Toronto Real Estate and Neighbourhoods Blog | Move Smartly

Some Title Insurance is Better Than Others

Bob Aaron in Legal, Home Buying

In the world of real estate, it’s not very well known that title insurance policies vary significantly from one company to another.

When it comes to basic title protection, though, policy coverage among insurers is very similar. Title insurance typically protects home buyers against loss from risks which are listed in the policy, including another person having an ownership interest in the property, outstanding liens, construction without a permit, fraudulent title dealing, breach of zoning bylaws and other circumstances which could result in loss.

But unlike insurance policies in other fields, some title insurance policies also include coverage for risks that are not specifically itemized.

This type of protection is called legal services coverage and not every title insurer offers it.

In plain language, if a mistake in a real estate transaction occurs due to a lawyer’s negligence, legal services coverage in a title policy protects the owner — even if the mistake falls outside the specific risks listed in the policy.

I often say that there is no such thing as a simple real estate deal. There are numerous aspects of a real-estate transaction in which mistakes can occur, even though the owner has received good and valid title to the property.

Beware Sending a Real Estate Deal Off the Rails

Bob Aaron in Legal, Home Selling, Home Buying

An interesting decision from Toronto’s small claims court last December provides a useful lesson on the obligations of buyers, sellers and lawyers when a real estate transaction starts to go off the rails.

In his decision, Justice M. Donald Godfrey wrote that the case came to court because the parties and their lawyers were unable to work out a “reasonable compromise” on the closing of a transaction on Mould Ave., in Toronto.

Nuno Barbosa and Paula Boas agreed to buy the house for $516,000 from Helder and Maria Rodriguez, with a scheduled closing of October 30, 2009. Two days before closing, the buyers discovered that the property taxes were not $2,300 as indicated on the MLS listing but were in fact almost $4,600. The increase was the result of a re-assessment of taxes due to an addition to the property which was completed in early 2008.

The buyers requested a $10,000 price reduction. When the sellers declined the offer, the buyers refused to close even though their lawyer was holding enough trust funds to complete the transaction.

After receiving advice from another lawyer, the buyers changed their minds and told their lawyer that they were willing to close and sue later. But the request was not made until after the 6 p.m. closing deadline.

The sellers did not agree since they did not know what damages they were exposed to as a result of two “chain reaction” closings, which depended on the sale of their Mould Avenue house.

The buyers then sued the sellers for return of their $10,000 deposit, and the sellers sued the buyers for damages resulting from their refusal to close. 

After an unusually long three-day trial, Justice Godfrey ruled that the buyers should have closed the transaction on time since the breach of contract was “not material.” However, the judge also decided that the sellers were entitled to refuse to close 15 minutes after the 6 p.m. deadline because the contract stated that time was “of the essence.”

Problems With Land Titles Just Got Clearer

Bob Aaron in Legal

A decision of the Ontario Court of Appeal in February may have settled the thorny question of whether or not courts have the authority to correct erroneous descriptions of properties in the land registration system.

The origin of the dispute dates back to 1985, when Veikko Kivikangas subdivided a parcel of waterfront land he owned in the Sudbury area into three lots.

Kivikangas instructed his surveyor to prepare a reference plan of survey showing the registered right of way to be in the same location as an existing gravel road which ran from the main highway across the first parcel, then the second, and into the third.

On the ground, the path takes a detour around a large rock outcrop. Unfortunately, the surveyor prepared and registered the reference plan showing the gravel drive going directly through the outcrop rather than around it.

Effectively, it was impossible to access the two inner lots using the registered right of way.

For many years, the owners of the three lots peacefully used the actual roadway on the assumption that it was located as described on the reference plan.

In 2005, Kimberly MacIsaac, one of the current owners, became aware that the registered road went through the rock rather than around it. The other neighbours discovered the discrepancy two years later.

Should Murder or Suicide be Disclosed?

Bob Aaron in Legal, Home Selling, Home Buying

Shortly after Sidney and his wife bought their Toronto home last fall, a number of their new neighbours told them that there had been a suicide there just prior to their purchase.

The neighbours knew in great detail that the event occurred in the basement washroom, and was soon followed by a crime scene-like display of 10 police cars, fire trucks and an ambulance.

Sidney emailed me to report that the seller told them that her brother, the original owner, died of a heart attack.

The property was inherited by the owner’s sister, who sold the house right afterward.

At the time of the sale, the house was in its original condition except that the basement washroom had been gutted and renovated. The buyers were told that the reason for new basement washroom was due to “renovations they never ended up finishing.”

The new owners are very unhappy. They wanted to know whether the seller was required by law to reveal the truth about the suicide, and how this impacts them when they resell the house.

In Ontario, sellers and real estate agents have no legal obligation to disclose information about suicides, murders, or any other matters which might stigmatize the house.

Bizarre Form Warns Against Signing SPIS Form

Bob Aaron in Legal, Home Selling

In the wake of a flood of court cases involving the Seller Property Information Statement (SPIS) and its counterparts across Canada, the Ontario Real Estate Association (OREA) has introduced a strange new form designed to warn sellers about signing the SPIS.

Property disclosure forms consist of a complex series of questions that agents sometimes ask sellers to complete. Some agents believe — incorrectly — that the form shields them from liability for undisclosed defects in the house.

Since the form first appeared in 1997, it has been the subject of about 230 court cases across Canada — and new ones are appearing at the rate of about one a month. Indeed, it is difficult to think of any other single form — except perhaps the marriage certificate — which has spawned so much litigation and has produced so much money for litigation lawyers.

Rather than place the warnings about signing the SPIS form right on the form itself, the new form 225, entitled “Important Information for Sellers,” contains a caution for anyone about to sign the disclosure form.

In a huge understatement, the warning form states “care must be taken when the form is completed.”

Condo Board Pays Personal Price for Clinging to Power

Bob Aaron in Legal

Five former board members of a London, Ont., condominium corporation have been personally ordered to pay costs totalling $36,300 as a result of two related lawsuits, after the old board ignored the wishes of a majority of unit owners. The old board had refused to recognize the results of a members’ meeting in which a new board was elected.

It all began when the board of Middlesex Condominium Corporation 232 obtained an engineering study to determine the remedial work necessary to prevent water leakage into the building. The board called a general meeting of owners to approve the borrowing of $600,000 to fund the repairs, which would have cost a total of $755,000.

The meeting was eventually held and authorization for the borrowing was defeated.

Unhappy with the high cost of the proposed repairs, a group of owners got together and requested a members’ meeting to replace the board of directors. Instead of calling the general meeting as they were required to do under the Condominium Act, the old board brought an injunction application to prevent the meeting from being held, as well as a second court application to appoint an outside administrator to assume management of the building.

Last August, Justice Alan Bryant ruled that the board’s application for an injunction was “for the sole purpose of preventing the owners from exercising their rights to hold a requisition meeting to remove the board members from office and preventing their right to elect a new board.”

In a separate hearing, Justice Thomas J. Carey turned down the board’s request to appoint an administrator. A members’ meeting was subsequently held and the old board was turfed out.

Real Estate Lawyers Do Not ‘Waste’ Client’s Money

Bob Aaron in Legal, Home Buying

Last week I received an email from a Star reader who had just bought a $588,000 home in Scarborough and wanted to know if I could refer him to a real estate lawyer “with the lowest fee in the business.”

“I’m seeking the least expensive legal representation I can find,” Richard wrote. “Now burdened with a large mortgage, I do not have the spare finances to spend on bloated real estate lawyer fees.”

Richard told me that he contacted a number of real estate lawyers to obtain competitive quotes, and then sent me the details of the lowest quote he received. The quote included the lawyer’s base legal fees, plus out-of-pocket expenses, title insurance and HST.

But Richard was still not happy and wanted something cheaper.

“I feel the disbursement and title insurance amounts should not exist as charges at all, nor should they be chargeable amounts to a potential client like myself,” he wrote. “I told the lawyer in our first meeting that I chose to decline the title insurance.

“I’ve read your article on title insurance,” Richard wrote to me, “and the brochures provided on the topic by the real estate lawyer, and I still reach the conclusion that the coverage is not necessary nor worth it.”

Homeownership Not About Crunching Numbers

Bob Aaron in Home Buying

Sometimes, even the experts get it wrong, or maybe not entirely right. In her new book, Money Rules, financial guru Gail Vaz Oxlade says that buying a home is not for everyone. Her No. 1 rule: Renting is not a waste of money.

“Home ownership can be a big ol’ pain in the arse,” she writes. “There are moments of joy and pride that come with home ownership, but it’s not for everyone.” So far so good.

Vaz Oxlade then sets out a list of people who should not own a home. In her world view, they are those people who:

Haven’t completed a realistic budget.

Have a variable income.

Work in an industry where employment is seasonal or erratic.

Don’t have the time, skills, desire or case to money with home maintenance.

HomeVerified Will Be Valuable New Tool for Home Buyers

Bob Aaron in Legal, Home Buying

Resale home’s history now available through HomeVerified and it has the potential to become an industry standard in every residential house purchase.

A new type of home history report is now available on the market, and it has the potential to become an industry standard in every residential house transaction.

The report, compiled by HomeVerified (homeverified.ca), a company based in London, is available for homes in every major municipality in Canada. Distribution and sales of the reports are being handled by Teranet, the company which owns and operates Ontario’s electronic land registration and title search services on behalf of the province of Ontario.

A typical home history report will include the following information:

The home’s insurance claims history for current and prior owners.

The insurance claims record for the neighbourhood.

Local school rankings.

Local demographics and amenities, such as banks, coffee shops, transit and shopping.

Contact information for politicians, including the mayor, MPs, MPPs, and municipal councillors.

Any history of a grow-op in the house or condominium unit, showing results from a Canada-wide search for marijuana grow-ops.

The grow-op registry may be the most valuable component of the home history report for home buyers. HomeVerified’s comprehensive database has been assembled from countless Freedom of Information requests made to police forces across the country. (Disclosure by some police forces has not been as complete as hoped for, but the database includes all addresses that are currently available.)

I can also foresee the HomeVerified report eventually being used for every Canadian mortgage and refinance application by those lenders who do not compile their own database of grow-op properties.

Landowners Responsible for Environmental Cleanup, Court Rules

Bob Aaron in Legal

In one of the scariest court decisions of recent years, the Ontario Divisional Court has ruled that innocent landowners can be held responsible to remedy contamination caused to their properties by a neighbour.

Back in December, 2008, Thompson Fuels filled the fuel oil tanks at the Hazel St. home of Wayne and Liana Gendron in the city of Kawartha Lakes (Lindsey). Subsequently, several hundred litres of the oil leaked from the basement of the house onto city property.

After noticing the leak, Wayne Gendron informed his insurance company. They hired D.L. Services to remediate the contamination. D.L. soon discovered that the oil had travelled into the storm sewers and was winding up in Sturgeon Lake.

When the Ministry of the Environment (MOE) heard about the spill, they sent a provincial officer to visit the site. The officer formally ordered Gendron to assess the extent of the spill, eliminate any adverse effects, and restore the natural environment.

Environmental remediation is hugely expensive. Three months later, Gendron’s insurance coverage ran out, and the ministry was notified. Since Gendron did not have the financial resources to continue the remediation work, cleanup efforts were discontinued. By this point, the Gendron property itself had been remediated, but contamination on the adjoining city property still had the potential to adversely impact Sturgeon Lake.