After a busy real estate summer, we thought we would write a brief blog post about common issues we have seen and how we can help you avoid them when buying or selling a home.
1. When can I get my keys (purchase) or money (sale)?
This is the number one question we get asked. Purchasers of course, want their key as early as possible, and sellers want the proceeds of the sale in their bank account as soon as possible.
We strive to ensure your transaction is completed as quickly as possible on closing day. There are a number of factors that are outside of your lawyer’s control, and those include: when your mortgage sends your lawyer funds for the transaction, when you are available to sign the closing documents (usually in advance of the closing day), and the scheduling and location of both law firms (because the lawyers both need to be available to do their part in the Land Registry System).
Generally speaking, the Agreement of Purchase and Sale indicates the transaction must close before 5 pm on closing day. Generally, we are able to do so much earlier than that. However, to move the process along as quickly and smoothly as possible, sellers should aim to be out of the home as soon as they can on the closing day, whereas purchasers should not expect to get their key until a bit later in the day. Anything earlier is a bonus!
2. Mortgage Financing – how did it go wrong?
Unfortunately, often times a mortgage is pre-approved but with certain conditions. A common one is the requirement of the lender to obtain an appraisal on the home being purchased. What purchasers don’t always realize is that the result of this appraisal can impact the ability to obtain a mortgage on the home, and we have seen some scenarios where financing was cancelled on this basis. What is critical to remember here, is that you should not waive your condition of financing until all the lender’s requirements have been met. A pre-approval is not always sufficient.
3. How much time does buying a house really take?
We know that everybody has a busy schedule these days, and so do we! Making your home purchase/sale go smoothly and keeping you informed is what we do for our clients. However, many clients do not realize the amount of time that will be required of them when doing a real estate transaction. Whether you are the purchaser or the seller, you will need to arrange time to conduct your inspections, attend the bank, and meet with the lawyer. Oftentimes, these tasks happen in the same week as the closing, which can increase stress.
Commonly, after meeting with your lawyer, the lender may require further information or documents to be signed. Sometimes, this requires a second appointment with the lawyer. Therefore, setting aside plenty of time to ensure that all the paperwork is signed is crucial to ensure a smooth transaction.
If you are prepared in advance and know what your responsibilities will be, then your transaction will feel much less stressful.
4. What if I live out of town?
We are often asked to act for a client who is relocating and will not be in the same town as the lawyer to sign the documents required. While we do live in an electronic age, lawyers will require original signatures on the legal paperwork, and will need to be present, or arrange for an agent to be present for the signing. If this is something you anticipate, you will need to advise your lawyer well in advance of closing so the appropriate arrangements can be made.
5. Bridge Financing
If you are buying a home before you sell, you will likely be getting bridge financing, which is a loan that is set to be paid out of the sale of the original home, usually a few weeks after you purchase your new home. Sometimes there is a delay in obtaining the bridge loan, as the funds usually come to the law firm in a different way than traditional mortgage financing.
6. Your responsibilities
There are a number of things your lawyer will need to you to obtain to move the transaction along. If you are purchasing, you will need to provide information relating to your mortgage financing, you will need to obtain home insurance information, and you will need to set up your utilities.
Your lawyer will advise you of the amount of closing funds required, and you will need to attend at the bank to obtain certified funds. You may consider doing a final walk-through of the home, to ensure it is in a good state prior to closing. Your lender may have other requirements that you need to comply with as well.
If you are a seller you will need to provide your lawyer with information about the mortgage to be paid out, and any other liens that need to be discharged on closing. If you want your lawyer to pay debts for you out of the sale proceeds and you will need to provide that information.
With these tips, we hope your purchase or sale experience will be smooth and without surprises.
When separating, it’s natural to want to focus on the end result (an agreement), particularly when you are anxious about what may happen – where will the children live? What will the property division look like?
The end result is important after all – these are among some of the larger decisions many people may make in their lives (both financially and in terms of parenting their children).
So it is even more important that we understand what steps lead us to that result and what factors influence it.
This is the financial information each spouse provides to the other. It includes simple things like tax returns, pay stubs or bank statements but sometimes can include more complex information like business or pension valuations.
In order to make sure this information is as accurate as possible, each party completes a ‘sworn Financial Statement’, which is a document sworn under oath setting out all of their income, expenses, assets and debts.
This Financial Statement is mandatory if your matter is in Family Court (and your case deals with financial issues), but should also be completed by both sides in any out-of-Court negotiation where support or property issues are involved.
Without full and complete financial disclosure by both parties, neither will be able to calculate with certainty what their obligations are for Child Support, Spousal Support or Equalization of Property.
Your lawyer can help you prepare your Financial Statement and let you know what information you need to collect.
It is important that each person have their own independent legal advice. That means each side having their own separate lawyer, acting only in that person’s interest. One lawyer cannot represent both sides in a family law dispute – it is a conflict of interest.
Legal advice is important at every stage of the family law process – from letting you know your rights and entitlements, to helping you choose a method of resolution, to negotiating an outcome and drafting a Separation Agreement, or representing your interests at Court if you can't reach agreement.
Sometimes having a lawyer means the difference between a poorly drafted, confusing agreement, versus one that can protect you and prevent disputes in the future.
Method of Resolution:
There are a number of different options to negotiate your Family Law matter, including Mediation, Arbitration, Collaborative Practice, negotiations between the lawyers or Family Court.
Not all of the processes are suited to all cases and all people. Which process to use can be a very significant decision, one your lawyer can help you with.
We will be writing a future article on the different methods of resolution and the pros and cons of each, as well as when each method may be suitable for your case.
Visualizing the process:
There are many different ways to visualize a family law negotiation, and below is a diagram with one possible interpretation. This shows Family Law as a machine with numerous, interconnected pieces.
Each gear rotates with other gears, and the outcome is affected by the interaction of all the gears.
If one gear breaks, is spinning the wrong way, or jams – that has an effect on the whole machine including the outcome.
This is also the case in Family Law. If the separating couple do not exchange financial disclosure, do not each have separate independent legal advice, or if they use an inappropriate method of resolution (or no method at all), that will have an effect on the kind of outcome they reach.
That can mean that one party gets a bad deal, is pressured by the other – or that the parties reach a result that is wrong or incomplete – and sometimes end up litigating the issues all over again later on.
Having all of the gears in place helps us get the process completed right the first time, and as quickly as possible.
The law takes these requirements so seriously that Section 56 of the Ontario Family Law Act actually allows the Court to set aside or review an agreement if there was insufficient financial disclosure, if a party did not understand the consequences of the agreement or was coerced into signing.
If you have questions about the family law process, please contact us.
'HOME-MADE' SEPARATION AGREEMENTS
Practicing in Family law, we periodically come across clients who have made their own ‘home-made’ Separation Agreement. It may be from a kit they purchased, a template they downloaded from the internet, it may be based on a friend’s Separation Agreement or it may be something they made on their own from scratch. There are so many ways these documents can go wrong.
One of the more common problems we see is where the wording of the agreement is not correct or not sufficient enough to achieve the client’s goals. Each and every separation has unique circumstances that need to be taken into account when drafting an agreement, such as division of property, parenting, child support, spousal support and more.
Parenting arrangements can vary widely – and what works for one family (or what you find in a template) may not work for your family. Where a child resides and how often they see each parent are very important issues – ones that should be customized for each family based on work and school schedules, holiday traditions of each parent, children's activities and so on.
A skilled family lawyer can make the wording in the Separation Agreement as clear as possible, so there is less ambiguity. When parents fight or disagree about parenting, ambiguity can sometimes be exploited by one parent. A common clause we have seen in home-made agreements is ‘The parties will share the children’s holidays’. What does that actually mean? Which holidays will be shared? How much time will each parent receive on each holiday? What if they can’t agree? These kinds of questions can be resolved by good drafting.
A poorly written Separation Agreement, on the other hand, can often result in the parents having to go to Family Court to resolve the ambiguity in the document.
When a home made agreement deals with Child Support, Spousal Support or Property Division, the potential for problems is even greater – because of the complexity of these issues.
We have seen home-made Separation Agreements that were trying to address the matrimonial home, for example the clause may say: “Party A will purchase Party B’s interest in the home”. But this clause does not give us any details – how much will Party A purchase it for? When does the purchase have to close by? What happens to the mortgages or debts secured against the home? Who is responsible for them going forward? Who will bear the cost of the transfer? These kinds of omissions can lead to a Separation Agreement that is essentially worthless or leads to unnecessary Court litigation.
Beyond these basic problems of drafting, there are other major concerns with constructing your own Separation Agreement. Often in these 'kitchen table' scenarios, neither party obtains legal advice on the agreement and neither makes financial disclosure to the other.
One of the key concepts in family law is making an informed decision. Without having disclosure of the other party’s finances, you won’t necessarily know what your entitlements are. For example, you can’t calculate the correct amount of child support owed if you don’t know the payor’s income. Likewise, it’s important to have a legal expert explain the content of an agreement to you before you sign – so that you have an appreciation of what the agreement really means and the obligations it places on you.
The law recognizes these concerns and this is why the Ontario Family Law Act allows for an agreement to actually be set aside when certain criteria are met. If a party has failed to disclose to the other significant assets or debts, if a party did not understand the nature or consequences of the agreement, and in some other circumstances, the Court can set aside the Separation Agreement the parties made.
The result is that home-made Separation Agreements are routinely challenged in Court and set aside because one or both parties did not make financial disclosure or did not have legal advice before signing their agreement.
For many families this can be a compounding of problems – first the emotional impact of the separation itself, then having to negotiate terms of a home-made Agreement, only to have one party drag the other into a potentially complex and lengthy Court battle over whether the agreement should stand or be set aside.
If you are considering using a ‘Will kit’ or home-made Separation Agreement, we strongly recommend you speak to a lawyer. By having the proper legal advice, you are far more likely to achieve a Will or agreement that meets the requirements of the law, is tailored to address your specific needs, and one that will stand the test of time.
We get an increasing number of calls about 'Do It Yourself' kits for Wills or Separation Agreements. There is a lot of confusion about the legalities of these products. In this week's blog segment we give you our perspective on Will kits.
THE WILL KIT
There are a number of possible problems or issues to be mindful of with the ‘Will kits’ that can be found in stores. The first is proper execution. We have seen our fair share of Wills prepared from a kit that were not properly signed or witnessed, rendering the 'Will' invalid. For a Testator trying to save money by purchasing a kit, they may find that improper signing or witnessing may completely defeat the purpose.
We have also seen kit Wills that were simply not filled out correctly. The deceased left the 'Will' in a safe place, intending their estate trustee to find it and follow their instructions. Upon death, the 'Will' was found, but the disposition sections were incomplete, meaning that no beneficiaries were designated and no gifts were declared to anyone. Some kits don’t even refer to the laws of the Province of Ontario.
The purpose of meeting with a lawyer to prepare and properly execute a Will is to ensure that your specific needs and concerns are being met, as no two cases are ever the same – something that standardized kits and templates cannot accommodate very well.
Our lawyers ensure that you have capacity, are not under influence from a family member or another person and that your intentions are accurately reflected in your Last Will. We can also prepare up-to-date Powers of Attorney for Personal Care and Property, to ensure that you and your possessions are being looked after in the event you become incapable and cannot make decisions for yourself.
There are many concerns that a kit may not take into account. If you plan to appoint more than one Estate Trustee or Attorney, will they have to act together (jointly), or can any of them act separately (Jointly and Severally)? Most clients don’t think about that when they come to see us. What about compensation for the people acting for you?
A Will is a relatively inexpensive document to complete, and should be drafted specifically to each person’s needs and wishes. After all, once you need it, it will be too late for you to change it.
If you have questions about Wills or Powers of Attorney, please feel free to contact us.
Next time in Part II, we will consider some of the risks of 'home-made' Separation Agreements and problems we have seen.
As Real Estate Lawyers, we often help clients who are surprised at how stressful buying a home can be, even if it was not their first home purchase. It is important to do your research to ensure you are an informed purchaser. Here are some tips on how to inform yourself during a house purchase, and how we can help you along the way.
How Much Can You Afford?
Too many clients come to see me and are surprised to find they don’t have enough money to close their purchase. They have relied on incomplete information. Clients reported to me they were told that they qualified for a mortgage and so they bought a house of equivalent value. But what they didn’t know about were the other costs they would face at closing such as: Land Transfer Tax, Legal fees, home insurance (which may have to be paid in full up front), connection fees or Tarion Warranty fees in new home purchases, hidden costs in your mortgage, and moving fees. Similarly, there are many ongoing costs such as condo fees or association fees, property tax, maintenance, utility payments and more.
Don’t just think about the purchase price of your home when crunching numbers. Inform yourself about all of the costs that are involved in the purchase and maintenance of your dream home.
Where Do You Want to Live?
Drive the route from your potential new house to work, to ensure your commute would be manageable. Research the schools in the area. Talk to the neighbours if possible to find out the information you can only get from locals.
Have a Close Look Inside the House.
Open and close all the doors (even the interior ones). In older homes, doors can stick, or door knobs may not work. Do the same thing for each window to make sure they work properly. Check the seals on the windows also. Run all the faucets (at once if possible) to see if any water drips under the sinks and also to see how the water pressure is. Flush all the toilets. Have a look at the electrical panel and thermostat. Smell the basement and attic / crawl space to see if you sense any moisture in the air. See if there are any signs of dampness such as buckets collecting water or dehumidifiers. Another sign is if there are moist cardboard boxes.
See if there are any noticeable cracks. Look at the roof. How do the shingles look? Does your agent or the homeowner know the age of the roof? Is there a visible slant in the home?
Look at the house at different times of day.
There may be issues apparent which you could not notice because you viewed it at night. You should also do the same for the neighborhood. It is not ideal to be the owner of the nicest house on a shabby street.
Make an appointment with a real estate lawyer.
Once you have decided on a house, it is prudent to make an appointment with a real estate lawyer. We will review your options with you and work together with your real estate agent to ensure that your Offer to purchase the home meets your needs and protects you.
Think About WHEN you Want to Close the Deal.
Will you plan to buy and sell your current house on the same day? You may want to investigate bridge funding. It is sometimes the case, especially during the busy season, that your sale may be delayed for various reasons, thereby making it impossible to sell your current home and buy your new one in the same day. While this possibility is remote, it happens more often than you think. Bridging your two deals can prevent this possibility and reduce stress for you. Generally, the fees to do so are minimal and are worthwhile considering the alternative.
Consider the time of year of your closing. You do not have to purchase your home on a Friday and you certainly do not have to purchase it on the Friday ending the month, in the busiest season of the year – summer! All this will achieve is extra stress and cost. Clients have reported to us that the cost of movers, inspectors and contractors may go up in the summer. Consider a closing outside of the busy summer months. We can close a real estate deal for you on any business day of the year!
Get A Home Inspection
Every home offer is different. All of the points we mentioned above are among the things you should consider addressing with your home inspector. As lawyers, we are not home inspectors and probably neither are you. So it is important to have a knowledgeable home inspector who can make you aware of problems not apparent to the naked eye. If the home inspection brings problems to light, speak to your lawyer about possible remedies or options to ensure you are getting what you bargained for.
Don’t forget to change the locks when you move in!
It is always best when purchasing a home to be well prepared and thorough. Our real estate lawyers have helped clients purchase homes all over Ontario. For more information, please contact our office in Barrie.