Category Archives: real estate law

Don’t underestimate the value of a real estate broker when buying or selling a house

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Buying or selling a house on your own sounds like an easy task, but anyone who has tried it, quickly learns how difficult it can be and how much the experience of a licensed real estate broker can simplify the process.

“In a way, anyone can sell a house, but it doesn’t mean that you will have an easy transaction or get a fair price,” said Daniel Dagenais, a Realtor® in Pointe-Claire and president of the Greater Montreal Real Estate Board’s (GMREB) Board of Directors. “There’s no point in selling your house and feeling like you’re king because you did the transaction yourself and didn’t pay any commission, but you actually sold it for cheaper than it’s worth.”

Dagenais outlined several key attributes that real estate brokers bring to the table when it comes time to buy or sell a house.

Brokers set fair prices for buyers and sellers

Real estate brokers in Quebec have access to the listings not only of houses for sale, but also those with the prices of houses that have already sold and those that have expired. Armed with that information and their own experience, they can quickly establish the right price for a house.

“The best price for a house is not necessarily the highest price, but is a fair price,” said Dagenais. “Sometimes buyers are not well educated about the market and they see something for sale and they end up paying too much money. I think this happens with buyers who are not using a broker.”

Brokers negotiate on behalf of their clients

Negotiating a closing price when buying or selling a home can be stressful. Real estate brokers conduct many transactions throughout the year and are emotionally detached when negotiating on their client’s behalf.

“A lot of people think they know how to negotiate,” said Dagenais. “This may be the case, but even for a good negotiator, a broker acts as a middleman who has a certain distance in the process. When you have a Realtor® making an offer and he’s asking another Realtor® to respond, it’s much easier than for the Realtor® trying to negotiate directly with a buyer or seller who becomes way too involved emotionally.”

Brokers have specialized knowledge of legal requirements

There is a lot of legal paperwork required to complete a real estate transaction that can overwhelm someone not trained how to do it properly. As part of their training to obtain their license in Quebec, real estate brokers spend a full 45 hours learning the intricacies of filling out the necessary forms to buy and sell a house.

“Filling in the forms properly is crucial. If you make one little mistake, maybe you don’t put the comma in the right place, it could jeopardize the transaction, create a lawsuit or just create dissatisfaction,” noted Dagenais. “We might have only a few hours to get an answer back so it has to be on the spot and you have to be very comfortable with all aspects of filling in the forms properly.”

Brokers are highly trained

Before they can buy or sell houses, real estate brokers must undergo close to 400 hours of training that takes about four or five months to complete. They must then pass a government-regulated exam in order to get their license. Before 2010, the exam was multiple-choice, but now students have to write long-form answers. To keep up with changes in the industry, brokers are also required to take 18 units of continuing education every two years, which amounts to 18 to 36 hours of additional training.

Brokers follow a code of ethics

Real estate brokers must act ethically in their dealings with the public and any who fail to do so can be fined by the Discipline Committee of the Organisme d’autoréglementation du courtage immobilier du Québec.

Dagenais also noted that real estate brokers are subject to a code of ethics and are covered by professional liability insurance that provides financial protection to consumers in case of unintentional fault, error, negligence or omission committed by a broker.

Brokers have access to specialized technology

From drone photography to virtual reality, the real estate industry follows the latest tech trends to help bring buyers and sellers together, but their biggest technological strength is their extensive database system of properties for sale.

“The most important tool is the database system that allows us to see all of the data of all the properties,” said Dagenais. “We can really evaluate properties on the market.”

Brokers are part of a network

Real estate brokers represent both buyers and sellers and work with each other to bring the two together.

“The key really is collaboration and we have an industry that is providing all the tools for collaboration. For real estate brokers, it’s kind of unique that when you accept a mandate to sell a property, you also include a portion of your compensation that you will give to a competitor who brings you the buyer. The high level of collaboration between brokers is really a unique feature of Quebec’s real estate industry.’’

“When you hire a real estate broker, you are really hiring 13,000 brokers,” said Dagenais, alluding to the number of brokers working in Quebec, “plus the visibility and access to Centris.ca with close to 100,000 available properties.”

Source:   Mark Stachiew, Special to National Post | February 22, 2017 

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5 tips for finding the right lawyer

In many respects lawyers are similar to any other trade or profession that you will need to retain as part of your investing business. There are good lawyers and bad lawyers. However, unlike a carpenter or a painter, it’s very difficult for most people to recognize if their lawyer is underperforming.

In fact, you may not even know that you’re using a bad lawyer until many years later, if ever. This is because most people do not have sufficient experience dealing with lawyers to be able to differentiate the bad from the good. 

To help ensure that you’re getting your money’s worth, here are some things to keep in mind when looking for a lawyer (or evaluating your current lawyer):

1. Find a lawyer who works with property investors – or better yet, who is a property investor

A good lawyer is a problem solver. Like a sick patient and a doctor, you come to the lawyer with a legal problem and they resolve it. A great lawyer will solve problems you may not even know you have yet.

A lawyer who is familiar with the business of property investing will be able to be proactive and offer solutions and ideas as to how to protect and further your business interests without you having to first identify a problem for them.  As an added bonus, lawyers who act for investors have a solid network and can often put clients in need together to make deals happen.

2. Find someone you like

Ideally, you want to build a long-term relationship with your lawyer and have them become an integral part of your business operations. Finding someone you like and who has a compatible personality goes a long way in helping to build that long-term relationship.

3. You get what you pay for

Lawyers who practice exclusively in residential real estate law typically operate on low margins and rely on volume to pay the bills. In order to maintain low margins these lawyers often rely heavily on their clerks and fall back on the title insurance that you’re buying to cut corners on analysis. You may pay less hiring the cheapest lawyer on the block, but you’ll almost inevitably end up getting less value for your money at the end of the day.

4. Avoid Yes-Men and Yes-Women

Many people come to a lawyer to help solve a problem and already have a pre-conceived notion of what the solution should be. Many lawyers are willing to go to great lengths to appease their clients in order to win their business, and avoid pointing out the folly in their client’s thinking in order to avoid angering the client.You’re paying for your lawyer’s opinion and advice; make sure you find a lawyer that gives you an honest analysis and doesn’t simply tell you what you want to hear.

5. Get online

In this day and age every lawyer worth their salt has an online presence. Read their bio online and find out what experience they have and which professional associations they are involved with. If you’re lawyer practices litigation, look to websites such as Canlii.ca to see if they’ve been involved in important cases and what those cases entailed.

Matt Maurer practices commercial litigation at Minden Gross LLP in Toronto (mindengross.com/our-people/details/matt-maurer). He regularly advises property investors and real estate professionals in all aspects of their businesses and specializes in dispute resolution. 

Source: Canadian Real Estate Wealth – 04 Jun 2015

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Joint tenancy can help avoid probate fees but not necessarily capital gains tax.

Joint tenancy can help avoid probate fees but not necessarily capital gains tax. 

Q: I have joint tenancy with my mother on two properties—a condo in Toronto and a cottage in Kawartha Lakes. She passed away in June 2014. I am keeping both properties. My accountant says that he can count the condo as my mom’s primary residence, but I have to pay capital gains tax on the cottage even though we have joint tenancy. I thought that with the right of survivorship, I didn’t need to pay capital gains tax? He says I am wrong. Can you please tell me what you think?

Kim

A: The Canadian Inheritance Study by Decima Research estimates that about $1 trillion in inheritances will be received by Canadian Boomers in the next 20 years. So your estate planning conundrum is becoming increasingly common, Kim.

When property is owned by more than one party, it is frequently held in joint tenancy with the right of survivorship. Spouses typically hold property as joint tenants, whereby upon the death of the first, the asset passes directly to the survivor and does not make up part of the estate of the deceased. More and more, I am seeing elderly parents holding property in joint tenancy with their children, which has pros and cons.

One of the pros is that the time and cost to administer an estate may be reduced. In particular, assets held in joint tenancy that pass to a survivor typically avoid probate fees. Probate fees in Canada can be as high as 1.5% of an estate (Ontario) and must be paid on certain assets in order to validate the will and permit the estate trustee to distribute assets to the beneficiaries. Other provinces have lower, flat fees and probate is less of a financial concern.

One of the many cons is that capital gains tax issues may arise.

In some cases, Kim, when someone gifts an asset to another person, there is capital gains tax that arises at the time of transfer. This is because when you transfer an asset to a third party—or any part thereof—even if money hasn’t changed hands, you are generally deemed to have sold it at fair market value.

In your case, it could likely be argued that the gift of half of your mother’s condo and cottage was not an outright gift, but rather, a case of a resulting trust. Assuming your mother was the sole owner at the time of transfer, used the properties herself and paid the ongoing maintenance costs, case law may suggest that the presumption of advancement did not apply and you were technically holding half the properties in trust for your mother. Accordingly, capital gains tax would not apply at the time of transfer. Though the properties may have been legally held jointly by the two of you, the properties were still beneficially your mother’s until her death.

Ask a Planner: Leave your question for Jason Heath »

Every Canadian is entitled to have one principal residence that grows in value tax-free. Your mother had two properties, meaning that one of them was growing in value on a tax-deferred basis. On your mother’s death, she would be deemed to have sold the two properties and one sale would be taxable, regardless of her holding the properties jointly with you. Capital gains tax would be payable at that time.

So I’m sorry to report that your accountant is correct, Kim. There is capital gains tax payable on one of your mother’s properties. You have discretion as to which property you deem to be her principal residence and you may be able to designate one property as her principal residence for some period of time and one property for another period of time. In other words, if she owned her condo for 20 years and her cottage for 10 years, you might deem her condo to be her principal residence for the first 10 and her cottage for the second 10, in particular if the cottage was worth more and/or rose more in value.

In this example, half the condo capital gain would be taxable and the cottage capital gain would be tax-free. In this way, you can at least retroactively minimize the capital gains tax payable.

Another important point is that if your mother didn’t pay capital gains tax when she gifted the properties to you, which I assume she didn’t, the properties may technically be subject to probate and the resulting cost of probate fees. This is because these assets still technically belonged to your mother on her death and likely should have made up part of her estate for probate purposes.

Capital gains tax is a fact of life, Kim. And in this case, a fact of death. Although it’s unfortunate to pay it, it’s better than the alternative—having an investment that has not gone up in value or worse yet, has lost money.

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ont. He does not sell any financial products whatsoever.