Who Should be on Title?

When buying a house, you must decide whose name will go on title. Will you be the sole owner? Should you be on title at all? Will you and your spouse go on title together? If so, will you be joint tenants or tenants in common? What about your children?

What is the difference between Joint Tenancy and Tenancy in Common?

Joint Tenancy means that two or more people own property in equal undivided portions, with an equal right to use the whole property. When one joint tenant dies, the property is transferred to the surviving joint tenant immediately before the moment of death. This means the property does not become a part of the estate of the person who died and the property will not be subject to probate fees, will not be taxed as a part of the estate and will not be distributed among the beneficiaries of the estate.

Joint tenancy is generally preferred for most spouses.

If two or more people own property as a Tenancy in Common, it does not have to be divided equally. Tenants in Common can own different proportions of the property, for example ¼ and ¾, and they can sell or mortgage their portion as they please. If one tenant in common dies, that person’s share of the property becomes a part of the deceased’s estate. It is subject to probate fees and it will be distributed to the beneficiaries of the deceased’s estate. As you can imagine, property can be a difficult thing to “distribute”.

Tenants is generally preferred for blended families and other unique arrangements (like a shared vacation cottage).

Can I hold title in only one name, excluding my spouse or common law partner?

Having title in your name does not always mean you are the only one with an interest in the property. If you are in a relationship and have been living together for at least two years, your partner may have a claim to part of the property even though they are not on title.

If you are a self-employed professional, you want to protect your assets from any business creditors. Some people attempt to protect their assets by placing title in their spouse’s name or have title held by a holding company.  This protection is not absolute and most bank will require a spouse to, at the very least be a Guarantor or Covenanter on the Mortgage.

What about going on title with my Adult Child ?

If you are thinking of holding a property in joint tenancy with an Adult Child for estate planning purposes, you should consult a lawyer. There can be many unintended consequences and pitfalls for such an arrangement. For example:

-loss of control: you cannot sell or mortgage without the consent of the child

-taxes: there may be capitals gains consequences for the parent or the child

-property transfer tax: depending on whether the property is a principal residence, you may have to pay property transfer tax

-creditors: the property will be at risk to claims by the child’s creditors

-uncertainty: it is possible that you may not be successful in creating a joint tenancy if the child does not live in the house. The joint tenancy may be unintentionally severed by a number of events.

Property Transfer Tax: First Time Home Buyers

First time home buyers get an exemptions from paying the property transfer tax and this "tax break" can save FTHB thousands of dollars. However, First Time Home Buyers need to carefully ensure that they qualify for this tax savings. Persons claiming a FTHB credit are regularly audited by the PTT Office.

The Criteria to Qualify are as follows;

Purchaser must:
a)  be a Canadian Citizen, or a permanent resident as determined by Immigration Canada,
b) have lived in British Columbia for 12 consecutive months immediately before the date
you register the property, or you have filed 2 income tax returns as a British Columbia
resident during the 6 years before the date you register the property,
c) never owned an interest in land anywhere in the world at anytime,
and
d) you have never received a first time home buyers’ exemption or refund.

The Property you purchase must also qualify as follows:
a) the price must be less than $425,000
b) the land must be less than 0.5 hectares (1.24 acres), and
c)  the property will only be used as your principal residence.

Importantly, if you sell the property or acquire a new principal residence within 12 months of purchase, you will lose the exemption and the Province will demand for the tax to be paid.

More information here:
http://www.sbr.gov.bc.ca/documents_library/brochures/firsttimehomebuyer.pdf

Key Supreme Court of Canada Case for Developer Disclosure

In the last few years, there had been a landslide of litigation over pre-sale contract under the Real Estate Development and Marketing Act. In a recently released Supreme Court of Canada case (Sharbern Holding Inc. v. Vancouver Airport Centre Ltd., 2011 SCC 23) , the Supreme Court critically defines what information is "material" and gives rise to a disclosure obligation what does not.

Under the terms of the Real Estate Act (now the Real Estate Development and Marketing Act), a Developer MUST disclose all material information, which means:

"Information is material if there is a substantial likelihood that it would have been considered important by a reasonable investor in making his or her decision to invest. In other words, information is material if there is a substantial likelihood that its disclosure would have been viewed by the reasonable investor as having significantly altered the total mix of information made available."

One of the critical points here is that the standard is that of a "reasonable investor" meaning that it is an objective test, and not subject to the variety of factors which may motivate individual purchasers.

Critically Developers who make a false statement in a disclosure statement will be provided a defense where:

"the statutory defence contained in s. 75(2)(b)(viii) of the Real Estate Act would preclude [a developer] from being found liable under s. 75(2). To rely on the defence, [a developer] had to show that it subjectively believed the representations it made were true and that it objectively had reasonable grounds for such a belief."

Developers who use and reasonably rely on experts to produce the information in their disclosure statements may have a defense under this provision.

Sales of Waterfront Property

Who Owns the Water?

All water in BC is owned by the Crown and strictly regulated. As property lines extend to, but do not include the foreshore, the upland owner has no rights to use or “possess” the water, only a right to access. A license from the Provincial Crown is require to use/ possess.

Waterfront Boundaries Can Change

The Crown owns all property which exists below the high water mark therefore if the high water mark changes, the property boundaries will change. A new survey is required to re-define the property after erosion (loss) or accretion (gain), especially for:

1. Property tax issues
2. Building on property (building envelope)
3. Building on water (dock location)

General Public has a Right of Access to Foreshore.

In Minor v. Van Ewyk, 2008 BCSC 558 the Court said that “the foreshore is open to public use…. The only rights the [land owner] may assert are her common law riparian right to unrestricted access to and from the water frontage, and the right conferred under a “License of Occupation””.

Dock Licenses

As Docks occupy Crown Land, a License is required for a legal dock. A License is a Personal Right and is not transferred with a transfer of the upland. There are Three Types of Dock Licneses commonly found on Okanagan Lake

A. License of Occupation (pre-2008)

B. Specific Permission (non-exclusive)

C. Water Lot Lease (exclusive occupation)

Importantly, unlike other some other lakes in BC, there is no General Permission on Okanagan Lake to build a dock!

The License will often have Limitations, for example:

A. Not to interfere with other rights or navigation (Fixed Impediments)

B. Environmental Covenants

C. Limitations on Use (# of slips/ commercial v. residential)

D. Cannot interfere with Public Access

E. No “non-moorage” purposes, incl.: patios, sundecks, hot tubs, roofs/ gazebos.

Assignment (Sales) of Dock Licenses

As a License is NOT conveyed with land, must be assigned

Suggested Contract Language:

The Seller assigns and the Buyer assumes all right, title and interest to the License of Occupation [or Permission] #19978722 with the Province of British Columbia, a true copy of which is attached to this Contract, for, inter alia, the Dock adjoining the property.

The Seller represents and warrants that the License of Occupation [or Permission] #19978722 is in good standing.”

Important Note: Consent of Province to the assignment often will be required and may be denied

Deposits on Residential Real Estate Contracts

A DEPOSIT is usually made from the BUYER in the BUYER’s AGENTS trust account and is held according to the stakeholder provisions of the Real Estate Services Act.

This means that the DEPOSIT can generally ONLY be released prior to completion where:
a) it is paid into COURT or in accordance with a COURT ORDER; or
b) by WRITTEN AGREEMENT of the parties.

Currently, there is a “gap” in RESA whereby a Buyer who does not remove his subject conditions could be faced by a stubborn Seller who refuses to release the deposit. This would force the Buyer (who doesn’t want the home anyway) to go to Court to get his deposit returned. In light of this I recommend that Buyer's do not make a deposit is made until subject removal.

The BC Court of Appeal expanded our understanding of “Deposits” in the recent case of Agosti v. Winter 2009 BCCA 490. The court distinguished between true deposits (amounts up to 10% of the purchase price) and excessive deposits. Absent other evidence, EXCESSIVE DEPOSITS (over 10%) may be characterized as punitive by the court and subject to “review and relief” under the Law and Equity Act.

With TRUE DEPOSITS, the court upheld the general rule that a true deposit is “earnest money” and is forfeit in the event of the Buyer’s failure to complete. This upholds the “ordinary meaning” of the word deposit and is reinforced by words such as “non-refundable” and “absolutely forfeited” upon breach by the Buyer. According to the Court, a Seller would be able to claim the TRUE DEPOSIT, even if such amount did not amount to a genuine pre-estimate of damages.

Importantly, this decision did not LIMIT the liability of the non-completing BUYER to the deposit amount alone. If forced to litigate, most Sellers are likely to seek amounts over and above the deposit, including (but not limited to) loss of profit, re-marketing costs, upkeep costs, and interest costs.

How can Realtors advise their clients?
a) no deposit should be made until subjects are removed;
b) a maximum deposit of 10% to ensure the deposit is a TRUE DEPOSIT;
c) once made to the brokerage, inform client that the deposit can ONLY be returned according to RESA; and
d) the minimum claim of a Seller in breach is likely the deposit amount, however the maximum claim may be substantially higher.

Addenda:
The Professional Standards Manual says that Listing Agents should, if no deposit is received, "advise sellers of the merits of a deposit being received from buyers". "Merits of a Deposit" is difficult language for Realtors and it will necessitate "what if" discussions in the event of non-completion. From a Realtor's perspective this is a good time to discuss what lawyer your client wishes to use.

2010 – The Year in Review

December is a wonderful month, the snow is falling and the ski hill is open. It provides a great time to look back and reflect on 2010 and look ahead to 2011. Some of the highlights for me this year have been:

1) Great Referrals from Great Realtors – in the past year I am proud to say that we have doubled our market share for real estate conveyancing. However, we did not do this alone. We only do this with the support of the first class professional realtors in OMREB who use and recommend our services everyday. Thank you all very much for you support in 2010.

2) HST – You’re probably thinking, seriously Peter? This is a highlight? From a lawyer’s point of view, Yes it is. The HST gave me a great opportunity to help out many realtors and clients through a difficult transition in the law. As lawyers, we don’t make the law but our job is to assist clients in working with it. So HST is something that 2010 will be remembered for. It will be interesting to see if the transition out of HST (and back to PST?) is something 2011 will be remembered for.

3) JUNE 30- We closed a record number of deals that day. The combination of pent up demand and the tax changes made for a very busy day. The economy looks to be aligning again for a similar June 2011 as buyers are putting off purchases as the prognosticators forecast the eventual demise of HST.

4) The Hard Deals – 2010 was the year of the hard deal. IRD penalties were rampant, Vendor’s were having trouble closing, and the economic uncertainty has lead to many properties being “underwater”. I am very proud to say that our firm did a great job of keeping these deals together. Having the litigation strength we do, we have been able to go to court and get the job done for a number of clients who have been on the innocent end of a deal gone wrong.

2011 is shaping up to be a very exciting time for us at Pihl Law Corporation. Some of the things “coming down the pipe” for us include:

1) Expanding our office space – we have taken over the first floor of our building and we are completing a state of the art “client centre”. I really look forward to inviting all of you to our “office warming” reception early in the New Year.

2) Expanding our staff – we are pleased to welcome Jody Serviss to our staff. She brings with her 6 years of conveyancing experience at a top tier law firm. New time you are in the office, please feel free to say hi to Jody.

3) Expanding our support of Realtors – we are constantly looking for a new and novel ways to assist Realtors to be “dealmakers”. Coinciding with the launch of our new office space, we are planning to launch a new toolbox to further assist local Realtors with their legal matters.

So, thank you all for a GREAT 2010, and I am looking forward to what is shaping up to be a Busier and Brighter 2011.

Power of Attorney

In Kelowna, it is common place that real estate closings occur with another party signing on behalf of the Seller and executing documents by a power of attorney. A power of attorney is a document whereby one person (the DONOR) confers authority on another person (the ATTORNEY) to take certain actions on their behalf.

A power of attorney can be LIMITED in scope. For example it can only allow a person to deal with banking affairs and it may specifically exclude the right to deal with real estate. There are specific limitations on powers of attorney with respect to real estate, for example, s.27 of the Property Law Act prohibits an ATTORNEY from selling land to himself and s.56 of the Land Title states that a filed Power of Attorney will (unless expressly excluded) expire 3 years after the date it was signed.

To be valid to transfer land, a lawyer is looking for a number of items including:
a)ascertaining the true identity of the parties involved;
b)make inquiries to ensure the POA has not been revoked;
c)ensuring that the ORIGINAL must be filed with the Land Title Office with a DF#;
d)ensuring that the POA was properly witnessed by an OFFICER under s.42(3) of the Land Title Act;
e) ensuring the POA has sufficient powers to transfer land; and,
f)ensuring that the attorney must be at least 19 yrs old.

Realtors should:
a)ensure they obtain a copy of the Power of Attorney for their file;
b)ensure they know the identity of their clients (both DONOR and ATTORNEY); and
c)ensure their client’s lawyer is aware that the Closing will be occurring by Power of Attorney.