Category Archives: Uncategorized

Identification Requirements – the Who, What, When, Where, and Why

You will be required to produce two pieces of valid identification (ID) when you attend our office to sign your real estate documents. The first piece of ID must be a valid photo ID such as a valid driver’s license, valid passport or a landed immigrant card. The second piece of ID can be a social insurance card, credit card or similar. When you attend our office for your initial appointment, you will be asked to produce your ID, and our staff will photocopy it for our files. If you have any questions with regard to appropriate ID, please contact our office immediately to clarify.

 

Here are the answers to some questions you may have:

 

What is needed? Two pieces of valid identification (ID).

 

What qualifies as “valid ID”?       The first piece of ID must be a valid photo ID such as a driver’s licence, passport, or landed immigrant card; the second ID can be a social insurance card, credit card, or similar item.

 

What do we do with your ID documents?

 

Our staff will photocopy the ID you produce when you attend our office for your initial appointment and will keep it in your file.

 

How long do we keep the information? We are required to keep the information for the duration of our professional relationship, or for six years after completion of our work for you (whichever is longer).

 

Why do we need your ID? The Law Society of Ontario (Ontario’s governing body for lawyers and paralegals) imposes strict rules that require the identification of clients. Requesting ID from clients is standard practice in law firms throughout Canada, whenever we are (a) being retained to provide legal services to the client, or (b) engaging in the receipt, payment or transfer of funds.

 

If you want to learn more about these requirements, please visit the Law Society of Ontario’s webpage on “Client Identification and Verification Requirements”.

 

What about clients that are not individuals? If our client is an organization (for example, a private company, partnership or trust), we are required to verify its identity by consulting documentation such as a certificate of corporate status, a copy of a partnership agreement, or a trust agreement, as the case may be.

 

Title Insurance – Essential or Unnecessary?

Title Insurance – Essential or Unnecessary?

Recently, I acted for a client who wanted to forgo title insurance on his house purchase. While it is true that title insurance is not mandatory in Ontario, I did my best to dissuade him, because I firmly believe that title insurance is a relatively inexpensive way to achieve peace of mind for years to come. And what’s more valuable than that?

What is title insurance and why do you need it?

Title insurance is a form of insurance that protects the owner of a property against financial losses from defects in title to real property. The coverage begins when you buy the policy and extends indefinitely into the past, covering any inconsistencies in the documented history of ownership.

The protection of title insurance is also important for lenders, who need to know that the mortgage they hold will not be unenforceable due to a title defect. For this reason, most mortgage lenders require title insurance, even though it is not mandatory from a legal standpoint.

What types of title issues are covered?

There are many risks involved in the acquisition of title to a property. These risks range from something as innocent as a mistake – documents previously filed could inadvertently have been wrong – or something as shameful as a forged transfer of ownership rights.

Here are some examples of situations where title insurance will protect you:

  • another party claims an interest in your property;
  • a fraud (such as forged documents or false impersonations) is/was committed;
  • zoning bylaws have been breached;
  • there are outstanding work orders or liens against the property;
  • the property encroaches on an adjoining property, or vice versa; and
  • surveys or public documents are found to contain an error.

Whom does title insurance protect? Owner’s vs. lender’s title insurance

Owner’s insurance, like the name suggests, protects the property owner from losses that are listed in the insurance policy. That coverage continues as long as the property is owned by the title holder and the policy has a set amount of coverage. Lender’s insurance, on the other hand, protects the mortgagee who helped fund the purchase. Keep in mind that the lender’s policy will only cover the amount of the mortgage, and not the full value of the property.

Do you have a choice?

Technically, a property owner can choose whether to obtain title insurance or not, since title insurance is not mandatory in Ontario. However, to the extent that the buyer requires mortgage financing for the purchase, most mortgage companies demand lender’s title insurance.

How much does title insurance cost and who pays for it?

Premiums for residential properties only cost a very small fraction of the purchase price. Unlike other forms of insurance, the buyer only pays for title insurance once, and there are no ongoing costs associated with it. With respect to lender’s title insurance – this is generally also paid for by the buyer as part of their mortgage closing costs.

Are there other benefits of title insurance?

The availability of title insurance plays a useful role in speeding up the process of closing.  When title insurance is purchased, many municipal searches – such as zoning and building compliance – are no longer required, thereby reducing the time period that clients have to wait before being in a position to close their transaction. At the same time, legal fees are kept to a minimum, since these time-consuming inquiries do not need to be made. As well, buyers are protected from the risk of errors by the municipality. (Typically, responses from municipalities were qualified to exclude errors and omissions and therefore may not have been very reliable in any event).

The benefits of title insurance – in a nutshell:

  1. Speeds up closing process
  2. Keeps legal fees down
  3. Protects buyers from the mistakes of others
  4. Offers peace of mind.

It is important to note that title insurance is not a substitute for a lawyer’s services, and we still conduct a full title search for our clients. Any encumbrances (for example, a right of way or a utility easement) that are discovered during the course of a title search are brought to the attention of our clients.

What is not covered?

Like all insurance policies, there are some exclusions to coverage that a buyer should be aware of. For a risk to be covered, it usually must have existed prior to the policy date and not be something that you created after you became an owner. Exclusions can include defects in title that you knew about before closing, aboriginal claims, environmental contamination, problems that would be discovered only by a new survey or inspection (such as a smaller lot size than originally anticipated), matters not listed in public records, zoning bylaw violations caused by renovations or additions performed by the policy owner, tenancy issues (such as the legality of rents or basement apartments), matters disclosed in a home inspection report, and the buyer’s ability to change the use of the land or undertake renovations or expansion. In other words, title insurance isn’t blanket coverage for your property, and will not protect you from every possible scenario. As well, remember that title insurance is also not a replacement for home insurance. Home insurance protects your home and its items from damage from the weather, fire and theft.

To sum up

Title insurance is an important component of a real estate transaction. Overall, if you value peace of mind over a relatively small expense at the outset of your property ownership journey, title insurance is the prudent way to go.

 

Pre-Construction Condos: the Good, the Bad and the Ugly (and What to Do About It)

The Good

Clients often approach me for advice about pre-construction properties. Pre-
construction condo purchases are popular with buyers for many reasons. For one thing,
the pricing is usually much more competitive earlier on in the construction process; for
another, buyers may get the chance to customize the home according to their own
preferences. They can choose their tiles, flooring and cabinet finishes; they can even
opt for an open plan layout or change the location of their electrical outlets. The list of
choices goes on and on…

Buying pre-construction also gives the buyer time (usually up to three years) to raise the
money required: the buyer only pays a small deposit at the outset, with the balance of
the down-payment (around 20%) payable in instalments over the months that follow.
As well, pre-construction buyers have the benefit of warranty programs (such as Tarion
Warranty Corp.) that offer protection against faulty workmanship or construction,
delayed occupancy, and even deposit protection.

But buying a pre-construction property does have some potential risks. We’ve all heard
the horror stories…

The Bad and the Ugly: What can go Wrong?

At one end of the spectrum – and by far the greatest risk – is the possibility that the
development could fail. Though this does not happen often, the risk does exist, and it is
enough to scare away some would-be purchasers. Imagine paying your hard-earned
money as a deposit, only to find out several months or years later that the project has
failed.

At the other end of the spectrum – less serious but still vexing – is the risk that a builder
will diverge from the original plans. I have seen many instances where the unit ends up
looking very different from what the purchaser envisioned. This can, indeed, happen,
because most builders’ agreements contain a provision that permits the builder to
change the plans in certain circumstances. When this happens, the buyer may or may
not have recourse, depending upon many factors.

Buyers should also be aware that brand-new places often experience “teething
problems” that take some time to be sorted out. For example, elevators may not initially
function as required, or fire alarms may go off more often than expected. Overall,
teething problems in new buildings are natural, but can entail extra, unexpected costs
and a lot of inconvenience.

What you can do about it, and how your lawyer can protect you

Despite all the risks outlined above, your lawyer can be a great help in protecting you
and making sure you are not disappointed. Your lawyer can also play an important role
in helping you understand what your rights are. The crucial thing to remember, however,
is to get your lawyer involved from the very start.

When you sign the contract with the builder, you will no doubt receive a somewhat
boring package of paperwork. Don’t be fooled: as boring as the documents appear,
someone has to read them. Your real estate lawyer can review the paperwork and
explain everything you need to know. This will often include things like budget
statements, proposed condo declarations and bylaws, as well as rules that will affect
every resident down the road. It only makes sense that you would want to know, ahead
of time, what you are committing yourself to.

There are countless examples of issues that your lawyer will identify for you before they
become problematic. For example, does the agreement give the builder the right to
make changes to the layout, or to use materials that are different from the ones you
saw? What other changes can the builder make? Builders often ask their lawyers to
prepare agreements that give them as much flexibility as possible, so it is your lawyer’s
job to make sure you understand exactly what your position is, and what you are getting
yourself into, before it is too late. A good lawyer can also help you negotiate caps on the
extra charges that a builder is entitled to add to your overall costs, or raise issues that
you may not have considered (for example, do you have the right to assign your rights
to another person?)

Understanding your Rights, Obligations and the Legal Jargon

What happens if you have second thoughts about your purchase?

You signed a contract with the builder, but now you’re having second thoughts. If you
react quickly enough, though, you’re in luck: the law gives you a ten day “cooling off”
period after you sign your agreement with a builder. This means you have ten days to
reconsider your decision, or request amendments to the agreement. You even have the
right to back out completely, without any penalty, should you so choose. At the end of
the ten day period, however, you are fully committed and the agreement is binding.

What does it mean when people say there are “two closing dates”?

In addition to the potential (and somewhat expected) delays before construction is
started – and during the construction process – you may even have to wait once you
have moved in before the unit is officially registered in your name. Ownership only
passes to you once the building is officially “registered”. This process can take several
months.

1. The Interim Occupancy Date

This is when you can move in, though you are still not, technically, the owner yet. From
this date until the actual closing date, you will be required to make monthly “rent”
payments to the builder (to cover your share of the common expenses, the property
taxes, and interest on the unpaid portion of the purchase price). The payments you
make at this stage are not applied to the overall amount that you still owe to the builder.

2. The Final Closing Date.

This is when the balance of the purchase price is due, and you take actual ownership of
the property. Title is finally registered in your name. You also start making your monthly
maintenance payments and bear all property taxes associated with the unit you have
purchased.

Tips for Managing your Risk: 10 Questions to Ask your Builder

1. How long have you been in business?
2. Where else are you building?
3. Do you have a track record of successful projects? Were they completed within the
time-frame promised?
4. Can I talk to prior customers/references? You really need to dig deeper than the
builder’s own promotional materials.
5. What’s your experience?
6. How many homes or condos do you build each year?
7. Are you licensed with the proper registrations?
8. Is there a model unit for us to view?
9. Can I get a site tour? (This isn’t always possible, but it’s definitely worth asking. You can
tell a lot about a builder by seeing them in action.)
10. Can I see the master plan? Request this from the builder as well as the municipality. A
brand-new community will look very different in 10 years than it does today. Know the
future plan for retail, schools and services, public spaces and infrastructure. These all
affect the value of your home.

The Bottom Line

Buying a pre-construction property can be a very positive experience with a huge
upside, so long as you are able to avoid the pitfalls. A seasoned lawyer can provide you
with the advice and guidance you need.