When you assume…

After several months of trying, John Sellerski finally signs an agreement to sell his home by allowing Susan Buyaranandan to assume his existing mortgage with TD Bank. On closing, Sellerski’s lawyer contacts TD Bank to get a written release so that Sellerski will no longer be “on the hook” for this mortgage. The bank, having no incentive to release Sellerski, will probably deny the request.

As a result, Sellerski will have no choice but to close the transaction while remaining liable for the mortgage, even though it has been transferred to Buyaranandan. If Buyaranandan ever defaults under this mortgage, the bank has every right to come after Sellerski.

How to avoid this? If the offer signed by both parties contains only a standard clause making it a condition that Buyaranandan assumes Sellerski’s mortgage, be sure to add a provision making the offer also conditional on Sellerski getting a release from the bank for that mortgage. That additional non-standard clause will also protect Sellerski’s interests.


What Will be…Will be

I often get calls from clients wanting to prepare their own wills using “Will Kits”. This is what I tell them: A will drafted by a lawyer, though a little more expensive, will save you time, grief and money compared to a will prepared without a lawyer’s assistance.

First, a “homemade” will may be defective if it is not signed or witnessed properly.

As well, Ontario law does not recognize common-law or same-sex spouses for the purpose of estate distribution. The only way to ensure that the testator’s partner receives a fair share of his estate is by way of a will properly prepared by a lawyer.

Finally, the testator will probably need a lawyer to tell him that his wishes, as he wrote them in his “homemade” will, might not be carried out after his death. For example, the testator may indicate in his “homemade” will that he wants to leave only a small interest in his estate to his spouse. Unfortunately, his wishes will not be carried out as the Family Law Act, could take precedence over a will and could entitle his spouse to one-half of his estate. A lawyer preparing his will would have been able to let him know that in advance.


Caveat emptor, qui ignorare non debuit quod jus alienum emit

I sometimes get calls from clients after closing where they complain about a leaky roof or a crack in the basement floor. These buyers tend to be the ones who did not have a home inspection prior to firming up the purchase. They now want to know whether they can sue the sellers for not disclosing these defects.

All I can do is sadly quote the above Latin phrase, which translates as “Let the Purchaser, who is not to be ignorant of the amount and nature of the interest, exercise proper caution” —in short, buyer beware. There is a duty on a buyer to know what she is buying. The law in this area is quite clear. Except for hidden defects which make the property dangerous or unfit to live in, sellers do not have to disclose hidden defects in a house. The doctrine of Caveat Emptor requires the buyer to do her own due diligence and home inspection before agreeing to purchase.


“Power of Sale” offers

A house bought on Power of Sale always feels like a bargain, but your client may not always be getting what she bargained for.

Especially when the Bank, as the vendor, uses the standard TREB offer in completing the transaction, your client needs to be careful to check which standard clauses have been deleted and what schedules have been added.

Be sure to review with buyers not just the fact that they are getting the house in an “as is where is” condition, but also the fact that they may not get vacant possession of the property on closing. Be aware that the appliances may be subject to a lien; that the closing date may be delayed; that they may not even end up getting the property if the original owner puts his mortgage back in good standing with the bank; that there will most likely be no survey provided by the vendor; and the vendor will also give no warranties about work orders or UFFI.


Another reason to have a Will…

It’s never comfortable to openly acknowledge this, but family situations these days can be a bit tricky. You’d like to be able to count on everyone to “do the right thing” with regard to your children but unfortunately, in the absence of a will, any family member who wants custody of your minor children can apply to the court for a custody order. What’s even scarier is that that “custody” could also entail control over monies that you’ve left for your children’s futures. The court will try to consider the children’s best interests when assigning guardianship; however, it may decide to appoint someone who may not have been your first choice.

Avoid this possibility by designating someone whom you would want to act as the Guardian of your minor children in your Will. This appointment will still need to be validated at a court hearing after you die; however, the fact that you have designated someone should hold sufficient weight in the court’s eyes and the court will likely fulfill your custody wishes as outlined in your will.

…And a reason to have a “Living Will”

A “Power of Attorney for Personal Care”, sometimes also referred to as a Living Will, lets you outline what you want to happen if you become ill and cannot communicate your wishes about your medical treatment. This document becomes effective only after you have been assessed as being mentally incapacitated. The importance of having this document in place is that it allows you to have some control over your personal choices. Should you become mentally incapacitated and not have this form of Power of Attorney in place, your family members would have to apply to the courts to be appointed as the attorneys—this could be financially onerous and time consuming. Not having a Living Will also opens up the possibility of a court battle within the family as to who should be appointed—and wouldn’t you rather know who is making decisions for you?


Surveys vs. Title Insurance

Is it sufficient for a real estate agent to just insert a clause in the offer for the vendor to provide the buyer with title insurance rather than a land survey? The answer becomes clear when you consider the purpose of each.

A survey reveals the location of the buildings on the land in relation to the lot lines, along with improvements like fences, pools, easements and rights of way in favour of neighbouring owners or utility companies.

A title insurance policy, on the other hand, is simply a form of insurance which insures over any title defects that may be revealed by a survey. It is a “quick fix” which allows a real estate transaction to close in a timely fashion without any hassles, however, without a survey all you have done is delayed the discovery of any potential problems to a later date.

Title insurance, while it has its advantages, does not eliminate the need for a survey.