to provide the existing survey should be included. An example of a safe clause to be inserted in the APS is as follows:

Attached to this agreement is a copy of the information available that depicts the property boundaries.

-OR-

Immediately upon acceptance, the vendor will provide any relevant documents in their possession that depicts the property boundaries on the property, including but not limited to, a survey if one is available.

Note: these clauses are drafted to provide only the information which the vendor has in his/her possession.

If you add on to the recommended survey clause the following, your purchaser gets what it needs and the vendor gives what it has.

The seller will further deliver, on completion, a declaration providing information on any additions to the structures, buildings, fences, and improvements on the property since the date of the information provided.

The purchaser will now have all the information the vendor has to give, a declaration providing information on any changes and title insurance.

3. Warranties and Representations: merge v. survive

Warranties and representations can either ‘survive’ or ‘merge’ on closing.

  • To ‘survive’ closing indicates that the seller will be held accountable to the purchaser for that warranty/representation even after the closing of the transaction (typically until a certain date).
  • To ‘merge’ on closing indicates that once the transaction is complete, the seller is no longer responsible for the items discussed.

Recently it has become more common for a hybrid of the merger and survival clause to be used.

Survive closing

An example of a clause to indicate survival is:

This warranty (or representation) shall not merge, but shall survive the completion of this transaction.

This wording indicates that both parties agree that the representations or warranties made shall remain in full force and effect for a certain time period following the closing. This clause keeps the seller on the hook to the buyer.

Merge on closing

Representations and warranties made by the seller herein and all other provisions of this agreement shall be deemed merged on closing.

This clause relates to the legal doctrine of merger which indicates that the contractual warranties and representations will be “merged” into the final representations and warranties that are stated within the closing documents that conclude the transaction. The seller’s obligation ceases to exist and claims cannot be made.

Hybrid clauses

The seller warrants that the chattels are in good working order and this warranty shall survive the closing but only to the condition of the chattels on the day of closing.

This is a way to ensure that the main items (fridge, stove, dishwasher etc.) that have been sold with the property are in good working condition the date of the sale, but it does not provide any guarantees from the next day forward.

4. Lawyers Approval

Once an APS is signed and conditions are fulfilled or waived, the contract becomes binding and amendments cannot be made unless both parties approve the changes. Typically amendments are difficult to obtain once the deal is firm because any changes are often for the sole benefit of one party. A clause pertaining to lawyers approval can help to avoid these problems because a lawyer can make recommendations before the contract becomes binding. An example of a clause that could be inserted is as follows:

This offer is conditional upon solicitor approval of the terms of this Agreement of Purchase and Sale in his sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller within 5 banking days following the date of acceptance excluding Sat/Sun & Statutory holidays, that the above condition has been fulfilled or waived, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period stated herein.

If you want the lawyer to be in a position to make any and all changes he/she wants upon review of the agreement let the lawyer review it before it is signed.

5. Rental Agreements – Hot Water Tanks

A new trend in residential agreements is for purchasers NOT to automatically agree to assume rental agreements such as those for hot water tanks. The purchaser should ensure that they are given the opportunity to review the contract before consenting to assume it as oftentimes, the terms are not attractive. An example of a clause to insert is as follows:

The Seller agrees to provide a copy of the rental contract for the hot water tank within 5 days of the acceptance date herein. The Buyer will have 3 days after receipt of a copy of the rental contract to confirm whether the Buyer intends to assume the contract or not. If the Buyer does not communicate his/her position within the time set out, the contract will be deemed to be assumed on completion.

This provides the purchaser with the opportunity to review the terms of the rental agreement and if they choose not to assume the contract, the seller is required to cover the associated costs (exit fees/charges imposed by water tank rental companies).

If you act for the vendor you want the purchaser to accept the contract so that your client does not have to break their contract and pay exit fees. If you act for the purchaser you want to protect your client from an unfavourable contract or for them to at least be aware of the terms. I do not recommend that this be inserted as a condition rather a negotiated item. Just like the fridge or stove –is it included or not.

6. Condominium Status Certificates

There is one section included in all status certificates that agents should be aware of:

It is the purchaser’s responsibility to review the declaration and description pertaining to the unit including any exclusive use common element area, to determine whether or not the vendor or any previous owner has carried out a structural change to the unit or has modified the common elements in circumstances where the Board has not given its prior written consent. As this unit and any appurtenant exclusive use common element (if applicable) has not been inspected prior to the making and execution of this certificate, the Condominium Corporation cannot comment upon matters of non-compliance which may be revealed by an inspection of the unit, and the Corporation reserves its right to enforce any matters of non-compliance notwithstanding that they may have existed prior to the issuance of this certificate.

This clause makes it the responsibility of the purchaser to determine if the unit and/or any exclusive use common elements have been modified or replaced. The reason for this is that if they are modified or replaced by the owner, and not the corporation, those items will become the responsibility of the new owners going forward.

I have a standard acknowledgement that I require the vendor to sign in order to confirm that they (nor the previous owner to their knowledge) have not made any changes to the unit. In order to be entitled to this acknowledgement I include the following clause in my requisition letter:

Required: On or before closing a declaration to be provided by the Vendor confirming that the Vendor, or any previous owner or occupant of the unit, has not carried out any structural change to the unit or modified the common elements without prior written consent of the Board of Directors.

If this issue is not raised when the agreement is drafted, there is no way to predict what remedy can be obtained for the purchaser. Since this matter can go to the center of why someone purchases a condo, I would recommend to agents that they include the following clause in the agreement:

The Vendor confirms that the Vendor has not, nor to his knowledge has a prior owner or occupant of the unit, carried out any structural changes to the unit or modified the common elements.

Since this matter can go to the center of why someone purchases a condo I would recommend to agents that they include the following clause in the agreement:

The Vendor confirms that the Vendor has not, nor to his knowledge has a prior owner or occupant of the unit, carried out any structural changes to the unit or modified the common elements.

If the vendor is unable to provide this representation because modifications have made, the following clause can be used:

The Vendor confirms that he or a prior owner or occupant has carried out the following (insert structural changes or modifications) but that prior written consent was obtained from the Board of Directors.

If consent has not been obtained, the vendor should be required to seek approval prior to the completion of the agreement or an abatement in the price should be negotiated.

7. Septic Systems

When acting for a purchaser, it is preferable to request that the septic system be inspected, however, in many cases this is not practical (especially during the winter months in which access is restricted). Due to this, I recommend that a clause is inserted into the agreement of purchase and sale to warrant the septic system. When you obtain a representation or warranty for your client you need to explain to your client what they have. It is something that can be relied upon if there is a need for a claim in the future. For big items this is important because it will lay the basis for a claim to be commenced. An example of a clause to be inserted is as follows:

The Seller represents and warrants, to the best of the Seller’s knowledge and belief, that at the time of installation:

1)    all sewage systems serving the property are wholly within the setback requirements of the property, and had received all required Certificates of Installation and Approval pursuant to the Environmental Protection Act;

2)    all sewage systems serving the property had been constructed in accordance with the Certificates of Installation and Approval;

3)    all sewage systems serving the property had received all required Use permits under the Act or any other legislation; and

4)    all sewage systems serving the property have been maintained in good working order during the Seller’s occupancy and will be in good working order on closing.

Further, the Seller agrees to provide any and all documentation relating to the sewage system, within the Seller’s possession, or which may be made available to the Seller by the appropriate authorities, and given to the Buyer prior to the last date set for examining title. The Parties agree that these representations and warranties shall survive and not merge on the completion of this transaction, but apply only to the state of the property existing at the completion of this transaction.

The Seller agrees to provide evidence if the septic system has been pumped in the past two years or to have the septic system pumped out before the completion of this transaction and will provide a receipt to the Buyer on closing.

8. Water Potability

If you are obtaining a mortgage for the purchase the lender will insist on a Water Potability Certificate. Even if you are not required to obtain this Certificate for your lender, when you sell, that person will require this and for your own health you want the water to be potable. Therefore, I can think of no situation when it would be appropriate to waive the requirement to have a Water Potability Certificate.

I have received a large number of offers in the past few months where there is either no clause to address the private water well or merely a statement that a Water Potability Certificate is required prior to closing. It is my strong opinion that a clause pertaining to this MUST be included in all offers for properties with a private water system.

This Offer is conditional upon the Buyer determining, at the Buyer’s own expense, that:

1)    there is an adequate and potable water supply to meet the Buyer’s household needs;

2)    the pump and all related equipment serving the property are in proper operating condition; and

3)    the Buyer obtaining a Certificate of Potability from the authority having jurisdiction indicating that there is no significant evidence of bacterial contamination. 

Unless the Buyer gives notice in writing delivered to the Seller no later than _____ p.m. on the _______day of ___________, 20____ that these conditions have been fulfilled, this Offer shall become null and void and the deposit shall be returned to the Buyer in full without deduction. These conditions are included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period stated herein. The Seller agrees to allow access to the subject property to the Buyer or the Buyer’s agent for the purpose of satisfying this condition.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.