This is our News letter Title Tips.
If you have a question about your particular transaction, please call.
Title Tips is not intended and should not be relied on as legal advice. For specific questions or situations, please feel free to call John Zinati or for assistance.
Title Tips Volume 1, Issue 1, Februaury 2004
Who is on Title?
A frequently raised issue is about who must be and who may be on title to a property. Where a mortgage is being registered, all the Borrowers on the mortgage must go on title as owners. It is therefore not possible for an individual to be a Borrower on the mortgage, to help with financing for example, without that individual also going on title. He/she must go on title. However, if the individual helping for financing purposes is only a Guarantor, not a Borrower, he/she may, but does not have, to go on title. Unfortunately, for the purposes of obtaining financing, Guarantors are less common because lenders require the income of the person helping with financing to qualify the mortgage and, when they do, he/she is considered a Borrower, not a Guarantor. Also, very often an individual will sign the agreement but will not be on title for financing or other reasons. In these cases, unless an amendment is prepared, it is important to remember that this individual will have to sign at least a Direction regarding Title through the purchaser’s lawyer before closing.
Who is the "buyer" in the offer?
Buyer – anybody can enter into an Agreement of Purchase and Sale unless he/she is under 18 or mentally incompetent. A Corporation also has all the powers of a natural person can enter into an agreement, as can a partnership. However, unless the acquisition of land is in the ordinary course of the business of the partnership one partner cannot enter into the agreement on behalf of the partnership. All partners must sign. Where an agreement is being signed under Power of Attorney, the agreement should clearly so indicate. We suggest the following wording:
“Mr. Smith, as attorney for Mrs. Smith” or “Mrs. Smith, by her attorney, Mr. Smith” - where Mr. Smith is the attorney for Mrs. Smith.
Title Tips Volume 1, Issue 2, April 2004
Who is the Seller ?
The person(s) registered on title should be shown as the Sellers in the Agreement and all should sign the offer. A non-titled spouse should also sign the Offer and closing documents for a transfer of a Matrimonial Home except in limited circumstances. If this is not possible and one of the registered owners or spouses is selling by Power of Attorney the Power of Attorney must include a power to sell the property (most do, but if in doubt check or have the vendor’s lawyer check). An original or Notarized copy should be provided to the vendor’s lawyer before closing. Where an agreement is being signed under Power of Attorney, the agreement should clearly so indicate. We suggest the following wording:
“Mr. Smith, as attorney for Mrs. Smith” or “Mrs. Smith, by her attorney, Mr. Smith” - where Mr. Smith is the attorney for Mrs. Smith.
If one of the owners has passed away you should determine if the owners held title as Joint Tenants or as Tenants In Common. This will be on the Deed or can be determined by a simple subsearch. If title was held as Joint Tenants then it will automatically pass to the survivor without the need for a court application. The vendor’s lawyer will prepare an application to place title in the name of the survivor. This is a simple procedure which does not require much time or a court application. However, the Death Certificate will be required. In these cases you would list the surviving owner as the seller. If title was held by two people as Tenants In Common and one passes away, or by one person who has passed away, an application to the courts must be made to appoint an Executor, whether or not there is a Will. This can be time consuming and sufficient time must be allowed for closing (ask the Estate lawyer). In these cases the seller should be listed as “ The Estate of ………” and the executors of the Estate should sign the offer and all closing documents.
Title Tips Volume 1, Issue 3, August 2004
How do you change the purchaser in the Agreement?
Very often a purchaser is changed after the offer is signed. Legally speaking, when changing a purchaser, the vendor wants to make sure that the new or added purchaser can be held legally responsible for closing if there is a problem. The new purchaser wants to make sure that the vendor can be legally bound to deal with him/her.
If possible, draft a new Offer on the same terms with the new purchaser and original vendor, have all the new parties sign it, release the original purchaser and assign or return the deposit. Another way to change the purchaser is to have an Assignment Agreement drafted whereby the new purchaser receives an assignment of the agreement. For new homes, the builder’s consent (and a fee) is generally required.
We rarely see new Offers or Assignment Agreements as the parties don’t want or have time to go to a lawyer to have one prepared. Instead, we often see amendments deleting one purchaser and inserting another. This can be problematic. If the change is being made this way, it is important to know that an agreement can only be amended by BOTH parties to the agreement. Both the original vendor and purchaser should sign the amendment changing the name. The original purchaser and the new purchaser alone cannot amend the agreement. If you do use an amendment to change the purchaser, then the new purchaser should also sign the amendment with the original offer attached to it and a statement inserted stating that the new purchaser accepts and adopts the terms of the original agreement.
Do you need a survey to close?
Tile Insurance, which is now commonly used, covers purchasers for losses which result from not obtaining a survey or not having an up to date survey. This means that in most cases a purchaser does not need a survey to close the transaction. Title Insurance can be obtained instead. The Title Insurance policy will usually cost about $270.00, which the vendor can be asked, or offer, to pay if a survey is unavailable (we include this in our closing cost package). So, a vendor should not agree to provide a survey unless he/she is sure he/she has one and, if so, should not agree to provide a more legible/current/complete/signed survey than is available. The purchaser can usually close with Title Insurance protection.
Title Tips Volume 2, Issue 1, April 2005
Grow Houses and Mould
Grow Houses are houses used to grow large amounts of Marijuana. These seem to be more common and are regularly being listed for sale. Before you list, or take a purchaser to a former Grow House, you should be aware of some concerns and issues.
Grow Houses use a lot of electricity and Police monitor usage to detect Grow Houses. So, in order to avoid detection, grow house electricity connections are often tampered with and illegally connected to the electricity grid. This means that the connection could be faulty and that the home’s electrical system overburdened, causing safety, health and repair cost concerns. Wires, panels, etc. may have to be replaced. Also, plumbing and sewage systems may be altered necessitating substantial repairs.
If you are listing a grow house you should ensure that the buyer acknowledges the previous use and the potential concerns with Grow Houses directly in the Agreement. The buyer should also waive any claims against the Seller, Broker or Agent.
If you are acting for a buyer you should ensure that a full and thorough inspection is conducted to determine if there are any environmental fitness, structural, electrical, plumbing, mould, or other damage concerns. If so, the buyer should carefully consider whether to proceed and, if so, insert a clause making the transaction conditional on the proper remediation and certification of remediation of all of the problems revealed. The purchaser should also ensure that the home can be insured as we have recently seen insurance declined on a Grow House for these reasons.
Grow houses also often result in Mould. Mould, which may be caused by excessive humidity, building leaks, bathroom surfaces and flooding can affect the air quality in a home and result in health problems such as asthma, coughing, wheezing and headaches. However, mould is not just a concern in Grow Houses, but in all homes, including, in a recent case, Condominiums. When mould permeates a home it can be extremely difficult and expensive to remove. It is therefore important that purchasers have an air quality test for mould prior to proceeding with the purchase. Some home inspectors will conduct the test for an extra charge. There are also specialized companies which will conduct these tests. If mould is found, a reputable and experienced company should provide an estimate for the cost of removal. The purchaser should make the Agreement conditional on satisfactory removal and certification of remediation from such a company. The purchaser should also ensure that financing will not be prejudiced by the presence of mould.
Title Tips Volume 2, Issue 2, August 2005
Investing in new Condos and G.S.T.
The Condo market still seems to be going strong and many people are buying condominiums or new homes for the purposes of investment; either to “flip”, or resell the unit, or to rent it out. What they don’t realize, however, is that most condominium and new home agreements contain a provision requiring that the purchaser be buying the property for his/her own use. This is because the builder will receive a rebate of 36% of the G.S.T. on the transaction from the government provided that the property was purchased for the purchaser’s own residential use. If the rebate is denied to the builder because the purchaser did not use the property as his/her residence, or as a residence for a family member in certain circumstances, the builder can charge the purchaser with the amount of the expected rebate and can sometimes lien the property for the amount claimed. There are some circumstances where an investor will be eligible for a similar rebate. The amount of the rebate can vary and there are a number of conditions, mainly that G.S.T. was paid without a rebate being obtained and that the first tenant is reasonably expected to occupy the unit as his/her primary place of residence for at least a year. Because there are other conditions, and this can get complicated, we recommend going over this in detail with a lawyer.
People sometimes try sell before closing to profit or try to avoid this. This often appears as “selling interest in Agreement” on the MLS. However, most new home or Condo agreements strictly prohibit dealing with an interest in the Agreement in any way before closing without the vendor’s consent, which is often denied. We have also seen Agreements which allow the vendor to charge the purchaser of a new Condo $3000.00 for each instance of listing or even advertising a property. If you see, or are considering, this kind of offer be extra careful, and have the Agreement reviewed by a lawyer.
Title Tips Volume 3, Issue 1, April 2005
Agreement allowed to be cancelled because deposit paid late.
As you may be aware, the Standard OREA Agreement of Purchase and Sale for a resale House or Condominium reads:
“Time shall in all respects be of the essence hereof provided that the time for closing or completing any matter provided for herein may be extended or abridged by an agreement in writing…”.
The clause makes it clear that time is essential in “all” respects and that this can only be amended “in writing”. A recent case, upheld by the Court of Appeal of Ontario, reminds us of how important this clause and timing are in Real Estate Agreements. In this case, the buyer inadvertently paid the deposit 7 days late. In the meantime, after the day on which the deposit was due, the seller had an opportunity to sell the property to someone else and did so. The court upheld the seller’s right to cancel the original agreement because the deposit was delivered late and sell the property to the new buyer. The court also held that the seller was not required to tell the buyer that it intended to cancel the agreement as soon as the date for paying the deposit passed and noted that the agreement was negotiated by a professional agent. Essentially, the court affirmed the notion that where parties enter into agreements which specifically state that “time is of the essence”, as is found in the standard OREA agreement, they will be held to that standard for timing. Although this recent case involved a commercial transaction, it may be relied on as authority for allowing parties to cancel a transaction when something is not done on time, whether intentionally or not and without an obligation to immediately advise the other party of the intent to cancel. This may also possibly be relied on and extended as general authority for all time related aspects of a transaction. Dates for satisfying conditions, providing waivers, conducting inspections, completing Status Certificate reviews, providing further deposits, and, of course, closing may all take on greater importance . So, to be safe and avoid the risk of allowing an agreement to be cancelled or be subject to other consequences, always pay close attention to and meet all the time limits in an Agreement. If you cannot, have them extended in writing.
Title Tips is not intended and should not be relied on as legal advice. For specific questions or situations, please feel free to call John Zinati or for assistance.
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