The importance of home inspections in today’s market

A recent story about a property owner in Woodbridge, Sydney Walters, highlights the importance of a home inspection. But even more than the need for a home inspection, the need to have a qualified competent home inspector is key. Read the Toronto Star story by clicking here.

This story talks of multiple contractors trying to determine the problem and not noticing the lack of insulation. It took Mr. Walters six years to determine why his home was hot in the summer and cold in the winter. His nine-year-old semi-detached house had no insulation in the attic.

The lack of insulation, which is the root of the problem for Mr. Walters, is certainly an odd situation and one that would not be expected in a newer home. People are more likely to expect issues with the quality of the insulation and other structural-type problems in older homes, but this situation highlights the need to rely on a competent home inspector in all situations. Mr. Walters did not feel a home inspection was necessary given his home was only two years old when he bought it.

A home inspection is the best protection available. The home inspector has the opportunity to access the property and investigate. It is, however, essential that you make sure you are confident in your home inspector and that he is insured. Before hiring a home inspector, you should ask the following questions:

1) Does the inspector belong to a governing body like the Ontario Association of Home Inspectors or the International Association of Certified Home Inspectors?

2) What is included in the inspection process – what is inspected and what is not?

3) Does the inspector go into the attic? Does the inspector check for mould and does the inspector have the proper training to inspect for mould?

In addition to taking as many precautions as you can in terms of whom you hire as a home inspector, it is also a good idea to accompany the home inspector on the inspection and make inquiries to understand what is being inspected. You want an inspector that uses tools to assist in looking for things that are not visible to the naked eye, like moisture or mould.

To write this blog, I interviewed Brien Johnston of Prestigious Home Inspections to educate myself on how to be a smart consumer when it comes to hiring a home inspector.

In Ontario, home inspectors are not regulated – in fact, insurance and belonging to the associations that do exist is not mandatory. It is up to the homeowner to make sure that a home inspection is conducted to safeguard against purchasing a home, like Mr. Walters did, that was missing insulation. The lack of insulation would have been discovered if the inspection was thorough and used tools like infrared thermal imaging.

Unfortunately, the outcome is usually that the new owner is responsible to remedy the problem. Once the problem is remedied, depending on the amount of damage, a court action might be worthwhile. The time and expense of a court action has to be weighed for each situation.

You can also access this blog at Advocate Daily by clicking here.

The content of this blog 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.

Seller Information Forms: Buyer Beware

Check out a recent story posted on Advocate Daily and published in Law Times Magazine which discusses the main legal issue in a case involving the use of seller information forms, which is the principle of caveat emptor.

You can read this full article by clicking here.

If you have any questions about this story, I invite you to contact me at shari@elliottlawyers.com.

Difference Between Surviving Closing and Merging on Closing

In real estate transactions the deal is closed and the transaction is completed once the money and documentation have been exchanged and the Transfer registered. However, certain warranties and representations can ‘survive’ the closing of the deal, if it is outlined in the contract as such. For example, a common clause that indicates 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.

On the other hand, representations and warranties can sometimes “merge” on closing, which is represented by a clause such as this: “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 not survive the closing. Instead, they are “merged” into the final representations and warranties that are stated within the closing documents that conclude the transaction.

The content of this blog 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.

Definition and Purpose of Representations and Warranties

In order to understand the use of the terms “representations” and “warranties” we need to begin with a definition of each.

A representation is “a statement of fact made to induce another to enter into a contract”. One party provides information to the other at the time the contract is made and the other party decides whether to proceed with the contract. For instance, the seller represents that the chattels have been in good working order. This representation is relied on by the other party to enter into the agreement.

A warranty is “a promise that a proposition of fact is true”, and they are assurances as to future events indicating that certain aspects of the deal will remain “as is” up to and through the closing.

From the point of view of the purchaser, the major purpose of representations and warranties is to require the seller to reveal certain facts that, when combined with due diligence, will disclose risks that can be assessed. This allows the purchaser to make an informed decision as to whether or not to complete the purchase. If any representations or warranties made by either party prove to be incorrect or non-factual the other party is entitled to seek compensation.

You can access the full article on this topic in our July 2012 Newsletter by clicking here.

The content of this blog 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.

What if the property you are purchasing has a tenant?

If your purchaser wants to move in, the landlord can provide notice to the tenant if the purchaser legitimately intends to use the property as his or her own residence; or for the use of their spouse, same-sex partner, child, parent, or in-law. The applicable legislation that outlines the processes to be followed and the requirements for eviction in Ontario is the Residential Tenancies Act, 2006, S.O. 2006, c. 17 (RTA).

What is the eviction process and how long does it take to get an order to evict a tenant?

In order to evict a tenant the landlord must follow a process that is set out in the RTA. First, the landlord must provide the tenant with a written ‘notice to vacate’ which outlines the grounds for termination and sufficient details of the situation. This is addressed in section 44 of the RTA which outlines that 60 days written notice is required. It is important to note that the landlord cannot force a tenant to leave until the end of the tenancy agreement. If the landlord wishes to accelerate the process and the tenant is agreeable the landlord can obtain and submit an Agreement to Terminate Tenancy, referred to as Form N11. This form allows the landlord to specify a date that is earlier than the 60 day notice period that is typically required, and can be enforced if both parties sign and agree to the terms outlined in the agreement.

If the notice to vacate expires of the deadline set in the agreement to terminate and the tenant has not vacated the premises, the landlord could then submit an application to the Landlord and Tenancy Board in order to schedule a hearing for an eviction order. Once an eviction order is issued by the board the tenant is required to vacate the premises as the board’s order is a legally binding decision. If the tenant fails to leave by the date set out in the eviction order then the landlord can take the matter one step further and file the eviction order at the Court Enforcement Office.

At the Court Enforcement Office, the landlord will be required to pay a fee of $315.00 for the Sheriff to force the removal of the tenant from the property. The Sheriff will provide the tenant with a notice that instructs the tenant to leave the rental property on or before a specified date and time. The Barrie staff have advised it currently takes approximately 2-3 weeks from the date of filing the eviction request for the Sheriff’s office to schedule this date. If the tenant indicates that they will not vacate the premises by the date listed on the notice provided by the Sheriff, the landlord should contact the Sheriff in order obtain their assistance for the eviction. The Sheriff will give the tenant five business days’ notice prior to the date and time scheduled for the eviction. The landlord will be required to pay a mileage fee to the Sheriff at 58 cents/km.

The content of this blog 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.

You can read this full article in the July 2012 Newsletter by clicking here. If you have any questions about this blog, I invite you to contact me at shari@elliottlawyers.com.

Do you really have a ‘survey’?

Vendors often think they have a survey, but what they produce is only a photocopy of part of the registered plan of subdivision showing no buildings. Prior to drafting the agreement of purchase and sale it is important to determine whether or not the vendor does in fact have a legal plan of survey, and if it is not, at least you can avoid your vendor promising to produce something they do not have.

The main purpose of a survey is to provide property owners with an accurate description of the dimensions of their property by setting property markers on the corners, and reporting on any additions or improvements that were made to the property over time (such as adding a fence or new building). Under the laws of Ontario, only a licensed Ontario Land Surveyor may provide this information. A survey is often required by property owners who wish to make changes to their property (add a building, building a fence, installing a pool etc.).

Some examples of clauses that are commonly used which can create problems include:

“Vendor will provide a survey”. This is assuming the vendor has the original survey to provide. If they do not, the purchaser can insist on one being obtained at an expense of approximately $600.00 to $900.00 for a simple residential survey. Also, a requirement to obtain a survey could delay the closing date.

“Vendor will provide a clean copy of the existing survey at the vendor’s expense”. Often, the copy provided is not legible, and the municipal zoning departments will not provide an opinion unless all numbers are legible. Including the language “at the vendor’s expense” can be misleading when the vendor did not intend to provide anything beyond what was already in their possession. The purchaser’s solicitor can demand a copy from Land Survey Records Inc. which maintains an online site where you can obtain a copy of an existing survey at an approximate cost of $150.00. The website where this information can be obtained is:
http://www.landsurveyrecords.com/

You can read this full article by clicking here. If you have any questions about this blog, I invite you to contact me at shari@elliottlawyers.com.

Feds Force Canadians to Lower Debt via Regulatory Changes – Again

The Federal Government has once again acted through regulatory changes to force Canadians to lower their debt levels.

On July 9th, 2012 the mortgage lending rules will be tightened once again in order to gain control of the rising household debt levels in Canada, which marks the third time in five years that the federal government has made changes.

The changes that are being made are as follows:
1. the maximum amortization period has been lowered to 25 years from 30 years;
2. the maximum amount Canadians can borrow when refinancing was lowered from 85% to 80% of the value of their home;
3. the maximum gross debt service ratio is now fixed at 39% and the maximum total debt service ratio at 44%; and
4. government-backed insured mortgages are now limited to homes that have a purchase price of less than $1 million.

Mr. Flaherty and his officials made observations about the market in Canada and noted that the biggest concern that we currently face is with the condominium situation in Toronto, and to a lesser extent in Vancouver, Montreal and Quebec City. He said that “in Toronto in particular, what I’ve observed and heard about is continuous building without restriction because of persistent demand. This concerns me because it is distorting the market”. Based on these observations, the decision was made to change the rules on government-backed mortgages in order to reduce the risk of a United States style housing market crash within Canada.

These changes will limit some people’s ability to purchase a home, particularly first-time homebuyers who will likely have a difficult time coming up with 20% of the mortgage and making higher monthly payments. Overall, it is anticipated by Mr. Flaherty that less than five percent of new home purchasers will be affected by these changes. This is because some of those people who might have been considering purchasing a new home will no longer qualify under the new guidelines that will be introduced on July 9th 2012.

To see the full article refer to the Advocate Daily website by clicking here. You can also access the full article in my July 2012 Newsletter by clicking here.

The content of this blog 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.

Co-Author Hayley Valleau

Shari D. Elliott & Hayley M. Valleau
Elliott & Elliott
135 Bayfield Street, Suite 101A
Barrie, Ontario, L4M 3B3
Tel.: 705-797-2672
Fax: 705-797-8445
Email: shari@elliottlawyers.com

Vermiculite Insulation Suspected in Home

What should a purchaser do if vermiculite insulation is suspected to be present in the home?

First you should ensure that your purchaser has a properly qualified home inspector who is aware of the concerns with vermiculite insulation. If a home inspection results in a determination that vermiculite insulation is either present or suspected to be present, a further specific inspection is required. Similar to environmental contamination it is always best to know exactly what the concerns are rather than attempt to guess and base an offer on assumptions.

It is important for Realtor’s to be as informed as possible in order to protect themselves and their clients from the restrictions and added costs that may result from the presence of vermiculite insulation. A listing agent should remember that vermiculite insulation is not a banned substance, nor is it a latent defect, and therefore may not have to be disclosed by the seller. However, disclosure at the beginning may be the best shield against potential liability. As a purchaser’s agent, if there is a particular concern regarding vermiculite insulation on the part of the purchaser, you might consider adding a representation to the offer to purchase warranting the property is not insulated with it. And, of course, realtors should recommend to buyers that they make their offers subject to a home inspection.

You can read this full article by clicking here. If you have any questions about this blog, I invite you to contact me at shari@elliottlawyers.com.

How to get assistance with determining if HST is due…

The CRA offers a rulings and interpretation service in relation to taxes and duties on goods and services. This free service is called the Excise and GST/HST Rulings and Interpretation Service. This service issues technical publications, as well as both rulings and interpretations on taxes and duties.

An interpretation is a written statement that the CRA provides to a taxpayer which sets out the CRA’s view on the application of legislation to a generic fact situation. A ruling is a written statement the CRA provides to a taxpayer that sets out the CRA’s position on how the relevant provisions of the legislation apply to a clearly defined fact situation of the taxpayer. It applies only to the taxpayer who requests it, or on whose behalf it is requested, and they are only issued when all relevant facts of a transaction or series of transactions have been provided by the requestor. Typically, rulings relate to ongoing issues or transactions, and time limits are not specified, but rulings may be also be provided in advance of any proposed transaction.The CRA considers itself to be bound by the rulings it issues, subject to certain limitations which can be found at the following website: http://www.cra-arc.gc.ca/E/pub/gm/1-4/1-4-e.pdf

For any further enquiries on HST you can call: 1-800-959-8287

You can read this full article by clicking here. If you have any questions about this blog, I invite you to contact me at shari@elliottlawyers.com.

The content of the articles in this blog are 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.

Is the Sale of Vacant Land Subject to HST?

The answer is probably not; but maybe. The situations when the sale will be tax exempt include: if the vendor is an individual and the land was kept by that person for personal use, if the parcel is being created by subdividing another parcel and the vendor is an individual and the land is being sold to a relative (including a former spouse or common-law partner) for their personal use, and finally, if you have never previously subdivided or severed your parcel of vacant land from another that you owned, and you subdivide the parcel into only two parts, the sale of either of those parts is exempt. In contrast, situations when the sale will be subject to HST include: if the sale of the land is capital property that had been used primarily in a business, or the sale of the land is in the course of business and if the land was subdivided into more than two parts, sales of the severed portions are taxable, unless sold to a relative for personal use.

For additional information review the Revenue Canada bulletin found at:
http://www.cra-arc.gc.ca/E/pub/gi/gi-003/gi-003-e.html

You can read this full article by clicking here. If you have any further questions about this article, I invite you to contact me at shari@elliottlawyers.com.

The content of the articles in this blog are 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.