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Tag: Law

Can a lender charge a mortgage pre-payment penalty under Power of Sale proceedings or once the mortgage term has matured, regardless if it is an Open or Closed Mortgage?

Under section 17 of the Mortgages Act, and pursuant to relevant case law the answer is “Yes” the lender can.  Subject to the wording in the original mortgage commitment/agreement, you will often find that lenders will charge 3 months interest pre-payment penalty if they have to enforce the mortgage via a power of sale proceeding or if you neglected to renew the mortgage once the term has expired and have failed to pay the lender out (within the time allotted pursuant to the lender’s notice).  Also, often enough, the original mortgage commitment/agreement will have qualified wording for “Open” mortgages stipulating that so long as the borrower is not in default, the borrower will be able to pre-pay the mortgage in whole or in part without a penalty or bonus.  However, once in default, a lender can demand the penalty payment of three months’ worth of interest calculated on the then outstanding principle balance, even if your mortgage is an Open one.In relevant case law the courts have often ruled in favor of the lender on disputes over its right to charge penalties pursuant to section 17 of the Mortgages Act, where the borrower was found in default of payment of any principal or interest money. 

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Real Estate law: Can You Refuse to Close if Your Condominium Square Footage is Less Than You Bargained For?

In real estate law, representations are very important elements to any agreement of purchase and sale.  Typically the party selling the property will represent things such as the size of the land, the size of the dwelling, that the chattels and fixtures included in the purchase price are free and clear of encumbrances and in working order, etc.  In law, a representation is defined as a statement of past or present fact without the statement necessarily also being a promise, although the law has recognized that a representation can be both a promise and a representation.  While the topic of representations in contracts is extremely comprehensive, 756289 Ontario Limited et al. v. Milan Harminc, (1998) CarswellOnt 1577, 98 G.T.C. 6206 (“Harminc”) is one example of where a representation affected a real estate transactions with respect to the representation of square footage.Harminc is a case wherein a buyer purchased a commercial condominium property from a builder.  The buyer refused to close and the builder sued the buyer for breach of contract and sought damages.  While the defendant buyer advanced a number of arguments for his defence, the case turned on whether the builder misrepresented to the buyer the square footage of the property and if so, whether that misrepresentation was material enough to entitle the buyer to rescind the contract and refuse to close.

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Real Estate Law: Choosing a Real Estate Lawyer and Understanding Fees

Often clients will shop around for legal services as if they were a commodity and not a service and therefore the lowest price is the only consideration in their decision.  Like almost any good or service, you often get what you pay for!When looking for a real estate lawyer, one should always ask the following questions:1)     Am I going to be communicating with my lawyer directly or strictly his support staff?2)     How often or timely will my Lawyer address my questions or concerns?3)     Will my Lawyer properly search the history of title to my property, including    searching abutting lands, in addition to off-title inquiries?4)     Will my Lawyer order a property tax certificate or rely on title insurance?  Leaving me as the new owner to chase any shortfalls from my insurer.

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Real Estate Law: Easements Affecting Your Property

Simply defined in the Blacks law dictionary, an easement is an interest in land owned by another person, consisting in the right to use or control the land or an area above or below it, for a specific limited purpose.  Often, easements are registered on title thereby granting or assigning rights to use the subject lands for a specific limited purpose.  A common easement registered on title grants access to utility companies and municipalities onto a subject property in order to service and maintain a specific utility or the lands, whether its cables for phones and internet or pipes for gas and water.  An easement could potentially hinder the enjoyment and use of a property and therefore can become a contentious issue during the course of a real estate transaction.The standard OREA agreement of purchase and sale (“Agreement”) contains a clause called “Title” and it states:

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When to File a Terminal Tax Return

The due date for the terminal return depends upon the date of the deceased’s death:1) For a death prior to November, the terminal return is due by the following April 30, or June 15th if the deceased had business income. The deadlines are the same for individuals alive throughout the tax year.2) For a death in November or December, the terminal return is due six months from death (ITA, s. 150(1)). There is also a specific rule in respect of the return for the year preceding the year of death, which the personal representative will often have to file if the deceased has been ill before death or has died early in the year.

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Taxation of an Estate as a Trust

Upon the death of a taxpayer, a T3 trust tax return is prepared, as well as a report of the income earned by the estate after the taxpayer’s death and before the distribution of the estate to beneficiaries are to be submitted.An estate cannot allocate its capital gains to its non-resident beneficiaries. Instead, they are to be taxed within the trust. In view of this, if the estate is immediately distributable, the estate could calculate its income, allocate all of the income to the beneficiaries (by issuing a T3 supplementary slip), take a deduction from its income of the amounts so allocated, and in the end file a return showing that there is no taxable income.It seems that the personal representative is required to file a return for income of the estate as a trust in situations where the trust generates income (ITA, s. 150(3); Income Tax Regulations, s. 204(1)). The administrative policy of the CRA is not to insist on the trust to file a return in circumstances when:

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Trustees: Distributions and Payments to Minor Children

Wills containing benefits held in trust for minor children would usually include clauses authorizing the estate trustee to distribute from the child’s trust directly to the child’s parent, custodian, or guardian. With the exception of a relatively small amount, the Office of the Children’s Lawyer is likely to question the validity of such distribution.Normally, an estate trustee cannot delegate fiduciary obligations to someone else, despite the presence of such clauses in wills expressing the testator’s intention that such delegation can occur. Considering the limited permissive distributions pursuant to s. 51 of the CLRA, only an appointed trustee can possess and spend trust funds on behalf of the minor child. Should a parent intend that the custodian or guardian receive distributions from the estate trustee for the benefit of a minor child, the will should expressly appoint him or her as a sub-trustee for such purpose, giving rise to all the obligations that flow from the appointment of a trustee. If this is not done, the estate trustee could be charged for breach of trust. In any event, the custodian or guardian is accountable as a de facto trustee.

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Guardians of the Property of Minor Children

No one, including parent or custodian, has an inherent right to possess or control property or assets otherwise belonging to a minor child. They can, however, apply to the court to be appointed as a guardian of that minor child’s property. While it may seem rare for minor children to own property of any significant value, many minors come into vast fortunes through testamentary gifts from others. A financial windfall for a minor can occur when a surviving parent dies intestate or with a valid will failing to authorize the estate trustee to retain a minor child’s inheritance in trust and administer the trust during the child’s minority. In such an instance the estate trustee is generally required to pay into court the estate funds to which the child is entitled. Likewise, an untimely death may entitle a minor child to life insurance proceeds (where a trust has not been established for those proceeds when making a beneficiary designation), or may give rise to the payment from the so-called “orphan’s” benefits from publicly or privately funded pension schemes. Without a court appointed guardian, such entitlements (with the exception of amounts qualifying under s. 51 of the CLRA) would be paid into court to the credit of the minor child and be held there during the child’s youth or until a subsequently appointed guardian of property makes a successful application to control those monies.

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Guardians Chosen in a Will, and the the Children’s Law Reform Act

Guardians, Custodians, and the Children’s Law Reform ActConventionally, “guardians” of minor children are whomever the parent has named in his or her will to take care of, and have “custody” over, the children after the parent’s death. In view of this, such appointees are “custodians” in waiting and not “guardians” at all, despite the fact that “custodian” is not a term specifically defined in the Children’s Law Reform Act (CLRA). A “guardian” is a person who has guardianship of the property of the minor.According to s. 61(1) of the CLRA, the father and the mother of a minor child are equally entitled to custody of the child. So long as a parent has not lost custody of a minor child by order of a court, no court order is required to bestow the right of custody on a surviving parent. After the enactment of the Children’s Law Reform Amendment Act, 1982, on October 1, 1982, the father and mother of a minor child have been permitted by will to “pass on” the statutory right to custody which each enjoys. Under s. 61(4)(a) of the CLRA (which is the consolidated

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Taxation at Death: Using Rollovers to Defer Taxes

RolloversAccording to the Canadian Income Tax Act there are two circumstances under which death need not bring forth a deemed realization of non-depreciable capital property or depreciable capital property:1) Outright transfer to a spouse, or transfer to a qualifying spousal trust; and2) Intergenerational transfer of farm property.In these examples the transferee would acquire the property at the deceased’s tax cost. It allows a deferral, but not an elimination, of the capital gain (and recaptured depreciation) until an actual or deemed realization by the transferee takes place. This is preferred because taxes are deferred and can be properly planned for. With respect to RRSPs, outright transfers to spouses also can avoid a deemed disposition.Transfers

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