RESOURCES
|| WHAT YOU SHOULD KNOW ABOUT PURCHASING A PROPERTY ||
REVIEW OF THE OFFER:
Although it is usually the responsibility of the real estate agent to prepare a purchase offer, once the offer is signed, it is a binding contract, and if there are any concerns or questions unanswered, the real estate lawyer can be used to review, explain, and fine tune the offer to the buyer’s satisfaction. A lawyer will often draft the offer or assist the agent in resolving complex issues. New condominium offers have a ten-day review period, but other new home and resale offers do not.
ONCE THE OFFER BECOMES AN AGREEMENT:
A signed purchase offer is a binding contract, and once any conditions, such as arranging a mortgage, or a construction inspection report, are satisfied, the parties are required to honour its terms. It is the job of the lawyer to investigate the title and clear any liens or claims from the land, and to provide a title certification – his guarantee that the buyer owns the property, free of any legal claims or debts other than the ones the buyer has agreed to take on, or to obtain title insurance to cover any insured risks.
TITLE SEARCH:
The government keeps a title history of every property, recording each owner and every mortgage or lien and most easements or agreements. . In each offer, a requisition date is listed, setting a deadline, by which time any title problems must be located and notice delivered to the vendor’s lawyer. The title search is then updated on the date of closing to ensure no new claims have arisen. The Land Titles Office has set fees for each service, which are paid by your lawyer on your behalf.
UTILITIES AND TAXES:
Most municipal utilities, such as hydro, water and gas suppliers require you to contact them several weeks prior to the closing date to arrange for new accounts and to have any rental contracts for water heaters or furnaces signed, and to arrange for any deposits required. The vendor will undertake to pay any accounts to the closing date, and the purchaser pays from there onward. The property taxes are adjusted so that each party pays the proper amount.
Some utilities, such as telephone and television cable, are personal to the vendor and purchaser, and the buyer is expected to arrange for a telephone number, if required, and cable service.
TITLE INSURANCE:
Your lawyer can purchase a title insurance policy as an alternative to a solicitor’s opinion that protects purchasers from someone claiming an interest in their property and protects against non-compliance with the requirements of applicable municipal and regulatory authorities. Title insurance eliminates the need for a recent survey and allows your lawyer to waive a number of clearances, levies and searches and reduce the cost of your closing. Coverage is no fault, whether or not there was an error, for any covered risk, and continues as long as you own the property.
Title insurance also protects against loss in case of a title fraud, where false identification or documents are used to register an unauthorized mortgage or deed against your property.
BUILDING & ZONING:
A copy of the survey of the property is sent to the local Building and Zoning Department with a request for full information about the zoning by-laws to make sure that the home meets the municipal requirements for distances to each lot line and the street line, the type of construction, home size, frontage and depth. If an occupancy permit or completion certificate is available, a copy is requested. Any outstanding work orders or deficiency notices on the record for the property are ordered and reviewed. If there is no survey available for the home, your lawyer will try to locate one, or discuss the problems and consequences of proceeding without a survey. Usually, these matters are covered by the title insurance policy.
Often if the home is less than 5 to 10 years old, there are subdivision agreements with the City and Region or Municipality requiring payment for the construction of services by the developer of the project, and a compliance letter is requested to ensure that everything is paid for or properly bonded, so that any existing or future grading and servicing problems will not be an expense for the purchaser. The local authority has a separate charge for each compliance letter or service, and these are paid by your lawyer and shown as a disbursement to the purchaser.
If title insurance is obtained these searches are usually not performed.
EXECUTION SEARCH:
A search of Executions, or Writs of Seizure and Sale, is conducted to ensure that there are no Judgments outstanding against the vendor or any prior owners of the property that could affect the title to the property. If anyone is successfully sued, and does not pay the debt, the Creditor can register an Execution in each Municipality, which binds the title to anything owned by the Debtor, including any land in the Municipality. If the Judgement is left unpaid, the land can be sold to retire the debt, and, once registered, the debt can be enforced against any subsequent owner of the land through forced sale. Executions are searched against the vendor and purchaser at the time of closing.
FINANCING:
Before you sign the Purchase Agreement, you should have determined the amount of financing you can qualify for. Once you have agreed to a purchase price and terms, you can determine the actual amount of financing required and discuss the exact terms with your financial institution to ensure that the mortgage meets your needs and lifestyle. There are a number of expenses that you should be aware of for the closing day, and you should consult your lawyer before finalizing the mortgage to determine what you will require. The mortgage company or bank is required by law to provide you with a Mortgage Commitment Letter setting out the terms of the mortgage, and you may want to review this with your lawyer before you sign.
Your financial institution will provide your lawyer with a copy of the Mortgage Commitment Letter, and quite often will allow your lawyer to act on their behalf in order to reduce the costs and avoid having to order duplicate sets of searches and clearances.
Ensure that your lender is made aware of the name and address of your lawyer at the earliest opportunity. The financial institution will send a package of material to your lawyer with instructions and a list of requirements.
Your lawyer will complete all of the needed documents and arrange for the mortgage funds to be available to purchase the home. Your lawyer must ensure that all of the conditions and terms set out in the Commitment Letter are fulfilled and must certify to the mortgage company that they have a good and valid mortgage on the property.
FIRE INSURANCE:
It is important that you arrange fire and liability insurance on your home. Proof of the insurance is required by your mortgage company before they will advance funds. You should arrange proper insurance with an Insurance Broker of your choice, in an amount of at least either the mortgage amount or the replacement value of the home. A letter confirming the insurance, called a binder letter, must be delivered to your lawyer before the closing date and it must show the name and address of the mortgage company as the payee in the event of any loss.
TAX SAVINGS PLANS:
The different levels of government have allowed home buying assistance plans to allow home buyers to save on taxes, and these plans should be taken advantage of if possible.
First time and other qualified home-buyers can also use money accumulated in their Registered Retirement Savings Plans (R.R.S.P.’s), of up to $35,000 each, to purchase a home. This money must be redeposited to the R.R.S.P. over the next 15 years or there are tax penalties. There are a number of forms which you must obtain from the company that holds your R.R.S.P. and deliver them to your lawyer to be completed.
If the money is withdrawn after March 1, the repayment begins the second calendar year after the withdrawal. a payment made in the first 60 days of a year are treated as made the prior year. To qualify, money must be contributed to the R.R.S.P. at least 90 days before the withdrawal.
NEW HOME PURCHASES:
If you are buying a home from a builder, you should complete a thorough inspection of the home prior to the closing and fill out a form called a Certificate of Completion and Possession under the Ontario New Home Warranty Plan (affectionately dubbed ONHWP (onwip) and formerly known as HUDAC, but now called TARION). As your purchase agreement probably states the builder is only obliged to repair those items listed, your inspection and report should be as complete and detailed as you are able. A representative of the builder should accompany and assist you in the inspection. If the builder doesn’t repair the deficiencies within a reasonable time, you have the right to complain to TARION which will ensure that the repairs are done. Often, your mortgage company will demand a copy of the Certificate, so that you should get at least one copy and deliver this to your lawyer before the closing date.
TITLE:
You have to decide how you wish to “take title”, or the name shown on the deed. You can use your full name, or leave out any middle names. A married woman can use her maiden or married name as she chooses. The names on title will be checked to ensure there are no judgments against the purchaser, and the more names the more specific the identification, but each name can be a separate computer match for execution problems, and initials in a name will match just too many debtor names. The key is to be consistent in using the same name for all purposes.
Title can be taken in a number of ways. Most couples use both names in “joint tenancy”. Each owns an equal interest, and if anyone dies, the survivor owns the title. But if one of the owners operates a business, or could run into debt, and doesn’t want creditors trying to seize their interest in the home to repay business debts, it might be wise to put title in the name of the other spouse, provided that the mortgage company is agreeable. In some cases, the purchasers may wish to have a specific percentage interest in the home, or want to deal with their interest in the property separately from the co-owner, such as by a will. In this case, they would take title as “tenants in common”.
BEFORE THE DAY OF CLOSING:
You should meet with your lawyer to review the Purchase Agreement and get a good estimate of the actual costs to buy the home. If any problems arise your lawyer will keep you informed, and if you become aware of any problems or changes to the agreement or mortgage terms, you should keep your lawyer up to date. A few days prior to closing, you will be required to attend at your lawyer’s office to review and sign all of the documents for the closing. Your lawyer should have informed you of the amount of money needed to buy the home, and you must deliver a certified cheque for the closing funds. You should have time to ask any questions and have them answered to your satisfaction.
CLOSING DAY:
All you should have to worry about is moving in. Your lawyer will arrange to have all of the mortgage and other closing funds available and arrange with the vendor’s lawyer to exchange certified closing cheques for a deed to the land showing you as owner. The title will be searched again to ensure no changes have occurred, and a final execution search conducted. The deed, mortgage, and any other required documents will be registered with the electronic registration offices (e-reg) and the keys to the home turned over.
If you are purchasing a new home, the keys are normally released at the builder’s site office. For a resale home, the keys are normally delivered to your lawyer’s office for you to pick up, unless some other arrangements are made.
It can take quite a bit of time for all of the proper arrangements to be completed, so that keys are usually not available until late in the afternoon. This is especially so if you have chosen a closing date on the last Friday of a month.
AFTER THE CLOSING
When you move into the new home you should check to see that all of the chattels or items listed in the Agreement of Purchase and Sale have been left in the property and are in working order. If anything is missing, damaged, or changed, you should contact your lawyer immediately, hopefully before the vendor’s lawyer has released all of the purchase funds.
Shortly after the closing your lawyer will prepare a reporting letter to you reviewing your title and explaining all aspects of the purchase to you. The letter will include copies of all of the closing documents, including the lawyer’s itemized account, the closing adjustments, and trust funds statement. You will receive a copy of the deed, mortgage and survey, if available, and other relevant papers. The report should answer any remaining questions and should be kept in a safe place for reference and may be needed for any future refinancing or sale.
LAND TRANSFER TAX
The Ontario Government charges a Land Transfer Tax each time the ownership of land passes. The tax is based on the purchase price and is payable by the Purchaser on closing. The Tax is 0.5% for the first $55,000, then 1% up to $250,000, 1.5% up to $400,000, and 2% above that.
The Tax can be calculated as follows:
Under $250,000: Purchase Price X 1% less $ 275.00
Over $250,000: Purchase Price X 1.5% less $1,525.00
Over $400,000: Purchase Price X 2% less $3,525.00
For Example:
Purchase Price of $150,000
X 1% = $1,500, less $275, LTT = $1,225.00
Purchase Price of $450,000
X 2% = $9,000, less $3,525, LTT = $5,475.00
The City of Toronto has its own additional transfer tax.
There is a program to rebate up to $4,000 of the Transfer Tax for first time home-buyers purchasing new homes and a further rebate if in Toronto.
H.S.T.
Harmonized Services Tax is payable on new homes and homes which have been used for non-residential purposes or substantially renovated. The H.S.T. on a new home is 13% of the purchase price, less a 36% new home rebate to a maximum of $24,000 provided that the buyer resides in the home. Usually the builder pays the H.S.T. as part of the purchase price, but this must be inserted in the offer. No Land Transfer Tax is payable on H.S.T., so that the net purchase price is calculated by deducting the H.S.T. and adding the rebate before calculating the Transfer Tax. If the buyer is not intending to reside in the new home, as in a rental purchase, the buyer must pay the H.S.T. and can then apply directly to the government for a rebate.
In a normal resale purchase, no H.S.T. is payable.
|| WHAT YOU SHOULD KNOW ABOUT WILLS AND POWER OF ATTORNEY ||
What are they? What do they do and when? How are they the same thing? how are they different?
Essentially, Wills and Powers of Attorney do the same thing. They allow you to appoint someone to carry out your instructions – follow your will – when you are not available or able to act for yourself. And although each has the same aim, they can never act together. A Power of Attorney is effective as long as you are but is only valid while you are alive. Conversely, a Will is only a piece of paper while you are alive, and only becomes a legal and binding document once you are dead.
First, let us examine a Power of Attorney.
Who or what is an Attorney? The Substitute Decisions Act (Ontario) allows you to appoint someone whom you trust and depend upon to act as your attorney. The attorney can be anyone who is over 18 and of sound mind, and is often a husband or wife, close family member or friend. The legal document setting this up is called a Power of Attorney You can name more than one attorney, acting together or separately, or can layer attorneys, so that if the person you name is unable or unwilling to act, someone else can take their place. The power of the attorney can be all-encompassing, or as restricted as you feel comfortable with.
What can it do? There are two basic types of Powers of Attorney: an Attorney over property and an Attorney over personal care. A personal care Attorney allows you to name a person and give them full authority to give instructions to your doctors or care-givers should you become mentally or physically unable to care for yourself:. The law allows you to give verbal or written instructions to your attorney – what types of medical care you would accept and what you would refuse-and gives your attorney the power to carry out your wishes.
"By giving the authority to one or two persons you trust, disturbing and painful family crises can be avoided through your forethought."
The second type of Power of Attorney deals with your property. You appoint an attorney to act on your behalf in any business or property transaction. You can impose whatever restrictions you feel comfortable with, such as to allow the attorney to assist in the purchase or sale of a specific property, or to be valid only in certain months, when you are on vacation, or only if you are unable, for any reason to manage your own affairs, in the opinion of your doctor, or a licences assessor.
At its widest, your attorney is given authority to sign virtually any document that you could sign (with a few exceptions, such as your Will, another Power of Attorney, or to exercise a position, such as officer of a company), An unrestricted attorney can sign cheques or contracts on your behalf, and you are bound by them as if you had personally signed. And, subject to any restrictions you impose in the document, the power is effective from the minute the document is signed. Anyone accepting the attorney’s signature, on presentation of the signed Power of Attorney is protected from any claim that the attorney acted improperly. The Power of Attorney is valid until revoked by you, but, if your attorney continues to act improperly, you continue to be bound. Therefore, by appointing someone as your attorney, you must repose the utmost trust and confidence in them If there is any doubt, then it is wise to put in effective restrictions, or name two or more attorneys who must act jointly or only with the consent of the majority.
What do most people do? The answer isn’t important, as a Power of Attorney should be designed to meet your needs, not everyone else’s. Nonetheless, many couples name each other as attorneys, then name an adult child, brother or sister, as a substitute attorney if their spouse can’t act. Most have both property and personal care Attorneys named in the same document. The types of restrictions vary widely, although most restrict them to be used only if they are incapable. They must then decide where to keep the documents. Obviously, if the document is kept in a safety deposit box or safe, it cannot be used, unless the attorney is told of the document and given access to a copy. But if the document is to be used as it should, signed copies are made, and delivered to the attorney and substitute attorney with appropriate instructions.
"What is a Living Will? Living Wills are not binding documents but are often used as another term for power of attorney for personal care, giving extensive instructions for your medical care if you are physically or mentally incapacitated. It is often made with a Power of Attorney."
What if I do not have a Power of Attorney? For a while, there were horror stories circulating. If you did not have a Power of Attorney and were in an accident, the government took over everything you owned. Your unfortunate husband or wife was left without money and had to ask the government for permission to touch any of your assets. Horror stories! Unfortunately, they were all too true. If any person were unable to manage their own affairs, a government department, the Office of the Public Trustee and Guardian, (PTG) took over management of all their assets. Without a Power of Attorney naming someone who could then apply to take over management, the consent of the PTG was needed on every document. If a distraught spouse had to sell the family home to meet expenses, she needed the consent of the PTG, even if the home was in her name alone. An application to have a spouse or family member take over costs thousands of dollars and required a complete plan for each asset to be disclosed Thankfully, the law was changed in 1996 so that family members were given the right to apply to manage the affairs and assets of the incapable person and so long as the plan and person appeared reasonable, they are allowed to take over without a court proceeding and the PTG would step aside. Still, the government, through the PTG, decides who is to take over, so that a simple Power of Attorney allows you to make the decisions in advance.
Once all the debts are paid, the Trustee is given a plan to distribute the estate as you wish. The distribution is as individual as you are. Usually, a couple will leave everything to each other, with provision for a trust for infant children if both parents should die while the children are too young to look after themselves. Often close relatives or friends are named as guardians to care for any children.
As the children grow up and start their own families, the Wills are tailored to meet more individual needs. Trusts can be set up to care for any disabled children, relatives, or parents. Provisions can be made for grandchildren, nieces and nephews, elderly parents, specific gifts or funds set aside. Your Will is your document, your bequest to future generations and final control over your resources.
Of course, your freedom and control are not absolute. If you are married, your spouse must be considered. The Family Law Act allows a spouse left out of a Will or not properly provided for to request an equalization of all net family assets. This results in a determination of all assets of both spouses, and a proper division. There are also rules disallowing setting up permanent trusts to keep adult children from ever taking control of money left for them.
"Who can my Trustee be? A Trustee must be over 18 and mentally competent. A Trustee who doesn’t live in Canada usually must post a bond personally or through an insurance or bonding company equal to the value of the estate. Obviously, you must trust your Trustee completely. If the Trustee acts improperly, the Court can take action, but only after the problem is discovered and the harm done. If you trust someone, but there is some question about their ability to invest, restrictions can be put in place, or a financial advisor can be named as a second Trustee. Often trust companies will act as Trustee if the estate is large enough, although their investments will usually be very conservative."
What is a Will? Formally, a Last Will and Testament, is a legal document written while you are alive to govern what will happen to your assets once you are dead. You can make many Wills during your lifetime, but normally each one cancels out all the others, so that only the last one made, provided that you were mentally competent and not under any duress, or undue influence, counts.
What goes in a Will? In a Will, you name a Trustee, also known as an Executor or Estate Administrator, to carry out your instructions. There can be more than one Trustee named, and substitute Trustees named if the first cannot act.. Then the Trustee is told what to do. Normally, there is a direction to pay any debts, taxes and fees that would be liens against your estate. An estate consists of everything you owned or had an ownership interest in at the time of your death.. In Ontario, on your date of death a calculation is made of the value of everything you owned, and an income tax filing must be made for any taxable income or profit. There is also a probate tax payable to the government based on the value of the estate.
When a person dies, everything they own at the time of their death becomes part of their Estate. Estate planning covers areas such as wills, trusts, Probating of wills, and estate administration. The essence of estate planning was to ensure that the wishes of the Testator, the person was passed away, are followed and that all that he or she has accumulated during their lifetime passes as they wish, to their family or beneficiaries as they see fit. Proper Estate Planning can substantially reduce taxes payable and set up special trusts for any disabled beneficiaries.
What powers does a Trustee have under a Will?
A Trustee is bound to follow the instructions in the will that appoints him or her and to fulfil the terms of any trust or gift. Unless agreed otherwise, the Trustee is entitled to be paid for services, depending on the amount of the estate and the time involved The Trustee can hire such professional investment and legal advisors as are needed. In the Will, you can set out the type of investments your Trustee is allowed to make. If you are silent, the Trustee is bound by the Trustee Act which grants powers to sell estate assets for the purpose of paying debts and distributing the estate. If monies are to be invested for children or any other reason, there are certain listed investments considered safe and reliable by the government. Unfortunately, they often have very modest returns and if the children are depending on the interest for their living expenses, problems can arise.
The terms of the Will can expand the powers allowed to the Trustee, depending on the Trustee’s experience and ability to invest wisely. The Trustee can be given the power to negotiate and settle any claims made against you or the estate. If you were operating a business or investing in market shares or mutual funds, the Trustee can be allowed to continue the business or investment funds. The Trustee can keep any real estate, including the family home, for the children, including any mortgaging or leases, and maintain the property. If the Trustee has a sound record, you may wish to give your Trustee full powers to invest in any investment he or she considers to be good. You might also want to allow the Trustee to distribute the actual assets, down to tables, chairs, jewelry and keepsakes among the beneficiaries.
Where should a Will be kept? Once your Will is signed, it should be stored in a fireproof place, usually away from your home. A bank safety deposit box is fine. Many lawyers keep fireproof vaults to store client’s wills and valuable documents. The Estates Court at Toronto will store Wills in a depository. The document is yours and should be under your control should you ever wish to review or change it.
How often should a Will be changed? A Will is a planning document and should be reviewed each time there is a major change in your life. It should be reviewed at least every five years to make sure it still does what you want. There are certain times in your life that the law changes your Will automatically. If you marry, the law assumes that you would want to change your Will, so that any prior Will not made contemplating the marriage is considered revoked, and a new will should be drawn. Similarly, if you divorce, the law assumes that you intended to remove your ex-spouse from the Will, and this is done automatically. Conversely, if you separate, there is no automatic change to your Will, so that marital spouses long separated still are entitled to the other’s estate if there is no Will, while long-term common-law spouses have no such rights. Even if there is a separation agreement stating that neither spouse will make a claim against the other, if there is an outdated Will leaving everything to the survivor, this overrides most releases.
Wills and Powers of Attorney are important planning documents which every person should have. Preparation should be relatively painless and inexpensive. While there are many do-it-yourself kits of varying cost and effectiveness, they should be professionally prepared and periodically reviewed with your lawyer.