Saving Your Client Money in a Real Estate Transaction

This weeks blog post is definitely not legal advice, however growing up in the Real Estate industry for the past 34 years, there are definitely a few ways I have discovered that both Realtors and Lawyers can add value to their clients transaction:

Negotiate from a position of strength – in short, ensure that your client has done everything they can do to help a deal move forward. This includes obvious things like obtaining a pre-approval and limiting subject conditions only to “bare essential items” (like title review, strata docs, home inspection, financing). However, taking this to the next level means having this discussion with your client:

1. What is the BEST outcome if the deal does NOT go through? And
2. What is the WORST outcome if the deal does NOT go through?

These two questions very quickly get to the heart of your client’s motivation.

Setting good dates – everyone wants to close at the end of the month, this means that you client is just one of many people needing services from lawyers, movers, strata companies. The best advice here is to remove subject conditions at least 30 days prior to closing, and have closing occur on the "off-weeks" during a month (ie; those weeks that do not contain the 15^th or 30^th).

Knowing the Local Area – there are many areas in the Central Okanagan where housing costs will be dramatically different for a number of reasons that are not immediately apparent from the listing, for example:

1. Are you too far from a fire hydrant/ protection area to obtain cost effective fire insurance (Some parts of the Upper Mission)?
2. Does the area you are in have such poor water quality which will necessitate you bringing in outside sources (ie; Glenmore – Ellison Irrigation District)?
3. Does the smaller municipality mean that you property taxes are going to be markedly higher (ie; Lake Country, Peachland)

Search out Hidden Costs

1. Get a good home inspection, but then get a follow-up expert inspection if anything substantive arises (ie; roof, foundation, building envelope/ water, electrical, plumbing).
2. Get to know your strata council – everyone reads strata docs, this is standard. However don’t be afraid to take the extra step of calling the Strata Council President, you’d be surprised what doesn’t make it into the minutes.

Dealing with Divorcing Clients - Fiduciary Obligations

As a professional, dealing with clients who are undergoing a divorce is always very difficult. Recently there was a local news story highlighting some these issues (http://www.chbcnews.ca/kelowna+lawyer+suspended+from+practice/6442483996/story.html)

As Agents where we know a client is undergoing a divorce it is important to get clear and unequivocal instructions from "your client". Realtors and Lawyers owe a duty of care to their clients, this includes, in the context of a Divorce, duties of:

1) Full Disclosure - to BOTH parties (for example, cc the other spouse on ALL emails)
2) Undivided Loyalty - You cannot favor the interests of one spouse over another
3) Confidentiality - Without your client's permission, you have to keep your conversations with both spouses confidential and not publicly disclose that information (ie; the fact that they are getting a divorce).

A caveat - the fact that there is an ongoing divorce proceeding MUST be disclosed to the lawyer representing the separating parties (who also must keep the information confidential) as this effects the legal work that needs to be done at closing.


Failure to ensure that both spouses are "on board" will quickly "scuttle" a real estate deal. For Realtors this means getting CLEAR and UNEQUIVOCAL instructions, preferably written, from both spouses. This is even true where only one spouse is "on title".


At Pihl Law Corporation, upon file opening we always ask all our clients whether they are aware of a pending family dispute among the parties as this is such an important issue. Both spouses must sign and approve an "Order to Pay" which sets out all deductions from the purchase price (including commissions and legal fees).

A Commercial Landlords Remedies Under a Valid Lease

 A landlord has five basic options when a commercial lease goes into default:

1. affirm the lease and sue for amounts due;

2. affirm the lease and distrain the tenant’s goods on the premises for rent in arrears;

3. terminate the lease and re-enter the premises;

4. affirm the lease and relet the premises on the tenant’s account; or

5. negotiate a surrender of lease.

Importantly: Choosing one of these options will often foreclose the possibility of choosing another alternative, therefore it is often in your best interest to discuss these options with your lawyer prior to proceeding.

1. Sue for Amounts Due:

The landlord can refuse to accept the repudiation of the lease by the tenant and do nothing to alter the relationship of landlord and tenant. The landlord can then insist on performance of the terms under the lease and sue for rent or damages on the basis that the lease remains in force.

2. Distress when rent has not been paid:

If the lease has not been terminated and the tenant owes rent, the landlord may seize the tenant’s goods at the leased premises and hold them as security for payment of the outstanding rent.

A landlord cannot distrain a tenants' fixtures or improvements. A fixture is personal property that is attached to land or a building and is regarded as an irremovable part of the building.  A landlord can then sell the seized moveable property (chattels) and apply the proceeds of that sale to the outstanding rent.

A landlord must be careful not to commit an illegal distress. An illegal distress occurs when:

1. there is no tenancy (if the possession is characterized as a mere license or other interest); 
2. no rent is due; or 
3. rent is due, but:

a. the landlord has terminated the lease;

b. the landlord or the bailiff break into the premises, or enter during a prohibited period;

c. exempt goods are seized, such as personal property of someone who is not the tenant;

d. the distress is made more than six months after the end of the term;

e. the landlord continues the distress after the tenant tenders the rent and costs of the distress; or

f. goods are seized off the premises when not permitted

When dealing with large items, a landlord should have a bailiff state that the goods are seized, secure and sell the property on the premises rather than removing them. If the tenant retakes them, then the landlord can recover damages and costs.

3. Re-entering and Terminating the Lease

The landlord will have terminated the lease if the landlord's actions made it clear that the landlord had no intention of allowing the tenant to re-enter the premises again or to carry on with the lease unless the money owing was paid. Once a tenancy is terminated and the landlord has taken possession of the premises, the landlord is then only able to sue only for rent due or for damages for breaches of covenant committed before the date of termination.

4. Affirming the Lease and Re-letting the Premises

The landlord can refuse to accept the repudiation or abandonment of the lease, but advise the tenant that it will re-enter the premises and re-let the property “on the tenant’s behalf”. The landlord then holds the tenant liable for any deficiency in rental for the balance of the lease term.

                         

This is foregoing is generalized information only and not legal advice for any particular set of facts.

For more information, please contact Peter Borszcz at PIHL Law Corporation:

Peter.borszcz@pihl.ca

250-762-5434

Twitter: @pihllawcorp