| Highlights: Rising Construction Costs & Delays – U.S. tariffs on Canadian steel and aluminum (25%) will increase building costs, leading to delays, cancellations, and reduced housing supply, especially in the pre-construction market. Housing Affordability Challenges – Higher construction costs may push developers to prioritize luxury projects, worsening the affordable housing crisis and forcing more buyers into the competitive resale market. Resale Market Volatility – A slowdown in new construction could drive higher demand for resale homes, but economic uncertainty and potential job losses in manufacturing may weaken buyer confidence Investor Sell-Off & Downfall of the Condo Market – Condo listings in Toronto surged 41% year over year, with growing inventory and falling prices, as investors react to stagnant prices, high carrying costs, and now economic fears. Legal Challenges & Solutions – Buyers, sellers, and investors need legal support for pre-construction contract revisions, mortgage renewals, and resale disputes amid a shifting market. |
The real estate market has been impacted by a series of economic forces, with the latest major concern in 2025 being the renewed threat of U.S.-imposed tariffs in Canada. The uncertainties surrounding this economic threat has the potential to disrupt Canada’s housing sector in both the pre-construction and resale markets.
From rising construction costs to shifting buyer confidence, tariffs introduce uncertainty that affects home prices, investment decisions, and overall economic stability. As a law firm advising real estate developers, investors, and homebuyers, we believe understanding these challenges and being vigilant of the economic climate help us to serve you best. This article explores the impact of tariffs on the pre-construction and resale markets, as well as the potential legal responses that could equip you to navigate the future of Canadian real estate.
The introduction of a 25% tariff on Canadian steel and aluminum by the U.S. is expected to rattle the pre-construction housing market. These materials are essential in building homes, condominiums, and commercial properties, and any increase in their costs will trickle down to developers, contractors, and ultimately, homebuyers.
Industry leaders, including the Ontario Home Builders’ Association, have voiced concerns about the potential for tariffs to increase the cost of new home developments. As the preconstruction market is already suffering with rising construction costs, a glut of unsold units from previous development booms, and a shift in investor interest, these additional trade barriers could be a brutal blow. Developers working on tight margins may find it increasingly difficult to keep projects alive with the increase in the price of construction materials, leading to potential delays, cancellations, or reductions in housing supply.
Canada is already experiencing a housing affordability crisis, with home prices—particularly in major cities like Toronto and Vancouver—remaining out of reach for many homebuyers. In 2022, only 17% of potential homebuyers cited affordability as a barrier; by 2023, that number nearly doubled to 33%. The added financial burden from tariffs could make it even harder for developers to build homes at affordable price points.
Higher construction costs often lead to higher listing prices for new homes and condos, particularly in urban centers where demand is already high. Additionally, developers may scale back on affordable housing projects in favor of luxury developments, where profit margins are more secure, and they are guaranteed to have buyers who could afford their properties. This could further exacerbate housing supply shortages and push more buyers into the already competitive resale market.
Price Volatility and Buyer Uncertainty
Unlike pre-construction developments, the resale market is not directly dependent on raw construction materials. However, the indirect effects of tariffs can still have significant consequences for homebuyers and sellers.
If construction slows due to rising costs, the shortage of newly built homes may push more buyers into the resale market, increasing demand and potentially driving prices higher. However, at the same time, economic uncertainty surrounding tariffs could weaken buyer confidence, leading some buyers to delay their purchasing decisions.
While some expected a slight uptick in buyers demand this year, concerns over U.S.-Canada trade tensions and potential job losses in manufacturing sectors have kept many buyers on the sidelines. If tariffs lead to layoffs in industries reliant on exports, demand for housing could decline sharply.
Investor Sell-Off and Rising Condo Inventory
Another notable trend is the surge in condo listings, with January 2025 setting an all-time high for new condo listings in Toronto. Investor confidence appears to be shaken, as more property owners look to exit the condo market.
The numbers tell the story:
For investors, the existing combination of stagnant prices, a falling rental market, and high carrying costs met with exacerbated economic uncertainties may prompt further sell-offs. This trend could create short-term downward pressure on prices, especially in a market that is already oversaturated with condos.
Navigating Legal Challenges for Homeowners and Homebuyers – We can help!
For homeowners, buyers, and investors, Toronto’s real estate landscape is evolving rapidly due to recent economic uncertainties. As reliable real estate lawyers, we seek to help clients anticipate and mitigate the potential legal risks in an increasingly complex market.
Pre-Construction Agreement of Purchase and Sale – Review and Amendment
Many buyers who secured pre-construction condos years ago are now facing unexpected challenges. Developers, grappling with rising construction costs due to tariffs on materials, may attempt to revise purchase agreements to pass these costs onto buyers. If you are a pre-construction buyer facing additional charges or contract modifications, our real estate lawyers will help you by:
Mortgage Renewal Risks: Protecting Homeowners from Financial Strain
As mortgage rates fluctuate in response to economic conditions, homeowners renewing their mortgages in 2025 may face higher borrowing costs and tighter lending conditions. Those experiencing financial strain may be at risk of forced sales or distressed transactions. Our legal experts assist homeowners by:
Resale Market Challenges: Managing Contract Disputes
A volatile market often leads to disputes between buyers and sellers in resale transactions. Price renegotiations, financing difficulties, and changing market conditions may result in contract breaches or legal conflicts. Our firm provides legal expertise to:
With volatile economic conditions, strategic legal guidance is more important than ever for those buying, selling, or refinancing property. If you need assistance with any real estate transaction, whether it’s the purchase, sale, refinance, or assignment of your properties, our firm is here to help ensure that you are legally protected and take the best steps forward.
Conclusion
As economic conditions continue to evolve, tariffs, supply chain disruptions, and responding legislative changes will have a profound impact on Toronto’s real estate market. Buyers, sellers, investors, and developers must make informed decisions and take proactive legal steps to safeguard their interests. Whether it’s renegotiating pre-construction agreements, resolving contract disputes, or addressing mortgage challenges, having reliable legal expertise is essential in navigating these complexities.
At Bradshaw & Mancherjee, we provide strategic legal guidance to help our clients anticipate risks, protect their investments, and ensure compliance with evolving regulations. Our team is dedicated to offering tailored solutions for every stage of your real estate transaction, from contract negotiation to dispute resolution.
If you want to take proactive steps to protect your property amid tariffs and related regulatory shifts that may affect your property or investment, contact us today for a consultation. Let us help you make informed, confident real estate decisions in a rapidly changing real estate market.
Highlights:
• Withholding taxes are amounts deducted by the buyer from the property sale price to ensure the seller or landlord fulfils their tax obligations to the government.
• Withholding taxes owed by non-resident sellers will rise from 25% to 35% in 2025.
• Non-residents earning rental income from Canadian real estate are taxed at 25%.
• Canadian buyers are liable for withholding taxes on property purchases from non-residents.
• Non-resident sellers can reduce withholding taxes and streamline property transactions by applying early for a CRA-issued compliance certificate.
Despite the volatile nature of Toronto’s real estate market, it has remained an attractive hotspot for foreign real estate investment, offering investors opportunities for substantial returns. However, as a non-resident, it can be quite difficult to navigate the complexities of Canadian tax laws. Understanding these laws is essential to avoid penalties, ensure compliance, and maximize your investment returns. This article will provide you with key insights on tax implications applicable to non-residents looking to engage in real estate transactions. It will be outlining your obligations, informing you of the new changes in legislation for 2025, and guiding you through practical steps to navigate the real estate market effectively.
When non-residents sell their real estate properties, compliance with Section 116 of the Income Tax Act is crucial. This section ensures that Canada collects taxes on any capital gains arising from property sales. It is important to be aware that starting January 1, 2025, there is an increased withholding rate of 35%. Additionally, the tax for the capital gains of non-residents has risen from 50% to 66% as of June 2024.
How the Process Works:
1. The buyer is required to withhold 35% of the gross sale price (50% if the property is depreciable) and submit it to the CRA unless the seller provides a Clearance Certificate.
2. Clearance Certificate Application: To avoid losing 35% of the sale price, non residents sellers must apply for a Clearance Certificate. This involves notifying the
CRA of the sale, paying the estimated taxes on the capital gain, and submitting the required documentation, including:
The clearance certificate application must be submitted within 10 days of the sale’s closing date. Delays in submission can lead to penalties and interest, so it is important to prepare proactively!
Katie is a non-resident who purchased a property in Canada for $550,000 and sells it for $650,000. Her capital gain is $100,000. Under Canadian tax law, she is taxable on 50% of the gain, which would be $50,000. If she did not obtain a Clearance Certificate, the buyer must withhold 35% of the $650,000 sale price, a significant $227,500. If she had a clearance certificate, she would only have to pay the tax on her capital gain. This example demonstrates that it would be more profitable for non-resident sellers to obtain the clearance certificate.
As a non-resident property owner in Canada, you are required to pay taxes on any rental income earned from your property. The Canada Revenue Agency (CRA) mandates a withholding tax of 25% on gross rental income, which must be remitted by either the tenant or property manager to the CRA.
If this tax is withheld on gross income, the burden can be significant. However, you can alternately file a Section 216 income tax return, allowing you to pay taxes on net rental income. This would be after deducting allowable expenses such as property management fees, maintenance, and mortgage interest. This option usually results in lower tax liability. If you are choosing this alternative, it requires timely filing and accurate record-keeping. To avoid penalties and interest, the section 216 tax return must be filed within six months of the tax year.
It is important to notice that Section 116 shifts the burden of collecting taxes onto the buyer if the seller is a non-resident. Failing to withhold the required tax can result in the buyer being personally liable for the amount owed to CRA. The significant burden carried by the buyer emphasizes the importance of verifying the residency status of the seller. This is why it is important for buyers to consult a reliable real estate lawyer for any property transaction.
In this case, a buyer in BC was assessed $600,000 in taxes because the seller was a non resident, and the required withholding tax was not remitted to CRA by the buyer. The buyer was completely unaware that the seller was a non-resident. This was because the buyer’s lawyer had failed to conduct su9icient investigation into the seller’s residency.
Tenants renting from non-resident landlords are also subject to withholding tax obligations under Section 215 of the Income Tax Act. A 25% withholding tax must be deducted from rent payments and remitted to the CRA. However, the CRA has clarified that it does not intend to collect unpaid taxes from individual tenants in most cases, as highlighted in a 2024 statement by the Minister of National Revenue.
The withholding tax obligation also applies to the sale of a purchaser’s rights under an Agreement of Purchase and Sale. When a non-resident assigns their right to purchase a property for a profit, the buyer must withhold taxes on the purchase price of that right. This rule ensures that capital gains on such real estate transactions are subject to Canadian taxation.
For example:
A non-resident purchases the right to buy a condo unit for $350,000 and later sells this right for $450,000, earning a $100,000 profit. The new buyer must withhold tax on the $135,000 they pay (including the $100,000 profit and the $35,000 deposit).
When you fail to comply with Section 116 requirements, it can lead to significant penalties, interest charges, and delays in accessing sale proceeds. Non-residents should prioritize compliance to avoid these outcomes.
With the increased rate of withholding taxes and increased taxes on capital gain, the financial stakes faced by non-resident sellers is significantly higher in 2025. This makes it necessary for non-resident sellers to take proactive measures including:
The safest measure for buyers to take to protect themselves is to engage a reliable and experienced real estate lawyer to help with any real estate transaction. This is our area of expertise, and we would be happy to assist you!
A real estate lawyer will help buyers confirm the seller’s residency status or obtain a clearance certificate. By obtaining a clearance certificate, the lawyer ensures that there are no outstanding tax liabilities or liens on the property, safeguarding the buyer from future financial obligations.
Engaging a real estate lawyer will also greatly benefit non-resident sellers. They will be able to accurately determine tax liabilities and guide you to complete a punctual and compliant filing of all required documentation. Real estate lawyers will also be able to provide you with legal advice and strategies to minimize tax burdens and maximize returns.
Owning Canadian real estate property as a non-resident o9ers significant investment opportunities but it comes with serious tax obligations. As a non-resident landlord, seller, or assignor, it is important to be aware of obligations implicated by the laws surrounding rental income tax and withholding tax on property sales. As a Canadian buyer, it is important to be aware of the burden on the buyer to ensure the collection of taxes. It is crucial for you to understand and comply with these regulations. With the new changes in the law in 2025 such as the increased withholding tax rate, the stakes are higher than ever. By consulting our experienced real estate lawyers at Bradshaw & Mancherjee, you can be vigilant of these challenges and navigate them to achieve your real estate investment goals.
| Highlights: Switching a property from residential/long-term rental to short-term rental use, such as through Airbnb, can trigger significant GST/HST liabilities upon sale. The change-in-use rule under the Excise tax Act applies to a property when it transitions to short-term rental use making it taxable on sale. If more than 90% of a property’s usage is for short-term rentals and the property is rented out for less than 28 days, In the case of 1351231 Ontario Inc. v. The King, courts decided that even brief use of a property for short-term rentals led to an $80,000 HST reassessment Property owners must understand timing rules, potential liabilities, and strategies to minimize unexpected costs and maintain profitability. |
Introduction
As the real estate market evolves and new income opportunities emerge, understanding the tax implications of switching property use has become crucial. Switching your property to be used for short-term rentals, like Airbnb, might seem like a valuable business opportunity, but it carries significant financial risks. Before taking this avenue, it is important to understand Canada’s GST/HST laws and how they apply to your property. Owners who use properties for short-term rentals must be aware of the tax liabilities they may face upon the sale of their property. Failure to consider these implications could lead to unexpected tax liabilities. This article explores how these tax regulations might affect you as a property owner.
When Does GST/HST Apply to Your Property Sale?
Typically, selling a used residential property in Canada is exempt from GST/HST taxes even when it is used as a long-term rental. GST (Goods and Services Tax) and HST (Harmonized Sales Tax) are consumption taxes levied on most goods and services in Canada. Owners of rental properties must understand how these taxes apply, particularly when properties are used for short-term rentals.
If a property has been used to generate taxable income, as a hotel, motel, AirBnb, or other short-term rentals, the sale may suddenly become subject to GST/HST. This can be a costly surprise for landlords. HST applies if:
In these cases, your property might be treated as a commercial asset, which could result in HST being charged when you sell the property. If a property owner transitions from offering long-term rentals to short-term stays (e.g., listing a property on platforms like Airbnb), the GST/HST change-in-use rule found in subsection 206(2) of Canada’s Excise Tax Act applies.
Change-in-Use Rule – subsection 206(2) of Canada’s Excise Tax Act
This rule states that when a property’s use changes to a taxable purpose, which means from long-term rental or residential to short-term rental, the owner is deemed to have “repurchased” the property at its current value.
What Qualifies as Change in Use?
If you decide to switch a property’s use from primarily long-term rental use to short-term rental use, you will inadvertently trigger GST/HST liability on the ‘deemed value’ upon sale.
This triggering of this tax liability was demonstrated clearly in the recent case of 1351231 Ontario Inc. v. The King (2024).
Case Study: 1351231 Ontario Inc. v. The King (2024)
A recent ruling from August 2024 clarifies that short-term rental activities can change the tax treatment of a property from exempt to taxable under Subsection 206(2) of the Excise Tax Act.
The case of 1351231 Ontario Inc. v. The King provides an eye-opening example. Here’s what happened:
The Final Outcome?
The CRA reassessed the sale as taxable, imposing $80,000 in GST/HST as there was a change of use under section 206 of the Excise Tax Act. The Tax Court upheld this decision, noting that the property’s use for short-term rentals, even briefly, disqualified it from GST/HST exemption at the point of sale.
Key Takeaways from this Case
This case clarifies several points for us on the topic of HST on sales of properties being used for short-term rentals.
Pro Tax Tips for Property Owners
Conclusion
Selling a property used primarily for short-term rentals in Canada can trigger significant HST implications, and it’s an area where property owners need to tread carefully. Under Canadian tax rules, rental income from short-term stays—defined as less than 28 consecutive days—is taxable. If more than 90% of the property’s use involves short-term rentals, the property may be categorized as a commercial asset. This change in use as per Canada’s Excise Tax Act can make the property’s sale subject to HST, potentially leading to a hefty and unexpected HST liability.
For property owners and real estate investors, these tax implications highlight the need for thorough tax planning and professional legal advice. An experienced real estate lawyer can help you understand how these rules apply to your situation, ensure compliance, and explore opportunities to mitigate tax liabilities. Given the complexities and potential for costly reassessments, proactive tax advice is crucial. Proper planning can make a significant difference in preserving your investment’s profitability and navigating Canada’s real estate market with confidence.
Canada’s housing market has experienced significant volatility and change in recent years. A lot of factors have propelled the big spike in real estate prices that we saw in 2021, followed by the decline in the last couple of years, to where we are now in 2024. The factors that are discussed in this article are not just periodic, but they consistently have an influence on the real estate market. Having knowledge of these factors will help you understand the direction of real estate prices in the future. This article provides you with a deeper understanding behind the home prices that you see under a listing. Being aware of these factors can help you be a better investor and make more confident real estate decisions.
The first factor is a major one and it is the economic factor. The news often discusses Gross Domestic Product (GDP) and inflation. It may surprise you to know we’ve had greater inflation in the last few years than we’ve seen in 40 years! Target rates of inflation have usually been 2-3% but in the last couple of years, we have been over that 3% mark. This becomes clearly visible when we walk into the grocery store. The same amount of groceries from three years ago are costing people over 20% more today! How is that relevant to the real estate market? Well, in fact, that affects an average Canadian’s ability to save money for the purchase of a home, affecting the affordability of home buyers.
Making the headlines of the news periodically in the last few years are the Bank of Canada changes in interest rates. A-level mortgage financing went up to 5-6%, B-level mortgage financing is well over 6% and private could be up to 15% depending on the lender. When we see interest rates increasing, it’s important to keep in mind that the same demand remains for the properties in the market. However, as previously discussed, the affordability of home buyers has changed drastically as their income levels remain the same. Buyers are not positioned to deal with the interest rate increase. This poses a problem for the sellers and buyers. The sellers still need to sell. The buyers still need to buy. However, potential real estate transactions are stuck because of a big gap between the reasonable sale price for the seller and an affordable purchase price for the buyer. It has become difficult to find the midpoint where both parties would find the transaction worth it.
The third factor which arises from the increases in interest rates and lack of affordability, is increasing supply. Real estate transactions sit on supply and demand. As properties sit on the market a lot longer with a lack of transactions taking place, more properties come every month to add to that supply. The properties that sit in the market for longer must demand for a lower price point. However, sellers that put their property on sale still need to operate on the same timeline that is motivating them to sell. Whether that’s a new job, purchase of a new property, or the lack of affordability in keeping the property due to the hike in interest rates. The market is inevitably conditioning a situation where a seller must sell, but the buyer may or may not buy. Buyers now have more options in the housing market even though their mortgage interest rates are high because of the increase in supply. With the buyer’s having more choice than the seller, this forces home prices down.
Another factor affecting housing prices in 2024 is government policies. Government policies include things like zoning, taxes, foreign buyer taxes, and stress tests, that have all been affecting the housing market for the past few years. These government policies are affecting real estate prices today. The foreign buyer tax was designed to bring prices down because it places barriers against money coming in from foreign sources. This should ideally drive the prices down for domestic home buyers. However, this gets in the way of more money coming into the housing market, which affects funding for building projects. On top of less funding for building projects, we are heavily regulated by building permits and standards in Canada. This reduces supply in the housing market and increases prices of preconstruction properties, cycling back to causing unaffordability for home buyers.
The reduction in housing supply becomes a significant problem as Canada consistently welcomes a record-breaking number of immigrants each year. High levels of immigration and population growth contribute to increased demand for housing, particularly in urban centers like Toronto, Vancouver, and Montreal. These cities are popular among immigrants due to the job market, existing cultural communities, and established settlement services. The increased demand that comes with population growth can drive up home prices and rent prices, especially in markets where the housing supply is already constrained. This fast-growing demand is met with a slow lagging of housing supply caused by the already discussed limited funding for building projects, slow construction processes, and strict zoning regulations. Government policies that promote immigration, such as programs targeting skilled workers and international students, further amplify this effect by continually boosting population growth. For example, Ontario’s Provincial Nominee Program (PNP), which enables the province to choose immigrants based on specific economic requirements in the region, has been highly successful in drawing skilled workers. As this may strengthen the local economy, it elevates the demand in the Ontario housing market and drives up home prices for everyone.
Housing prices in 2024 are influenced by a complex web of factors that continually shift supply and demand, shaping the market’s overall direction. Economic conditions such as GDP growth and inflation play a significant role, as they impact overall home buyer affordability. The rising interest rates have added another layer of pressure for home buyers, further reducing affordability. This situation is met by an increased urgency among sellers to sell their properties that have been sitting on the market for a long time. On the other hand, stringent government policies that regulate real estate development reduce housing availability, and the housing market is unable to meet the demand driven by drastic population growth that comes with immigration. Understanding these intertwined factors is crucial for navigating the current and future landscape of the real estate market.
For investors, homebuyers, and sellers alike, being aware of these market influences can help anticipate potential shifts and prepare for upcoming changes. This awareness enables stakeholders to make strategic decisions, whether it’s timing a property sale, identifying investment opportunities, or securing a new home. By staying informed, you can better position yourself for success in the ever-evolving real estate market in Canada.
Buying a home is one of the biggest investments you’ll ever make, and it’s natural to feel anxious. But before you panic, take a moment to assess your situation using Zubin’s Home Buyers Guide.
If you recently bought a resale property, there’s no need to worry! Most of the time, the buyer’s remorse you’re feeling is entirely normal. However, if you signed the agreement prior to 2020, it’s still important to double-check a couple of things:
Pre-construction buyers, it’s time to brace yourself. Post-2020 agreements might present a few challenges:
In both scenarios, if the value or monthly losses don’t add up, it’s crucial to speak to a lawyer. They can help you navigate closing challenges or understand the consequences of defaulting on the transaction.
Highlights
All Ontario real estate owners need to be aware of the recent change implemented by the government in relation to Notice of Security of Interests. The new Homeowner Protection Act 2024 introduced on June 6, 2024, made significant changes to the registration and enforcement of Notice of Security of Interests in Ontario. Creditors will no longer be able to register their security interests on title to the properties where consumer goods are installed as chattels or fixtures. This article will introduce you to these changes in the law and highlight the impacts that comes as a result.
A Notice of Security of Interest (NOSI) is a lien registered on title notifying the public of an interest of a creditor in the personal property. This provides security to a creditor who allows the property owner to rent certain equipment and fixtures. The Notice of Security of Interest is recorded in the Land Registry System so that a creditor is protected upon the sale or refinancing of the property. The registration notifies anyone with existing or future interest in the property that a specific fixture on the premises is encumbered by a security interest. Consumers are often unaware of the registration on title when they rent the equipment. It only comes to light during the purchase, sale, or refinance of a property as lawyers conduct a title search on the property. Equipment on the property that requires a NOSI includes water heaters, air conditioners, furnaces, water softeners, water purifiers, etc.
There are two major effects that come from the Homeowner Protection Act 2024.
The first effect being that the NOSI can no longer be registered against the property where consumer goods are concerned. As per Section 1 of the Ontario’s Personal Property Security Act, “consumer goods” are “goods that are primarily used or acquired for personal, family or household purposes”.
The second effect being that existing registered NOSIs registered as of and prior to June 5, 2024, are considered expired. These are no longer of effect, and they may be deleted by an application submitted by your solicitor subject to legal fees & disbursements.
If a new NOSI is not in relation to consumer goods, this must be confirmed by a statement signed by a lawyer. In such cases, the NOSI will be registered pursuant to section 54 of Ontario’s Personal Property Security Act.
Following these changes in the law, creditors would have to pursue by independent means of enforcing their security interests. Where creditors were able to wait for the sale or refinance of a property to recover their payment, they now will have to begin legal proceedings to enforce their debts. They would have to wait to obtain judgements in these proceedings and register writs of executions on title. This places consumers in the same position as before but consumers would incur significant additional costs as per the rules of the court.
The alternate route that creditors can take to enforce security is by seizure and sale as per the Personal Property Security Act (PPSA). The collateral concerned in many cases is HVAC equipment and the disruption caused by such harsh enforcement will result in the consumer incurring significant additional costs.
Many creditors also would turn to reporting consumer defaults to credit reporting agencies. This would then remain on the consumer’s credit report for a seven-year period despite the resolution of all defaults. This would not be a route for the creditor if the option to passively enforce the default through NOSI existed.
Creating a transparent real estate market allows homeowners to protect their interests and buyers to make fully informed decisions. Being aware of the new changes in the law is essential for ensuring the legality of any property transaction. As proactive real estate lawyers in Toronto, we prioritize keeping our clients updated on the latest legal developments. At Bradshaw & Mancherjee, we ensure that your real estate transactions are secure, legally compliant, and successful.
Estate planning is essential for every individual to secure their personal and financial legacy. To ensure that your wishes are honoured, and your loved ones are taken care of, it is important that your Will and Power of Attorneys are well-crafted and in place. Estate planning involves taking the proactive step of organizing your affairs and determining how your assets will be managed and distributed in the event of incapacitation or death. This article will delve into the importance of these elements and how they contribute to a comprehensive estate plan.
A Will provides you with peace of mind, knowing that your estate is managed intentionally, while minimizing potential legal and financial complications in your absence. A Will, also known as a Last Will and Testament, is a legal document that describes your intentions for the distributions of your assets and wealth, and the care of any minor children after your death.
Being the cornerstone of your estate plan, a Will gives you the powers to name executors, specify bequests, appoint guardians, and establish trusts for your beneficiaries. Here are some of the key elements involved in crafting your Will:
Executor/trustee: a legal representative chosen to administer an estate upon your passing.
Beneficiary: an individual or organization that is receiving some or all of your assets and property upon your passing.
Bequest: a provision in your will that allows you to allocate specific assets to beneficiaries or charity organizations named in your will.
Custodian: an individual responsible for the care and upbringing of your dependants or minor children if you pass away.
Testamentary Trust: a legal arrangement that holds money, property, or personal items for beneficiaries by managing assets based on the directions in your will.
Should you fail to establish a Will that secures the future of your estate, your estate will be distributed without your freedom of choice in accordance with Ontario’s Succession Law Reform Act.
A Power of Attorney is an important legal arrangement that allows you to appoint an individual to act on your behalf while you remain alive. As a grantor, you would be able to appoint an attorney to ensure that your affairs are managed smoothly and in accordance with your wishes and best interests. Your attorney is trusted with the responsibility of making significant decisions when you become mentally or physically incapacitated. There are two types of Power of Attorneys in Ontario: Power of Attorney for Property and Power of Attorney for Personal Care.
Grantor: The person who makes a power of attorney and appoints another to act on their behalf.
Attorney: The person you appoint to act on your behalf.
The Power of Attorney for Property grants the attorney with the power to make decisions regarding finances on your behalf. As a continuing/enduring power of attorney, the attorney can exercise this authority when you are no longer mentally capable of managing your affairs. As a non-continuing power of attorney, the attorney can exercise this authority while you are still mentally capable of managing your financial affairs. For example, if you are away from home for an extended period of time, you may appoint someone as your attorney to look after your financial affairs.
An attorney is empowered with the authority to do almost anything with your finances. This includes:
The Power of Attorney for Personal Care involves making health care and personal decisions for you. These are important decisions surrounding medical treatments, living arrangements and palliative (life-support stage) matters.
In Ontario, there are a few requirements that must be met in order to appoint one as a power of attorney.
The attorney must be:
When more than one person is acting as authority, you can grant them authority to act independently under several authority, or the individuals chosen can also act together under joint authority.
Now that you have a brief overview of Wills & Power of Attorneys. We are going to begin eliminating some common misconceptions.
Once you reach the age of 18, it is important to draft a Will even if you don’t own a lot of financial assets or have children. All Canadian adults should have a Will and Power of Attorneys to secure their future. Having a Will ready illustrates what your loved ones should do in the event you pass away. No matter how old you are, life is never a certainty, and things can happen unexpectedly. By having a Will in place, you can be ready, protected, and have peace of mind.
Your estate will be distributed based on Ontario’s Succession Law Reform Act if you pass away without a Will. This means that you do not have the ability to fully exercise the freedom to allocate your assets as you please. This could leave spouses, common-law partners, or other loved ones vulnerable as assets would not be distributed according to your intentions.
There are many Will templates offered online for different prices. However, if the correct legal language is not used in your Will, your Will could be ruled invalid, and your estate would be handled by the courts as if you had no Will. You may also be unaware of witnessing and other requirements without which your Will would be legally invalid.
More complicated estates may not be sufficiently handled by the templates available online. For example, if you own a business, own multiple properties, have complicated family dynamics, or significant assets, an estate lawyer would be able to provide you with constructive and tax-effective strategies based on their legal expertise.
Why would you risk losing your ability to choose what happens after your passing? To ensure that your Will and Power of Attorneys are both legally valid and effective, the best thing to do is hire an estate lawyer.
An individual’s legacy and security of their loved ones are built on a well-structured estate plan. After facing the difficult time of losing you, your family should not be burdened with the confusion of how to handle your financial and personal affairs. With our firm’s meticulous attention to detail and deep understanding of the law, we ensure that our clients’ assets are protected, their intentions are honoured, and their beneficiaries are looked after well. At Bradshaw & Mancherjee, our expertise in drafting wills and creating power of attorneys allows us to tailor legal strategies that meet the unique needs of each client. As estate lawyers in Toronto, we take pride in our role of safeguarding the legacies of those we serve, making estate planning an integral part of our practice.
There are various financial complexities that come with a home purchase. Understanding the associated costs is crucial in determining the steps you should take in your real estate transaction. This article provides a comprehensive overview of closings costs, including mortgage and property-related fees. These costs can add up quite quickly, so it is important to educate yourself of these costs before stepping into a real estate transaction.
Closing costs are the administrative and legal fees associated with a real estate transaction. These costs can vary significantly depending on the property’s location, mortgage loan amount, and the mortgage provider. Here is a brief closing cost breakdown to provide you with a little homebuyer assistance.
Title insurance: If you intend on purchasing your property with a mortgage, one of the conditions in your mortgage commitment will require that you obtain a title insurance policy. This is a one-time fee paid at closing and the policy remains active throughout the duration of your home ownership.
Land Transfer Tax: This tax is payable for any purchase of real estate, including condominiums, cooperative apartments, and vacant land in Ontario and other provinces. The amount of the tax increases as the purchase price increases. Some cities, such as Toronto, also have a municipal Land Transfer Tax.
Home inspection fee: The buyer is expected to cover the cost of home inspection. Home inspection is not required but it is highly recommended as they often reveal major structural issues that the buyer should be aware of before completing the transaction. These issues are usually not simply noticed by walking through the house with a realtor.
Survey fee: Mortgage lenders typically require a land survey to be presented by the seller to the homebuyer. If a survey exists, it will be handed over to you by the seller. This is a map of a property’s boundaries outlining the beginning and end of a property’s borders. If the seller does not have a survey, the homebuyer may be required to pay for one.
Legal fees: These fees cover services such as title searches, contract reviews, and document preparation, which are provided by the real estate lawyer. They vary depending on the complexity of the transaction and the expenses involving title insurance, land registry fees, and courier fees that the lawyer incurs while representing you on the transaction.
Homeowners Insurance: Securing home insurance coverage is vital for your property. It is essential for you to obtain home insurance coverage effective as of the proposed closing date and it is a necessary cost for closing. If you are obtaining a mortgage, your lender’s interest as first loss payee must be noted on the property. Prior to closing, we must receive a copy of your policy or binder letter.
Pro-rated property taxes: When buying a new home, your lawyer will confirm that all of the seller’s expenses have been covered up until the closing date, including property taxes. If the seller is not up-to-date with the property taxes, they must pay the outstanding balance to the municipality. However, if the seller is ahead and paid the taxes for the year, the buyer must reimburse the seller for the amount paid between the closing date and end of the prepaid period.
Home appraisal fee: A conventional mortgage requires the order of an appraisal on the home being purchased. This mortgage-related fee is for lenders to verify that the property you are securing a mortgage against is worth the value being paid for it. By conducting an appraisal, lenders can provide you with accurate loan estimates. Going forward, any mortgage refinancing done on the property would be subject to a home appraisal fee as the value of any home changes over time.
PST on CHMC-insured premium: CMHC (Canada Mortgage and Housing Corporation) Insurance protects lenders if borrowers ever default on their mortgage. This is required if you are not able to make a down payment of 20% or more on the home you wish to purchase. This cost is added to your mortgage and paid over the course of the mortgage loan. However, there is a Provincial Sales Tax (PST) associated with CHMC that must be paid for upfront. In Ontario, the PST on CHMC Insurance is 8%.
For example, if the CHMC Insurance Premium is $6200 with the 8% tax rate in Ontario, the PST owed would be $496. This would be paid on closing day.
This article provides you with a concise summary of some of the general costs associated with the purchase of a home. However, there may be fees subject to your particular real estate transaction. On the day of closing, your lawyer will guide you through the Statement of Adjustments as well as the Trust Ledger Statement, which will provide you with an accurate picture of the costs associated with your transaction.
The statement of adjustments outlines a list of debits of amounts already paid (such as the deposit) and a list of credits (such as the purchase price and prepaid fees on the property). The credit column subtracted from the debit column provides you with the amount owed to the seller on the closing date.
The trust ledger takes the amount you owe to the seller and outlines how the amount is allocated. The list of credits includes the loan amount from the lender and your down payment. The list of debits outlines where all of that money is going and how it will cover the different closing expenses.
Buying a home is a significant life decision and it is important that buyers do not walk into this decision blindsided. Navigating the closing costs associated with purchasing a home can be complicated, which is why you require the expertise of a real estate lawyer to guide you through the process. At Bradshaw & Mancherjee, we provide you with the support and knowledge you need to make informed and confident decisions about the purchase of your home.
A recent phenomenon that we are starting to observe in the real estate market is the brutal state of condo assignment sellers. An increasing number of pre-construction condo assignors in the GTA are facing major difficulties in closing deals. This shortfall is triggering a sell-off, with unit prices dropping and sellers losing all of their deposit and more! First of all, what is an assignment sale?
An assignment sale is a type of real estate transaction that with pre-construction properties. This is where the original buyer transfers their rights and obligations under the Agreement of Purchase and Sale to a new buyer, before closing or taking possession of the property. The new buyer then steps into the original buyer’s position and completes the deal directly with the builder.
In a market where all odds are against the assignor, it is important for assignors to be aware of the heavy competition surrounding them. There are desperate assignment sellers who bought units that they cannot afford to close and there is more assignment inventory than there has ever been. To top it off, there are even more resale condos on the market than there has been in the past decade. That means the only way to succeed at an assignment sale is to make the unit better priced than other competing assignment listings AND the resale market. This surge in assignment availability has driven unit prices to take a major plunge below the original purchase price. Consequently, assignment sellers are often forced to accept significantly lower offers than anticipated. Not only failing to make profit but facing extensive loss out of their own pockets.
The interest in assignment flipping really escalated after the year of 2020 due to its belief of high profitability. Stories of people making hundreds of thousands of dollars without closing between 2018-2020 circulated through the market. Family, friends, and realtors passed along such anecdotes gambling their interests without being fully aware of the risks involved.
In the midst of this dilemma, appraisals are serving as the safety blanket for newly completed condo units, providing them with value and allowing people to close. When observing the prices of resale condos between the years of 2018 to 2024, it can be seen that the price per sqft remains the same, that is $1000/sqft. That is zero nominal change in a period of six years! This is a whole building cycle for pre-construction properties. Pre-construction condos purchased in those years are worth way more than $1000/sqft with closings coming up in 2025 and onwards. In this situation, if appraisals don’t come in, then the average investor would not have hundreds of thousands of dollars to make up for the substantial shortfall.
Another trend that we can observe in the preconstruction market is the steep decline in projected completions as presales are not happening. The only people active in the preconstruction market right now are end users, people who are buying to downsize or upsize. However, it is worth pointing out that end users only make up 20-30% of the pre-construction buying pool and the rest are investors. This is because end users don’t want to wait 5 or 6 years for their unit to complete, so they are more active in the resale market. Less investors active in the pre-construction market means that there will be much less project completions in the future.
What does this mean for the real estate market? This means that we have a real supply issue for the future if our population continues to grow at this rate, as the fastest growing metropolitan area in North America. However, waiting for this demand to play out is not a solution for the dilemma in assignment sales today. This phenomenon may take longer than expected to come to play.
Assignors are backed into a corner in the situation of today’s market. Assignors are forced into a situation of selling at a loss, and refusing to sell at a loss means that they are forced into closing as the buyers of the unit. Either way, assignors in the pre-construction condo market are finding themselves in a tough spot.
With the dynamic nature of Ontario’s real estate market, things do not always go as planned from the initial agreement to the final closing. However, it is important to remember that the Agreement of Purchase and Sale is a legally binding contract. This means that there are legal implications for all the parties involved when certain parties choose to withdraw from the agreement. Depending on whether they are the buyer or seller, parties are vulnerable to significant legal and financial consequences. This article will uncover the legal and financial consequences facing sellers who choose to withdraw from real estate contracts as per Ontario real estate law.
Seller’s remorse is a real phenomenon. It happens when the seller believes they made a mistake in selling their home. They may face regret for not making enough money from the sale of their property, missing their old neighbourhood, or simply just regretting the decision to sell in that particular point in time. The court’s response to seller’s remorse is not generally a favourable one and it is not a legally recognized reason for breaching an agreement. In these circumstances, sellers may face legal disputes or financial penalties.
In order to understand legal implications, one needs to understand the legal footing of real estate contracts in Ontario. Upon signing the property sale agreements, both the buyer and sellers are obligated to fulfil the terms outlined in the contract. The primary duty of the seller is transferring the ownership of the property to the buyer by the stated closing date. Further duties of the seller are outlined in the contract for the period of due diligence, from when the contract is signed up until the closing of the property. During this period, the buyer is given an opportunity to conduct an appraisal, a title search, organize their mortgage, perform property inspections. Meanwhile, the seller has the obligation of maintaining the property in the condition it was agreed upon for closing, providing access for inspections, clearing encumbrances, and conducting agreed-upon repairs or modifications on the property before the closing date.
Sellers backing out of an APS face detrimental consequences for contract cancellation. Ontario property law is sincere in upholding its duty of protecting both buyers and sellers’ rights in real estate transactions. During a real estate closing, seller obligations must be upheld to avoid seller penalties. When the seller breaches the agreement, legal recourse is readily available to the buyer. This could involve potential lawsuits for damages, specific performance, losing the deposit, or reimbursement costs involved in the execution of the agreement of purchase and sale. A buyer has the right to seek damages from the seller in courts, where the seller would owe monetary compensation for any losses incurred by the seller’s contract termination. By requesting specific performance, buyers can have the court forcefully order the seller to sell their property in honour of the purchase and sale agreement. Buyers can also have the costs involved in the property purchase process recovered at the expense of the seller if the closing process cannot be completed due to the seller. Such costs include inspection fees, legal fees and moving costs.
The breach of a real estate contract is not immediately sent to court for resolution.
Real estate disputes that occur through contract breach are usually first attempted to be resolved through negotiation between the buyer and seller. There may be a possibility that the parties themselves come to a compromise that prevents the breach of the agreement.
Next, to avoid the time and expense of a court case, the parties may reach a settlement through mediation, where a neutral third party helps to facilitate a mutually agreeable resolution.
Finally, If the conflict fails to be resolved through mediation, parties may decide to proceed with court litigation. This is when courts will intervene and decide the consequences depending on buyer’s rights and seller’s rights outlined in the law and with the consideration of the terms in the agreement of purchase and salw.
To prevent seller’s remorse and the significant legal and financial repercussions that sellers may face in breach of contract, there are some basic steps you can take:
We can help you!
Fortunately, these are all precautions that our legal team at Bradshaw & Mancherjee would be happy to assist you with. Our proficient experience in the field of real estate law means we specialize in protecting both sellers and buyers.
With our meticulous attention to detail, we will review your contract for potential contract contingencies, negotiate terms that safeguard your interests, and represent you in disputes that may arise in the course of your real estate transaction. Bradshaw & Mancherjee offers strategic advice and legal solutions tailored to protect sellers’ interests and navigate complex contractual obligations in Ontario.
By working with our team of professionals, you can make confident real estate decisions every step of the way. For any inquiries you may have or to schedule an appointment with one of our expert legal professionals, please feel free to contact us.