Buying and selling real estate with the same closing day comes with its own set of increased risks. All parties involved should be aware of what could potentially happen. Read today’s blog post to learn more!
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Title and Real Property
Holding title to real property refers to the interest of a particular individual who has legally recognized ownership of property. More traditionally, title to real property was used to refer to an individual who has the legal right to use the property. Today, title to real property can be held in several different forums.
Tax Concerns and Leased Property
Within a real estate transaction, not all property is transferred in the traditional sense that both the dwelling and the subsequent land are conveyed in fee simple. An increasing number of transactions include purchases where the dwelling is conveyed in fee simple, but the land itself is merely leased to the occupant.
Chattels Versus Fixtures
Condo Purchases and Status Certificate Review
Trust in Real Estate Services Act
Buying and Selling Real Estate on the Same Closing Day
GST/HST New Housing Rebate
Calculating Equalization
Author: Stacey Staios - Articling Student
Edited By: Ryan Carson
If a married couple decides to separate or divorce, both parties are entitled to what is called the equalization of net family property. This means that each spouse is automatically entitled to an equal share of the profits of that marriage. Barring a domestic contract between the spouses, either spouse can apply for equalization of family property under the Ontario Family Law Act (FLA).
Upon the breakdown of the marriage, in order to compensate the spouses fairly for the equal contribution during the marriage, the FLA states that the value of all assets acquired during the marriage will be divided equally. This will require one of the spouses to make an equalization payment to the other, in order to equalize the value of each spouse’s net family property. The purpose of equalization is to recognize that child care, household management and financial input are the joint responsibilities of the spouses and inherent in the marital relationship there is equal contribution.1
The first step in calculating equalization is to determine the valuation date. This date is typically the date of separation and is a fixed date, meaning there is very little discretion for the court to adjust the date. According to section 4(1) of the FLA, the valuation date is the earliest of; date of separation with no prospect of reconciliation, date of divorce granted, date of nullity, date of application for equalization due to improvidence, or day before death. In most cases, the valuation date is the date of separation.
The second step is to determine the net worth at valuation date. Once the valuation date is established, the parties must list all assets they have that would be considered property for purposes of the FLA, including any debts each party has. Some examples that would be considered property include but are not limited to life insurance, severance pay entitlements, partnership interests, future income from a trust and leasehold interests. It is important to note that professional degrees, licenses, and expectation of inheritance are not considered property for the purpose of equalization.
The third step is to determine the net worth at the date of marriage. Any assets owned before marriage are considered a deduction when calculating equalization, excluding the matrimonial home. A rule of thumb suggests that the more money you have coming into the marriage, the higher deductions you will have. The current value of the assets is irrelevant, as deductions are calculated in ‘date of marriage’ dollars.
The forth step is to calculate any exclusions in determining equalization. Any assets acquired during the marriage would be considered an exclusion. This may include property, other than a matrimonial home, that was acquired by gift or inheritance from a third party after the date of marriage. It is important for the spouse to keep their inheritance separate and have the testator (individual leaving the inheritance) specify that any income generated from the inheritance is to be excluded in such circumstances. In addition, a marriage contract entered into by the parties can state that property may be excluded, along with rights to proceeds from life insurance.
The fifth step is to determine the difference between assets on the valuation date and assets on the date of marriage for each party, then divide that number by two. This calculation gives you the net family property, and requires the party with the higher number to pay 50% of the difference to the party with the lower net family property number. The presumption at the end of the calculation is that there will be an equal division of value. However, there are cases where an unequal division of net family property will occur, meaning that there will be a variation from the 50/50 split. For example, if spouse A has calculated a net family property of $100,000, and spouse B has a net family property of $300,000, spouse B will pay $100,000 to spouse A, being 300k-100k=200k/2=100k. The court will only award an unequal payment under section 5(6) of the Family Law Act where the court is of the opinion that an equal split would be unconscionable, having regard to different factors.2 For example, if one spouse was found to be to be recklessly depleting their net family property, the court would intervene and may order an unequal payment in favour of the innocent spouse.
When calculating equalization for the purpose of net family property, it is important to pay attention to specific dates, including the valuation date, the date of marriage, and when items were received, inherited or purchased. It is also important to note section 7(3) of the FLA which sets out limitation periods for when an application can be brought forth by a spouse.3
Upon the breakdown of the marriage, in order to compensate the spouses fairly for the equal contribution during the marriage, the FLA states that the value of all assets acquired during the marriage will be divided equally. This will require one of the spouses to make an equalization payment to the other, in order to equalize the value of each spouse’s net family property. The purpose of equalization is to recognize that child care, household management and financial input are the joint responsibilities of the spouses and inherent in the marital relationship there is equal contribution.1
The first step in calculating equalization is to determine the valuation date. This date is typically the date of separation and is a fixed date, meaning there is very little discretion for the court to adjust the date. According to section 4(1) of the FLA, the valuation date is the earliest of; date of separation with no prospect of reconciliation, date of divorce granted, date of nullity, date of application for equalization due to improvidence, or day before death. In most cases, the valuation date is the date of separation.
The second step is to determine the net worth at valuation date. Once the valuation date is established, the parties must list all assets they have that would be considered property for purposes of the FLA, including any debts each party has. Some examples that would be considered property include but are not limited to life insurance, severance pay entitlements, partnership interests, future income from a trust and leasehold interests. It is important to note that professional degrees, licenses, and expectation of inheritance are not considered property for the purpose of equalization.
The third step is to determine the net worth at the date of marriage. Any assets owned before marriage are considered a deduction when calculating equalization, excluding the matrimonial home. A rule of thumb suggests that the more money you have coming into the marriage, the higher deductions you will have. The current value of the assets is irrelevant, as deductions are calculated in ‘date of marriage’ dollars.
The forth step is to calculate any exclusions in determining equalization. Any assets acquired during the marriage would be considered an exclusion. This may include property, other than a matrimonial home, that was acquired by gift or inheritance from a third party after the date of marriage. It is important for the spouse to keep their inheritance separate and have the testator (individual leaving the inheritance) specify that any income generated from the inheritance is to be excluded in such circumstances. In addition, a marriage contract entered into by the parties can state that property may be excluded, along with rights to proceeds from life insurance.
The fifth step is to determine the difference between assets on the valuation date and assets on the date of marriage for each party, then divide that number by two. This calculation gives you the net family property, and requires the party with the higher number to pay 50% of the difference to the party with the lower net family property number. The presumption at the end of the calculation is that there will be an equal division of value. However, there are cases where an unequal division of net family property will occur, meaning that there will be a variation from the 50/50 split. For example, if spouse A has calculated a net family property of $100,000, and spouse B has a net family property of $300,000, spouse B will pay $100,000 to spouse A, being 300k-100k=200k/2=100k. The court will only award an unequal payment under section 5(6) of the Family Law Act where the court is of the opinion that an equal split would be unconscionable, having regard to different factors.2 For example, if one spouse was found to be to be recklessly depleting their net family property, the court would intervene and may order an unequal payment in favour of the innocent spouse.
When calculating equalization for the purpose of net family property, it is important to pay attention to specific dates, including the valuation date, the date of marriage, and when items were received, inherited or purchased. It is also important to note section 7(3) of the FLA which sets out limitation periods for when an application can be brought forth by a spouse.3
Articles written by Stacey Staios:
Testamentary Capacity Aggravated and Punitive Damages Leaves of Absence in Ontario Co-Parenting In The Age of a Pandemic Corollary Relief Disability Accommodation in the Workplace
Estate Planning: A How To Guide Should You Consider A Cohabitation Agreement? What Is Wrongful Dismissal?
Disclaimer
The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this web site are advised to seek specific legal advice by contacting members of Carson Law, Carson IP, or their own legal counsel regarding any specific legal issues. Carson Law does not warrant or guarantee the quality, accuracy or completeness of any information on this web site. The articles published on this web site are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.
References
1 Family Law Act, s.5(7)2 Family Law Act, s.5(6)
3 Family Law Act, s.7(3)
Rent Control In Ontario And What We Need To Know
Assignment of an Agreement of Purchase and Sale
Bill 184 Is Now Official In Ontario
Author: Anika Helen - Paralegal
Edited By: Ryan Carson
Since mid-March, Ontario rental housing providers have been unable to evict tenants who were unable to pay rent due to the impact of Covid-19. Many people have lost their jobs and are still recovering from the impact, if at all. During the pandemic, the province had stopped evictions to protect tenants from being forced out of their home. As a result, landlords were not paid months of rent and many are still not receiving rent. Now, a bill has been passed to protect both landlords as well as tenants in times of hardship. The bill proposes a number of amendments to the Residential Tenancies Act, 2006 (RTA) and Housing Service Act, 2011. Following are the new updates to the legislations and details about what this new bill is about.
What Does This New Bill Entail?
Bill 184 is known as Protecting Tenants and Strengthening Community Housing Act. Bill 184 will require anyone with rent arrears to pay back their landlords in a structured repayment plan. The legislation before was structured to protect tenants from unfair eviction due to rent arrears, especially in the midst of Covid-19. However, as the health crisis eases and the suspension on evictions comes to an end, the legislation had to come up with a way to also protect landlords who have lost months of rent, and are still not being paid by many tenants. This bill provides options for landlords to make structured payments in order to pay back the amount of rent owed.
Changes In The legislation
Compensation from former tenants
At this point, landlords are permitted to apply for seeking rent arrears under Section 87 and 89 of the Residential Tenancies Act, 2006. Landlords can also seek compensation for over holding or damage to a rental unit where the tenant does not give up possession beyond the expiration of the lease. The legislation plans to permit landlords to use the sections to file an application even after a tenant has moved out of the rental unit. Landlords will have one year from the date their tenant has moved out to file an application with the Landlord and Tenant Board for compensation regarding any of the above situations.
This bill will allow landlords to seek compensation with respect to a tenant interfering with another tenant’s or another resident’s reasonable enjoyment of the premises. Landlords will be able seek compensation for the tenant’s failure to pay any utility bills for which they were responsible. Landlords have one year from the date the tenant moves out of the unit to file this application. Hence, the most important change to this part of the legislation is that landlords will be able to pursue an application for the above matters even after tenants have vacated the rental unit.
Increased fines for terminating a tenancy in bad faith
Before bill 184 passed, the Landlord and Tenant Board would take action when a landlord terminated a tenancy in bad faith. Landlords’ usual reasoning for ending a tenancy would be for personal use, demolition, conversion and substantial renovation. The board would order landlords to pay an equal amount of rent increase as a result of the tenant moving elsewhere, including moving expenses, storage costs or similar expenses. Landlords were also fined up to $35,000 in the case that they acted in bad faith.
What Bill 184 changes is that now, if a landlord ends a tenancy in bad faith, the board can order the landlord to compensate the former tenant in an amount equal to up to twelve months’ rent at the monthly rate last charged by the landlord.
Affidavits are required for applications to the Board to terminate a tenancy
Bill 184 requires landlords to swear an affidavit setting out the particulars of the reason for termination of tenancy. It can be any of the above-mentioned reasons, but the affidavit makes sure that any landlord who wants to terminate a tenancy in bad faith will be held accountable. In addition, landlords are now required to indicate whether or not it has been two years in between filing the present application and a previous one in case a termination notice was given before for similar reasons.
The Bill makes sure that a landlord does not act in bad faith considering the reasons for termination. It permits the Board to use a landlord’s previous use of notices of termination under Sections 48, 49 and 50 in determining whether or not they are acting in good faith in currently applying for termination of a tenancy under those same Sections. The important part of this is that the sworn affidavit will deter landlords from terminating tenancies in bad faith.
Penalties
Before Bill 184, Section 238(2) of the Residential Tenancies Unit provided that a corporation found liable for a breach of contract under the RTA are liable on conviction to a fine of not more than $100,000. Bill 184, however, increased this maximum to $250,000.
Position of Lawmakers
The government has stated that this bill will make it easier to resolve disputes while protecting tenants from unlawful evictions. The purpose of the bill is to simply protect both landlords as well as tenants. The changes being implemented will bring fairness to the system. Every eviction does not necessarily need a hearing at the Board, but a fair eviction in the case that a tenant does not pay back rent owed in bad faith, not because they cannot afford it. The changes to the legislation also protect tenants in the case that a landlord decides to terminate a tenancy in bad faith. Now, if a landlord acts in bad faith, the board will require them to compensate the tenant for hardship, in addition to receiving a large number of fines.
Position of Tenants
Tenants all over the province who currently rent are not happy with the bill. Many had lost their jobs when the pandemic started and many of them were not able to make rent payments. Activists and tenants all over the GTA are protesting this bill saying that it will lead to mass evictions, as not many people happen to have jobs right now. Tenants and activists are worried that once they arrear in rent payment, a structured payment plan will be implement for tenants to pay back the money to the landlord. Keeping in mind that when the pandemic started, none of the renters were forced to make rent payments as the board put a halt in filing applications for eviction. The idea was never that renters will not have to pay the rent ever again, but that once the economy started to get better, and people get their jobs back, tenants would have to come up with a payment plan for the months of rent they previously did not have to pay due to the pandemic.
Tenants are scared and they fear that they will be evicted and will not have a chance to present their case to the Board. According to tenants and activists, the bill puts renters and the working class in danger. People do not agree that landlords should be able to evict tenants in the case that tenants do not pay back the rent arrears that were incurred during the pandemic.
Comments
Though both sides have fair and justified concerns about the residential tenancy system, Bill 184 was not enacted to be unfair on any tenants going through hardship due to the pandemic. During the pandemic, landlords were simply not allowed to file any application for evictions related to rent arrears. That led to mortgage deferrals for a number of months before financial institutions decided to recently suspend that. Landlords will be forced to sell their homes, or pay mortgage out of pocket to keep tenants in the rental units. The bill is trying to support landlords in these hard times as well as trying to protect tenants. It is understandable that many might fear that it gives landlords the leverage to treat tenants unfairly. However, the bill makes sure that tenants are protected. As discussed above, landlords will not be allowed to evict tenants in bad faith, and if they do, they will be fined and will be forced to compensate. The bill does not open up disputes regarding unfair evictions. If a landlord takes any steps that treats a tenant unfairly, it is advisable that reach out to a legal representative for help. It is important to know what your rights are and options to make sure you are protected.
Articles written by Anika Helen:
When Are You Allowed To Evict A Tenant In Ontario? What Different Kinds of Damages are there in Litigation? Section 718.1 of the Criminal Code
Common Summary Conviction Offences Impact of COVID-19 on landlords and tenants Who is a litigation guardian and what are their duties?
Disclaimer
The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this web site are advised to seek specific legal advice by contacting members of Carson Law, Carson IP, or their own legal counsel regarding any specific legal issues. Carson Law does not warrant or guarantee the quality, accuracy or completeness of any information on this web site. The articles published on this web site are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.
When Are You Allowed To Evict A Tenant In Ontario?
Author: Anika Helen - Paralegal
Edited By: Ryan Carson
According to the Residential Tenancies Act, 2006, and the Rental Fairness Act, 2017, a landlord can evict a tenant only for certain reasons. Tenants can get evicted for doing things are not legally allowed to do in a rental unit. Some situations where a landlord can evict a tenant are:
Evicting a tenant for non-payment of rent or not paying the rent in full
When a tenant pays rent late and the rent is not paid in full by midnight of the day when it is due, the landlord does not have to accept partial payment. It is up to the landlord whether they want to accept the partial payment and how to proceed to recover the rest of the rent that is owed to them. Landlords can serve a notice that advises tenants to pay the remaining balance of the rent, or move out of the home. The notice gives the tenant 14 days to pay the rent or to move out. If the tenant takes neither of those steps, a landlord can then proceed to file an application with the Landlord and Tenant Board for an order that requires the tenant to pay the rent or evict the tenant in the case the rent has not been paid by the deadline outlined in the notice.
Evicting a tent for persistently paying the rent late
When a tenant is often late with rent payments, a landlord has the option of serving a Notice to Terminate a Tenancy at the End of Term. In most cases, 60 days’ notice is required for the termination. However, for daily and weekly tenants, 28 days’ notice must be given before the end of their lease or rental period. Alongside of serving the notice, a landlord can also apply to the Landlord and Tenant Board for eviction of the tenant, where a hearing is held to hear both sides and make a decision.
Evicting tenants for damage to unit or complex
A landlord may serve a notice of termination of tenancy if the tenant, another occupant who lives with the tenant, or a guest of the tenant willfully and negligently causes damage to the rental unit or parts of the rental unit. A notice of termination will outline the following:
Provide a termination date that is 20 days after the notice is served;
Require the tenant to repair the damaged property or pay for the costs of repair of the damaged property within 7 days after the noticed is served. If the costs of the repair of the damaged property are not reasonable, the tenant must then pay for the replacement of the damaged property
In the case that the tenant complies with the notice of termination and pays for the damages of the property within 7 days and causes no further damage to the property, then the notice of termination is void.
Evicting tenants for illegal activities
A landlord may provide a tenant with a notice of termination of tenancy if the tenant, an occupant that lives with the tenant, or a guest of the tenant carries out illegal act, business, trade or occupation and permits another person to do so in the rental unit. The notice provides 10 days for the tenant and their occupants to move out of the unit.
Evicting tenants for interfering with reasonable enjoyment
A landlord may provide a notice of termination of tenancy if the conduct of the tenant, an occupant who lives with the tenant, or a guest of the tenant interferes with the enjoyment of other occupiers in the residential complex. If the conduct interferes with another person’s lawful right, privilege or interest of the landlord of another tenant, they can be served with a notice of termination. This notice provides the tenant with 20 days to move out of the rental unit. However, in the case that the tenant or an occupant of the tenant stops the conduct or activity and causes no further issues, within 7 days of being received the notice, then the notice of termination is void.
Evicting tenants for too many persons living in the rental unit
A landlord may provide a tenant with a notice of termination if there are too many persons living in the rental unit. If the number of persons living in the rental unit exceeds the limitations of the rental unit, contravenes health and safety standards as well as housing standards required by law, then a notice of termination may be served by a landlord. This notice provides tenants with 20 days from the day they receive the notice, to move out of the unit. However, if within 7 days, the tenant removes the excess number of persons from the unit and complies with health and safety standards, or housing standards, the termination notice is void.
Evicting tenants for impairing the safety of others
When a tenant, an occupant who lives with the tenant, or a guest of the tenant carries out an activity to threatens or affects the safety of other tenants or landlord in the residential complex, a notice of termination of tenancy must be served by a landlord to a tenant. The notice provides the tenant with 10 days to leave the rental unit and end the tenancy. As soon as the landlord serves the notice, they can then proceed to file an application with the Landlord and Tenant Board to evict the tenant(s), or wait to see whether the tenant(s) move out of the rental unit by the termination date set in the notice of termination of tenancy. When it comes to safety of others, this notice does not give a chance to the tenant to rectify their behavior. Like most notices, this notice will not be void if the dangerous activities are stopped by the tenant(s).
Evicting a tenant for Landlord’s Own Use
A landlord is allowed to evict their tenant if the landlord requires the rental unit for the following reasons:
Their own use;
The use of an immediate family member. For example, children, wife, father, etc.;
And the use of a person who will provide care services to the landlord or to members of the landlord’s immediate family, who is also living in the same residential complex.
However, since September 1, 2017, a landlord has to compensate a tenant in an amount that equals to one month’s rent, OR offer the tenant another rental unit that is acceptable by the tenant, if the landlord serves a notice of termination for the uses mentioned above. Once the notice is served to the tenant, the landlord can then proceed to file an application with the Landlord and Tenant Board for an order to evict the tenant. However, when it comes to corporations or companies that own residential complexes, this section does not apply to them. Only an individual is allowed to evict tenants for their own use. Corporations are not permitted to evict tenants for the above-mentioned uses.
Evicting tenants for selling the house
A tenant can be evicted if their landlord sells the home. When it comes to a landlord’s residential property that was rented out, they can only evict the tenant if the new owner of the property will be using the unit for their own use, their immediate family members or someone will be providing care for them and their family members. However, if a landlord is selling their home and they have a tenant living in the property, they can keep the tenant IF the new owner would also be renting out the rental unit. The eviction will depend upon whether the new owners will be living in the property or whether it will be rented out. Once the landlord for eviction serves a notice, they can proceed to file an application with the Landlord and Tenant Board for an order of eviction.
Evicting tenants for demolition, conversion or repairs
A landlord may give notice of termination of tenancy if the landlord required the rental unit to carry out the following:
Demolish it;
Convert it to use for a purpose other than residential premises;
And do repairs or renovation that are so extensive that they require a building permit and vacant possession of the rental unit.
For this notice of termination, the landlord must provide the tenant with 120 days to evict the rental unit after the notice is served. A tenant may end the tenancy earlier than the 120 days provided by the notice, if they wish to. In this scenario, the landlord must compensate the tenant in an amount that equals to three months rent OR offer the tenant another rental unit acceptable by the tenant.
A landlord cannot lock a tenant out of their rental unit
A tenant has the right to stay in the rental unit until a landlord is able to get an order from the Landlord and Tenant Board for eviction. It is illegal to lock tenant(s) out of their rental units or the building. If a landlord is convicted of carrying out such activity, they can be fined up to $25,000 if the landlord is an individual, or $100,000 if the landlord is a corporation.
It is important to know your rights, and what steps to take whether you are a landlord or a tenant. If you think you need help in a situation that relates to any of the above mentioned scenarios, reach out to a legal representative and get proper guidance before you take any steps.
Disclaimer
The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this web site are advised to seek specific legal advice by contacting members of Carson Law, Carson IP, or their own legal counsel regarding any specific legal issues. Carson Law does not warrant or guarantee the quality, accuracy or completeness of any information on this web site. The articles published on this web site are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.
An Investment Conversation with Mark Baltazar from Peak Multifamily Investments
Ryan Carson and Mark Baltazar from Peak Multifamily Investments had a productive conversation about multifamily and commercial real estate investments that will be very informative not only for everyone, but especially first time investors!
Some topics included are:
Advice for first time investors
The ideal property type to invest in according to Mark
How has investing in multi residential changed since COVID-19?
With working from home now being more common, how will that affect the real estate market?
Have a question for Mark or want to know more about Peak Multifamily Investments?
Mark Baltazar Peak Multifamily Investments
Instagram: @mark_baltazar Instagram: @peakmultifamily
Facebook: Mark Baltazar Facebook: Apartment Building Investors Network
Sale of Canadian Property by a Non-Resident
Author: Warren Gilmore – Law Student
Edited By: Ryan Carson
If purchasing a property in Canada from a Non-Resident, the transaction will involve a unique set of tax concerns. It is important to have an understanding of your obligations, and to have them provided for in the Agreement of Purchase and Sale in order to avoid personal tax liability.
When a Non-Resident owner of property in Canada decides to sell, the CRA determines any yield in the value of the home that will be considered capital gains. As such, the CRA requires the Non-Resident Vendor to pay taxes on these gains. It is the responsibility of the Purchaser to perform a reasonable amount of due diligence to determine the residency classification of the Vendor. In conducting this due diligence, the Purchaser can request that the Vendor execute an “Affidavit of Residency.”
For the protection of the Purchaser, Agreements that involve these Non-Resident concerns usually include a clause that reads something to the effect of:
“The Purchaser is advised that the Vendors are Non-Residents of Canada and the Vendor's lawyer shall retain 25% of the purchase price in Trust until appropriate clearance certificates are issued by Revenue Canada. The vendor agrees to provide undertaking of such on closing.”
The Non-Resident Vendor is required to secure a clearance certificate from CRA before obtaining the entirety of the sale proceeds. This clearance certificate will outline how much of the sale proceeds are taxable, and are owed to CRA. While the clearance certificate cannot be applied for until all conditions have been fulfilled and the Agreement becomes binding, it is ideal to have this certificate in possession prior to the closing date of the transaction. This will allow all parties in advance to know exactly what taxes are owed, eliminating the need for a holdback. If this condition is not provided for and a clearance certificate is not obtained, the Purchaser will become the obligated party, and will be responsible for any taxes that CRA determines to be applicable to the transaction.
If a clearance certificate is not obtained before the closing date, the Purchaser and their lawyer should take the necessary steps to have the allotted portion of the sale proceeds remain in trust with the Vendor’s lawyer, pending a complete tax assessment from CRA.
The amount of the purchase price to be withheld is solely dependent on the nature of the subject property. If the subject property is determined to be non-capital, meaning that is was never used to produce income, and instead involved family residential use, then Section 116 of the Income Tax Act, provides that 25% of the purchase price is to be withheld. Alternatively, if the subject property is considered to be capital, and was used to produce income, the holdback allotment can increase to as much as 50% of the purchase price.
If this assessment reveals that no taxes are owed on the property, CRA will issue a clearance certificate, which permits the release of the sale proceeds that were being withheld. Conversely, if the CRA assessment revels that the transaction is indeed subject to taxes, then the amount owing will be deducted from the holdback amount. In total, this assessment period can take anywhere from 1-3 months to conclude.
Disclaimer
The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this web site are advised to seek specific legal advice by contacting members of Carson Law, Carson IP, or their own legal counsel regarding any specific legal issues. Carson Law does not warrant or guarantee the quality, accuracy or completeness of any information on this web site. The articles published on this web site are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.
Ask A Lawyer!
Recently, Ryan was able to sit down (virtually) with Matt McKeever, a Real Estate Investor and Entrepreneur to answer questions that viewers, like you, had about the real estate market and incorporating a real estate business.
Check out the information packed videos below!
Canadian Real Estate Lawyer Advice For First Time Buyers
Should I Incorporate My Real Estate Business? | Ask A Real Estate Lawyer
Is Wholesaling Real Estate In Canada Legal?
If you enjoy these videos, let us know! We will continue to produce informative content to help you in any way we can.
Have a question for or want to know more about Matt Mckeever?
Instagram: http://www.instagram.com/mattmckeever85 Twitter: https://twitter.com/mattmckeever85 Business Inquires: mattmckeeverbusiness@gmail.com ►SUBSCRIBE: https://www.youtube.com/channel/UCdRtqnqBSq4GY7DGiYICu5g?sub_confirmation=1
Understanding Construction Liens
Author: Sarah Nadon – Law Student
Edited By: Ryan Carson
On July 1, 2018, the Ontario Construction Lien Act changed its name to the Construction Act. This name change allowed the Act to represent a broader scope of topics. While much of the Act remained untouched, several key components were changed. These amendments now drastically change the scope of the law governing the construction industry.
There are a number of factors that come into play when determining when a construction lien expires. There are three important time frames to consider:
Preservation of lien deadline;
Perfection of lien deadline;
Two-year limitation period to set action down for trial.
Preservation
The initial step to pursuing a construction lien claim is to preserve the construction lien by registering it against the title of the land. While most liens need to be registered, there are certain circumstances where the lien needs to be served.
In order to calculate the deadline for preserving a lien, it must be determined whether the individual was a contractor or another person (ex. supplier, subcontractor). If the individual is in fact a contractor (a person who supplied directly to the owner), the lien expires 60 days after the publication of the Certificate of Substantial Performance of its contract or the date of which the contract was completed or abandoned, whichever occurs first. Previously, in the old Act, this was a 45-day period.
Perfection of a Lien
Registering a Claim for Lien, preserves the lien and temporarily extends its life. A preserved lien has 90 days to be perfected or else it will expire. The lien must be perfected 90 days from the last day on which the lien could have been preserved. The time to perfect a lien was extended from 45 days to 90 days, giving the individual 150 to register and perfect a lien.
Pursuant to subsection 36(3) of the Act, if the lien attaches to the property, the lien is perfected by issuing a Statement of Claim and by registering a Certificate of Action on title of the property. If the lien does not attach to the premises, such as Crown land or a railroad crossing, it is perfected by starting an action to enforce the lien. In some circumstances a lien may be perfected by sheltering under the perfected lien of another claimant.
The action is started when the Statement of Claim is issued in a court office in a country in which the property is located. Unlike the Rules of Civil Procedure, which requires that a Statement of Claim be served within a six-month period, a lien must be served within 90 days of the claim being issued.
Due to the new act, lien claims with a value under $25,000 will be referred to the Small Claims Court. The objective of this is to make the court process less expensive and easier for the claimants to resolve their disputes.
Two Year Limitation Period
Once a lien is perfected within the time limits set out in the Construction Act, it is important to note the two-year limitation to set the action down for trial. If the lien is not set down for trial within the two-year limitation period, a motion may be brought to declare the lien as expired and to have the action dismissed.
Articles written by Sarah Nadon:
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Disclaimer
The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this web site are advised to seek specific legal advice by contacting members of Carson Law, Carson IP, or their own legal counsel regarding any specific legal issues. Carson Law does not warrant or guarantee the quality, accuracy or completeness of any information on this web site. The articles published on this web site are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.
The Prudent Real Estate Investor’s Legal Checklist
Author: Warren Gilmore – Law Student Edited By: Ryan Carson
Real estate investing has long been a lucrative business practice. Whether you are new to the business, or already have multiple properties, it is important to make sure that you have the necessary legal safe guards in place. In order to best protect yourself and your business, there are many important legal steps that the prudent real estate investor should investigate and consider implementing into their business operations.
Incorporation
Incorporating your business requires transitioning your sole proprietorship in the business into a company that is recognized formally as a corporation. When a company incorporates the business becomes its own legal entity, separate from the individuals that that make up its ownership. Incorporating also helps to protect the personal assets of the individual business owners in the instance that judgements or other enforceable debts are registered against the company.
In Ontario, incorporations are governed by the Business Corporations Act, 1990. This act requires that all shareholders within the corporation are to be registered as such. Shareholders are those individuals who make up ownership of the company. When the corporation is created, a specific number of shares must be established and issued proportionately to the individual shareholders. The act further requires that a corporation must have at least 1 shareholder, but no more than 50.
All of these advantages of incorporating apply to the practice of real estate investing. Considering the value of real estate, once your operation reaches a certain size it makes a tremendous amount of sense to protect yourself and your partners by incorporating.
JV Agreements
A Joint Venture Agreement works to join together two or more parties, either individuals or corporations, who desire to enter into a limited business arrangement or a single project. The most common example of this arrangement we see in the real estate world involves parties coming together to combine their resources in order to invest in property. For example, Party A and Party B come together in order to purchase a multi-unit rental property. All parties to such an arrangement agree to pool together their resources and to share in the overall performance of the project, including any profits and losses.
Joint Venture Agreements are intended to clearly outline the responsibilities and expectations of the parties as they pertain to the current project. The agreement should further outline the specifics of the project itself, the contributions, both operational and financial, and the specific obligations of each party.
If you find yourself investing with other individuals, or even other companies on individual projects, a Joint Venture Agreement should be considered. An experienced lawyer can help to ensure that all your concerns are clearly and effectively addressed in order to best protect your interest in a given project.
The Transactional Process
If your business operations involve multiple purchases and sales of properties, having an experienced real estate lawyer that you know and trust is another essential tool to have in your company toolbox.
When purchasing or selling a property, a real estate lawyer will help to represent your interests in the particular transaction. They will communicate directly with the lawyer representing the other party to the transaction. They will work to resolve any issues that might arise between the parties before, during, and after the transaction has closed. This might involve the fulfillment of particular conditions to the agreements, or any breaches to the agreement that may arise.
Additionally, a real estate lawyer will help you to navigate many potential speed bumps that often present themselves when purchasing real property. A real estate lawyer will work to discover any potential title issues that might exist on a prospective property and take the necessary steps to resolve them.
Further, depending on the nature of the investment property itself a real estate lawyer can help you put into place other legal safeguards for your investment. For example, if investing in a rental property, a real estate lawyer will not only be able to assist you with the closing of the transaction, but also to put in place the necessary rental agreements with tenants renting the property.
Whatever the particulars of any given real estate investment, it is essential to have an experienced real estate lawyer in your corner.
In summary, the nature of investing in real estate requires a significant degree of due diligence, as large sums of money are involved. The legal components mentioned here are all essential aspects of the overall process of ensuring that your business maintains an optimal level of legal protection.
Disclaimer
The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this web site are advised to seek specific legal advice by contacting members of Carson Law, Carson IP, or their own legal counsel regarding any specific legal issues. Carson Law does not warrant or guarantee the quality, accuracy or completeness of any information on this web site. The articles published on this web site are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.
.Non-Resident Speculation Tax
Author: Warren Gilmore – Law Student
Edited By: Ryan Carson
In 2017, the province of Ontario implemented a specific tax on foreign real estate buyers, the Non-Resident Speculation Tax. The tax works to impose greater financial burdens on foreign real estate purchasers, providing for a tax rate of 15% in addition to the purchase price of residential property. The tax applies specifically to residential properties located in the Golden Horseshoe area, effective as of April 21, 2017. Agreements of Purchase and Sale that were signed prior to this date, and that were not assigned to another party after this date, are not subject to the Non-Resident Speculation Tax.
The tax is intended to deter foreign buyers from purchasing residential property in an effort to moderate the skyrocketing housing market in the Golden Horseshoe area. Foreign investors have long found the housing market in these areas of Ontario to be a safe and attractive place to invest their foreign dollars. This practice has caused the value of homes in these areas to inflate, somewhat artificially. As a result, residential property in these areas are often out of reach for the everyday local residents of these communities. The Non-Resident Speculation Tax helps to relevel the playing field, and works to moderate residential real estate prices, making them more affordable for local residents.
The Non-Resident Speculation Tax is applied to foreign buyers, any individuals who are neither Canadian Citizens, nor Permanent Residents. The tax is also applicable to foreign corporations, those with corporate nerve centers outside of Canada.
Taxable trustees are also subject to the Non-Resident Speculation Tax. This typically includes trusts which have one or more trustees considered to be a foreign entity, or if the direct beneficiary of a trust is an individual considered to be a foreign entity.
However, purchasers who have been subject to this tax may be entitled to a rebate in the instance that they meet particular exempting conditions provided for in the legislation. These exemptions include:
If the buyer within 4 years of the real estate purchase closing date, becomes a Canadian Citizen or a Permanent Resident.
If the buyer is also a full-time student at an educational institution, at a campus located in Ontario for at least 2 years.
If the buyer has been legally employed in Canada for a least 1 year.
Individuals applying for one of these exceptions are also required to abide by the following conditions:
The buyer must hold title to the subject property either exclusively, or exclusively between themselves and a spouse.
The buyer is required to occupy the subject property as their primary resident for a minimum of 60 days beyond the closing date of the transaction.
The buyer must submit their application for an exception rebate no longer than 4 years after the closing date of the transaction.
The Non-Resident Speculation Tax may even have an effect on Canadian citizens in certain respects. If residential real estate is purchased through a partnership, where one of the partners is considered a foreign entity, the entire purchase will still be subject to the 15% tax. The tax is not imposed proportionality to the particular interest held by the foreign entity. In other words, if any member of a partnership is without an exemption to the tax, the tax will be fully applicable to the entire transaction.
Should you find yourself in a situation where the prospective purchase of residential property may be subject to the Non-Resident Speculation Tax, it is imperative that you meet with a lawyer to determine your potential eligibility for any of these exemptions. At Carson Law we can help you navigate these concerns, in part of an overall plan to best protect your interests.
Disclaimer
The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this web site are advised to seek specific legal advice by contacting members of Carson Law, Carson IP, or their own legal counsel regarding any specific legal issues. Carson Law does not warrant or guarantee the quality, accuracy or completeness of any information on this web site. The articles published on this web site are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.
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