Toronto Basement Apartments - What's Legal?

**This report sheds some light on this complicated subject.  We will look at basement apartments including:   Key concepts The history The evaluation process Four key issues The rules Inspections and their costs Where to get more information Definitions Is it 'legal'? 'Legal' involves five separate issues including - Do the local bylaws permit you to have a basement apartment? Does the apartment comply with the fire code? Does the apartment comply with basic building code requirements? Does the apartment comply with basic electrical safety requirements? Has the apartment been 'registered'? **We will look at these issues more closely.   Building code vs. fire code The Building Code prescribes minimum requirements for the construction of buildings. For the most part, the Building Code is a code that applies only the day the house was built. The code changes over the years, but we don't have to keep changing our houses to comply with the code. The code does not apply 'retroactively'. The Fire Code is a subset of the Building Code. It prescribes construction and safety  issues as they relate to how the building is required to perform should it catch fire. A significant distinction with the fire code is that it can apply retroactively. Basement retrofit   Now that we know that the Fire Code applies retroactively, we can see where the phrase " basement retrofit" comes from. A new Fire Code was developed that applies to basement apartments. The code applies retroactively, so all basement apartments whether existing or new must comply with the new Fire Code. All owners of homes with basement apartments were given a period of time to upgrade their homes to comply with the new Fire Code. This 'grace period' has long since passed. Certificate of compliance All basement apartments have to be inspected to verify that they are in compliance. Once this has been verified and any improvements completed, the apartment is given a 'certificate of compliance'. Bylaw       We mention this term here to make sure that we don't confuse bylaws with building codes. Bylaw in the context of basement apartments refers to whether you are permitted to have a basement apartment in your area and any special conditions involved. Bylaws are set by municipalities to keep people from being a nuisance to their neighbours. Codes are health and safety rules to protect occupants. Basement Apartments - The History   Prior to 1993, there was little to worry about. After 1993, a permit was required to change a home from single family to multi-family.  In 1994, the NDP government in Ontario said that we could ignore local bylaws that prohibited second dwelling units in houses if certain conditions were met. In 1994, the province set new Fire Code rules for basement apartments. A deadline was established for all existing basement apartments to upgrade to the new fire code. Upgrading to comply with the new fire code is called a "retrofit". The owners were allowed to apply for an extension for up to two years past the deadline if they had financial or logistical obstacles. Even with the extension, the deadlines have long since passed. In 1995, the provincial Conservative government told municipalities that they could enforce their bylaws regarding basement apartments. A grand-fathering clause says that apartments existing before November 1995 do not have to meet local bylaws.   The Evaluation Process   NEW UNITS    If you are thinking of adding a basement apartment here is the procedure - Check the Zoning Bylaw at City Hall Buildings Division to find out if basement apartments are allowed.  Check the Zoning Bylaw at City Hall Buildings Division to find out if basement apartments are allowed. You would then apply for a building permit. Keep in mind that you will have to comply with today's building codes.  EXISTING UNITS   This report will focus on existing homes with a single basement apartment. The first step is to check with Municipal Property Standards or the Fire Department for a Certificate of Compliance. If there is one, you are done! If the unit is not registered, you need to do some more work Verify that zoning bylaws permit a basement apartment. In most cases they do. The next step is to have the fire department inspect the home. They will verify compliance with the fire code. This is the most daunting part of the process because any deficiencies will have to be corrected by order of the fire marshal. The next step is to have the Electrical Safety Authority (which used to be called Ontario Hydro Inspection Department) inspect the electrical system. Once again, you will be required to make any improvements that are prescribed. If the apartment unit passes the inspections, the unit can be registered with Municipal (Property) Standards (If not, improvements may cost $15,000 or more).  Four Key Elements   Fire containment. Mean of egress. Fire detection and alarms. Electrical safety.  Let's look at each of these.   1. Fire Containment The goal is to contain the fire in the unit that the fire started, long enough to get all of the occupants out of the house. This means that any walls, floors, ceilings and doors between units should control the fire for at least a few minutes. These components are given ' ratings' of how long they will survive a direct fire before burning through. A 30 minute rating means that the component will control the fire for at least 30 minutes.    The typical requirement is a 30 minute separation between the units. Drywall and plaster are acceptable. but suspended (T-bar type) ceilings are not. The ceiling must be continuous. For example, this means that you can't have exposed joists in the furnace room - this area has to be drywalled or plastered as well. Doors should be solid wood or metal - at least 1¾ inch thick. 2. Means of Egress - Escaping the home The goal is to allow the occupants to get out of the house if there is a fire. There are two common situations; either each unit has its own exit, or there is a common exit. If each unit has its own exit, you are all set. If the units share an exit, it is more complicated.  A common exit is allowed if it is 'fire separated' from both of the units with a 30 minute rating. If the common exit is not appropriately fire separated, you can still use this common exit as long as there is a second exit from each dwelling unit and the fire alarms are interconnected (if one alarms, the others will alarm as well).    Here is an example: There is a common exit area but the common area does not have a 30 minute fire separation between both of the units. If there is an 'acceptable' window for an escape route and the smoke alarms are interconnected, we are all set. What is an acceptable window? The windowsill must be within 3 feet of grade. We don't want people jumping and breaking a leg. The smallest dimension is 18 inches. The opening is at least 600 square inches (30 inches by 20 inches for example) If there is a window well on a basement window, it must extend 3 feet out from the house wall, to allow room to crawl out. 3. Fire detection    All units must have smoke alarms. The owner of the property is responsible for ensuring that there are smoke alarms and that they are maintained. The smoke alarms do not have to be interconnected unless the fire separation to the common exit area does not have a 30 minute rating (Note: It must have at least a 15 minute rating). A carbon monoxide detector (CO detector) may be required by the city. 4. Electrical Safety An electrical inspection by the Electrical Safety Authority is required. The Electrical Safety Authority used to be called Ontario Hydro Inspection Department. All deficiencies must be addressed.  General Rules Here are a few rules that your apartment must meet. All bathrooms need either a window or an exhaust fan If there is a parking spot for one of the units, there must also be a parking spot for the other unit (yes, you read it correctly!) The minimum ceiling height is 6 feet 5 inches The entrance door size must be at least 32 inches by 78 inches Inspections and their costs As we already pointed out, two inspections are required, fire code inspection and electrical safety inspection. Once the inspections are done, you will be required to make the prescribed improvements. Improvements may be minor, but can cost $15,000 or more. There is lots of room for the inspectors to be more or less 'strict'. In municipalities that encourage basement apartments, the inspection may be lest strict. In municipalities that discourage basement apartments, the inspection may be more strict. Inspections for fire code compliance cost between $120 and $300. Inspections for electrical safety cost $72. The consequences If you are going to represent the property as two family, verify that it is registered with Municipal Property Standards. Failure to comply can result in a $25,000 fine and one year jail term. More information: The Second Suites kit from City of Torontois a useful reference. Contact Shelter, Housing and Support at416-397-4502.

Basic Waterproofing for Basements

Source: NACHI mold basement   Water Damage Concerns Basements are typically the area of a structure most at risk for water damage because they are located below grade and surrounded by soil. Soil releases water it has absorbed during rain or when snow melts, and the water can end up in the basement through leaks or cracks. Water can even migrate through solid concrete walls via capillary action, which is a phenomenon whereby liquid spontaneously rises in a narrow space, such as a thin tube, or via porous materials. Wet basements can cause problems that include peeling paint, toxic mold contamination, building rot, foundation collapse, and termite damage. Even interior air quality can be affected if naturally occurring gasses released by the soil are being transmitted into the basement. Properly waterproofing a basement will lessen the risk of damage caused by moisture or water. Homeowners will want to be aware of what they can do to keep their basements dry and safe from damage. Inspectors can also benefit from being aware of these basic strategies for preventing leaks and floods. Prevent water entry by diverting it away from the foundation Preventing water from entering the basement by ensuring it is diverted away from the foundation is of primary concern. Poor roof drainage and surface runoff due to gutter defects and improper site grading may be the most common causes of wet basements. Addressing these issues will go a long way toward ensuring that water does not penetrate the basement. downspout extension too short swales Here are some measures to divert water away from the foundation: Install and maintain gutters and downspouts so that they route all rainwater and snow melt far enough away from the foundation of the building to ensure that pooling does not occur near the walls of the structure. At least 10 feet from the building is best, and at the point where water leaves the downspout, it should be able to flow freely away from the foundation instead of back toward it, and should not be collecting in pools. The finish grade should be sloped away from the building for 10 to 15 feet. Low spots that may lead to water pooling should be evened out to prevent the possibility of standing water near the foundation. Shallow ditches called swales should be used in conditions where one or more sides of the building face an upward slope. A swale should slope away from the building for 10 to 15 feet, at which point it can empty into another swale that directs water around to the downhill-side of the building, leading it away from the foundation. basement cracks Repair all cracks and holes If leaks or seepage is occurring in the basement's interior, water and moisture are most likely entering through small cracks or holes. The cracks or holes could be the result of several things. Poor workmanship during the original build may be making itself apparent in the form of cracks or holes. Water pressure from the outside may be building up, forcing water through walls. The house may have settled, causing cracks in the floor or walls. Repairing all cracks and small holes will help prevent leaks and floods. Here are some steps to take if you suspect that water is entering the basement through cracks or holes: Identify areas where water may be entering through cracks or holes by checking for moisture, leaking or discoloration. Every square inch of the basement should be examined, especially in cases where leaking or flooding has not been obvious, but moisture buildup is readily apparent. A mixture of epoxy and latex cement can be used to fill small hairline cracks and holes. This is a waterproof formula that can help ensure that moisture and water do not penetrate basement walls. It is effective primarily for very small cracks and holes. Any cracks larger than about 1/8-inch should be filled with mortar made from one part cement and two parts fine sand, with just enough water to make a fairly stiff mortar. It should be pressed firmly into all parts of the larger cracks and holes to be sure that no air bubbles or pockets remain. As long as water is not being forced through basement walls due to outside pressure, the application of mortar with a standard trowel will be sufficient if special care is taken to fill all cracks completely. If water is being forced through by outside pressure, a slightly different method of patching with mortar can be used. Surface areas of walls or floors with cracks should first be chiseled out a bit at the mouth of the crack and all along its length. Using a chipping chisel and hammer or a cold chisel, cut a dovetail groove along the mouth of each crack to be filled, and then apply the mortar thoroughly. The dovetail groove, once filled, should be strong enough to resist the force of pressure that was pushing water through the crack. sodium-silicate sealant Apply sodium-silicate sealant to the walls and floor Once all runoff has been thoroughly diverted away from the foundation, and all cracks and holes have been repaired and no leaking is occurring, a waterproof sealant can be applied as a final measure. Sodium silicate is a water-based mixture that will actually penetrate the substrate by up to 4 inches. Concrete, concrete block and masonry have lime as a natural component of their composition, which reacts with the sodium silicate to produce a solid, crystalline structure which fills in all the microscopic cracks, holes and pores of the substrate. No water vapor or gas will be able penetrate via capillary action because the concrete and masonry have now become harder and denser from the sodium silicate. Here are some steps and tips for its application: Special care should be taken when applying sodium silicate. It is an alkaline substance and, as such, can burn skin and eyes if it comes into contact with them. Inhalation can also cause irritation to the respiratory tract.   Sodium silicate must be applied only to bare concrete, concrete block or masonry that has been cleaned thoroughly and is free of any dirt, oil, adhesives, paint and grease. This will ensure that it penetrates the substrate properly and fills in all microscopic cracks. It can be applied using a garden sprayer, roller or brush to a surface that has first been lightly dampened with a mop or brush. Apply two to three coats to the concrete, waiting 10 to 20 minutes between each application. Concrete block and masonry will take three to four coats, with the same 10 to 20 minutes between applications. Any excess should then be wiped away. Sodium silicate should not be over-applied or it will not be completely absorbed by the substrate, leaving a white residue. Paint can then be applied without fear of water vapor getting trapped between the paint and the wall, which could eventually cause blistering and peeling. Adhesives for tile or floor covering can also be used more effectively, once the substrate has been sealed. Diverting water away from foundations so that it does not collect outside basement walls and floors is a key element in preventing flooding and water damage. Ensuring that any water that does end up near basement exteriors cannot enter through holes or cracks is also important, and sealing with a waterproof compound will help prevent water vapor or gas from penetrating, as well. By following these procedures, the risk of water-related issues in basement interiors can be greatly reduced, protecting the building from damage such as foundation rotting, mold growth, and peeling paint, as well as improving the interior air quality by blocking the transmission of gasses from the soil outside.

Six Things You Should Avoid Before Buying a Home

Buying a home is not an impulse buy. In most cases you will have a few months notice before you actually go through with the sale. Planning ahead is crucial particularly if you don’t have extensive financial resources. Since mortgage lenders will be sizing up your finances carefully, don’t give them any reason to reject your application. You never know what effect today’s actions will have on your mortgage application in three or even six months. Even something as simple as transferring money from your savings to your chequing account can negatively impact the mortgage process. So here are some suggestions on things you should avoid before buying a home: 1. Do not make any major purchases Don’t invest in any major purchases. Cars, weddings, jewellery, furniture and electronics can all wait until you’re settled in your new home. When you make a major purchase, you limit the amount of money available for your down payment, and decrease the amount of liquid capital in your name. If you do have to make a major purchase before buying a home, you might want to put it on a low-interest credit card until after your mortgage application is approved. Sometimes you can’t control what life throws your way, but think carefully about your options before making a decision. 2. Don’t move money around When a lender reviews your loan application for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs. To do so, they will request statements from all of your accounts that contain liquid assets. Moving your money around, even if you are consolidating your funds to make it “easier,” could make it more difficult for the lender to properly document and measure your finances. So leave your money where it is until after closing. 3. Do not make large investments It is also not recommended to make investments just before buying a home; again, you’re decreasing the liquidity of your assets. If you’ve come across a new stock in which you’d like to invest or if it’s a great time to buy bonds, wait until after you’ve settled the finances on your home. Furthermore, you’ll have to disclose all of your finances before buying a new home, which means accounting for every withdrawal and deposit in all of your accounts. This can get quite tedious, especially if you’re trying to dig up cancelled cheques for the new home theatre or HDTV you just had to have three months ago. 4. Do not change your bank  Changing banks is always a hectic ordeal, so don’t do it before buying a home. You’ll have to provide information about previous accounts that are now closed, and therefore inaccessible. And if you diversify your money too much in money market accounts, savings accounts, chequing accounts and other places, you’ll have a harder time with the disclosure process. If you’re frustrated with your bank and want to change, tough it out a little longer and switch after your mortgage is approved and you’ve set up shop in your new home. This will save you hours of headaches and frustration. 5. Do not apply for a new credit card or line of credit Even though the inquiry won’t hurt your credit too badly if you already have a good credit score, the additional credit card will cause the lender to question your financial stability for buying a home. 6. Do not change your job unless absolutely necessary Try not to change jobs. Your employment is a key factor in the mortgage approval process, and if you can’t show steady employment, you might be denied. Of course, you can’t help matters if you’ve just been laid off or an opportunity presents itself that you can’t pass up. This could become more difficult if you become self employed. In most cases, lenders want to see at least two years of self-employment before they will approve you for a loan. So if you can, wait until after buying a home to become self-employed. For part-time workers, changing jobs creates unpredictability in the number of hours you will work so the lender cannot determine your gross income to qualify you for a loan. If you’re going to change jobs before buying a home, wait another six months before going ahead with the real estate transaction. This gives you an opportunity to establish employment and to show a steady income from a single employer. This looks much better on a loan application than a long list of recent employers. As mentioned above, there will be times when you can’t avoid all of these things before buying a home, but know that it’s in your best interests to wait until the dust settles. The goal should be to move into your new house with as few obstacles as possible.

–

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What Can Hurt a Home’s Appraisal

Owners can take steps to avoid having their home appraised at a lower value than the asking price.

“Taking the time to understand the areas that can positively influence your appraisal can help ward off the chances that your home will be appraised at a lower value than the asking price,” according to a recent article at Realty Times, which highlights ways sellers can prepare for an appraisal. 

Here are a few ways that home owners can hurt their appraisal, according to the piece.

• Leaving the home untidy. Having an unkept exterior or interior can cause an appraiser to decrease the value somewhat. Remind your sellers that curb appeal is also important for an appraisal. Overgrown bushes or an unkept home exterior could prompt an appraiser to take as much as 3 percent off the value, according to a CNNMoney article. 
• Having incomplete remodeling projects. Don’t let home owners keep a remodeling project unfinished prior to an appraisal. If they must, make sure they include details of the complete project and when it is to be finished to the appraiser. 
• Failing to list improvements or upgrades made to the home. Compile a list of upgrades and home improvements made to the home and provide it to the appraiser. While some items, like a new roof, may not help raise the appraised value, other items might. 

Spectacular Bedroom with Glass Floor Over the Water | DesignRulz

Spectacular Bedroom with Glass Floor Over the Water | DesignRulz

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Home ownership in Canada reaching new heights

The Canadian real estate industry is in a tight spot these days.

With home-ownership rates headed for record levels and the federal government tightening lending rules to cool the market, the question now is whether we have reached the saturation point.

Bank of Nova Scotia economist Adrienne Warren says that when the latest census figures come out next month she expects us to be in the elite company — depending on your view — of countries with more than 70% of households owning their own homes. Based on the 2006 census, we were at 68.4%. “It’s similar to the U.S., U.K. and Australia when they came up with the mid-decade census,” Ms. Warren said.

Ms. Warren said the biggest jump in home-ownership rates going into the 2006 census was among young people buying condominiums. Do we need another census to tell us that that group expanded or can we just look up at the cranes across the country? “It was people in their early 20s buying as opposed to waiting until they got older. It probably continued,” Ms. Warren said.Some countries, like Italy and Spain, could be as high as 80% while in others with expensive real estate, like Switzerland, home-ownership rates are more like 30%, she said.

Interestingly enough, the United States is believed to have cracked that 70% threshold before the bottom fell out of its housing market.

Already Ottawa has stuck a pin in the housing balloon with new rules, including a restriction that limits amortizations to 25 years, which ultimately increases monthly payments for consumers and limits how much they can borrow.

The Office of the Superintendent of Financial Institutions added its own rules tightening up regulations for financial institutions.

“The government is saying you should not be a homeowner if you cannot afford it,” said Benjamin Tal, deputy chief economist at CIBC World Markets Inc.

The Canadian Real Estate Association released data last week that showed home prices across the country had actually slipped 2% from a year ago to an average of $353,147.

“We are at the peak of home ownership in Canada,” Mr. Tal said. “In fact, we are probably too high and it will probably go down.”

It’s impossible to argue against the emotion of owning your home or the advantage of forced savings that comes with a mortgage — a clear edge for people with no financial discipline.It’s not that 70% is some type of threshold we can’t break through but renting is becoming that much more attractive as the gap between home ownership and renting costs widens.

The principal advantage is you can leverage your investment by putting only 5% down because the government will back your mortgage with the bank. But leverage means nothing when your investment is decreasing in value — it just compounds your losses.

If you consider that average $353,147 home with a 5% down payment, it will cost you close to $1,600 in monthly mortgage costs, even at today’s 3% interest rates with a 25-year amortization. Canada Mortgage and Housing Corp. said in June the average two-bedroom apartment in new and existing structures was $887 a month. Add in other home-ownership costs like taxes and the gap widens.

Beyond the current expansion, there’s no arguing against the long, steady price appreciation of housing, which has been going on for decades, but there is an alternative to home ownership if you want upside exposure to the market.

Michael Smith, an analyst at Macquarie Equities Research, has published a report for the past five years comparing condo returns to apartment real estate investment trusts.

“REITs win,” said Mr. Smith, adding in a report in January the REITs would have returned 31.5% over the past year compared to a condo return of 12.4% in Toronto and 6.1% in Calgary. Going back another four years, the numbers are even more in favour of the public vehicles.

“What I would say now, since I did the last study, is if anything the outlook for the REIT versus the condo is even more compelling given where the condo market seems to be correcting,” Mr. Smith said.

Sam Kolias, chief executive of Boardwalk Real Estate Investment Trust, Canada’s largest apartment owner, says he is already seeing the push back into apartments.

“If you wanted to be hedged against housing [going up], you could rent and buy stock in our company,” said Mr. Kolias, who added that occupancy rates have climbed close to 99% as house prices have risen steadily. “We’ve never been as full as we are now.”

While this may all be bad news for housing, Phil Soper, chief executive of Royal LePage Real Estate Services, still sees room for expansion.

“There is nothing magical about 70%. The U.S. rate fell from this rate because of a collapse in their financial system,” said Mr. Soper, who points out home ownership in the U.S. is still about 66%, even after “one of the worst meltdowns.”

He said one key driver of the housing market that has not changed is the rule that allows consumers in with just a 5% down payment.

“We have public policy in place that supports home ownership,” Mr. Soper said.

Okay, you can probably still get into the housing market. But with prices falling and the gap between renting and carrying a home widening, the question is do you really want to make that investment?

What Happens on Closing?

By Lorne Shuman

Whether you have bought a resale or a new home, you need to understand what happens on the day that your deal closes-or the closing day.  Many important things occur on closing.  First, you become the legal owner of the property.  Second, you receive the keys to the property.  Third, you become responsible for the many financial obligations that owning a home imposes. This column will examine these issues in more detail and give you a better understanding of what happens on closing day.  If you have bought a brand new condominium, the closing process is slightly different and some of these comments may not apply.

After many months of waiting, you are about to close your house deal.  Things happen quickly and you need to be prepared.  If you have bought a brand new house, your builder has notified you and your lawyer of the closing date.  Your lawyer will advise you to notify the gas, hydro, building and tax departments of the change of ownership.  You will need to arrange for movers as well as setting up accounts for cable and telephone. You will also need to insure the property.

Your lawyer will call you to set up an appointment to sign all the necessary papers and advise you of the required funds to close the deal. Included in this number will be legal fees and disbursements, the title insurance premium, Land Transfer Tax (you may qualify for an exemption if certain criteria are met) as well as adjustments between you and the vendor.  The legal fees and disbursements should not be a surprise.  Land Transfer Tax and closing adjustments are costs that that your lawyer should have warned you about and estimated for you when you signed the Agreement of Purchase and Sale. 

Adjustments are variable and often depend on the closing day.  Here is how they work:  If your deal is closing in February and the vendor of the property has already paid for the entire year of property taxes, there will need to be an adjustment in the vendor’s favour.  Essentially, you need to compensate the vendor for the fact that it has fully paid your realty taxes-something that you would be paying for in any event.  As such, there will be an adjustment in favour of the vendor.  Your lawyer will prepare and explain to you how the adjustments were arrived at.  The opposite analysis applies and the Vendor will need to make an adjustment in your favour if it has not paid the realty taxes.  On a newly built home, the adjustments are usually more complex.

If you have bought a newly built home, you will need to do a careful inspection of the property prior to closing.  Depending on the terms of your contract, this may not be the case for a resale home.  In any event, you need to be aware of the fact that you will not receive the keys to the property until the deal is closed.  Closing occurs when the lawyers have exchange documents, keys and funds and the documents have been registered.  Registration normally occurs later in the day.  Keys are released after closing.  If you have bought a new home, the keys are often released at the site office.  If you have bought a resale home, your lawyer will advise you as to how and when you may pick up the keys.

Closing day is the culmination of many months of preparation.  Working with an experienced real estate agent and real estate lawyer will ensure a smooth closing. 

Low-Rise Home Types Drive June Price Growth

Greater Toronto REALTORS® reported 9,422 home sales through the TorontoMLS system in June 2012. The number of transactions was down by 5.4 per cent in comparison to June 2011. The year-over-year decline was largest in the City of Toronto, where sales were down by 13 per cent compared to June 2011. Sales in the rest of the Toronto Real Estate Board (TREB) market area were comparable to a year ago.

“Buyers continue to face the substantial upfront cost associated with the City of Toronto’s unfair Land Transfer Tax,” said TREB President Ann Hannah. “Recent polling by TREB suggests that many households are considering home purchases outside of the City of Toronto to avoid paying the Land Transfer Tax. This goes a long way in explaining the disproportionate decline in sales in the City versus surrounding regions.”

The average selling price in June was $508,622 – up by 7.3 per cent compared to June 2011. The mortgage payment associated with the average priced home in June, assuming five per cent down and a five-year fixed rate mortgage amortized over 25 years, would account for approximately 35 per cent of the average household’s income in the GTA after adding property tax and utility payments.

“According to new mortgage lending guidelines set out by Finance Minister Jim Flaherty, the GTA housing market remains affordable. The share of the average household’s income going toward major home ownership payments for the average priced home remains below the 39 per cent ceiling recently announced by Mr. Flaherty,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

“The average household in the GTA continues to benefit from a considerable amount of flexibility to account for higher interest rates moving forward,” continued Mercer.

No Breaks for Offshore Condo Investors from the Taxman
By: Mark Weisleder


Printed With Permission

There have been a lot of stories of foreign citizens buying Canadian condominium units from floor plans and then reselling them, for a profit, as soon as the building is registered. These sellers must be aware that the Canadian taxman must be paid before they get their money. In some cases, the entire deal could be delayed until this gets done. In general, you are a resident of Canada for tax purposes if you have lived here for at least 183 days in the past year. If you are a resident, and you sell any Canadian real estate, you do not have to pay any tax owing until you file your tax return at the end of the year. For instance, if you are a resident and sold a property in July 2012, you would owe income tax, if any, by April 30, 2013 — the deadline for filing your 2012 income tax return. However, if you are a non-resident, you must clear up your taxes before a real estate sale closes. This means applying to the Canada Revenue Agency (CRA) for something called a Certificate of Compliance. In general, you need to pay 25 per cent of the capital gain on your sale in order to get the certificate. If the certificate is not received prior to closing, the buyer will insist on a holdback, typically 25 per cent of the entire purchase price, until the certificate is in fact produced. (In some cases the holdback amounts to 50 per cent of the purchase price.) In more and more cases that I see in my practice, these certificates are not available for closing, owing to a backlog in processing the requests by the CRA. The reason the buyer insists on the certificate, or the holdback, is that if the seller sells without paying the required taxes, the tax burden then becomes the buyer’s responsibility. Let’s look at an example: the non-resident buys a condominium for $300,000 in 2010 and wants to sell it now for $400,000. The gain is $100,000. The tax on the $100,000 must be paid before closing in order for the seller to receive the certificate. However, if the certificate is delayed, then the sum of $100,000, being 25 per cent of the total purchase price, will be held back on closing until the certificate is delivered. If there is a mortgage on the property, this might require the seller to come up with his own money to pay off the balance of the mortgage before closing, since there may not be sufficient funds left after the holdback to do this. Even if the property is sold at a loss, the seller must still obtain the certificate or else the same 25 per cent of the purchase price will be held back on closing. The CRA may also delay the delivery of the certificate if the seller owes outstanding income tax for prior years, or if the seller has not, for example, paid the proper withholding taxes on any rental income he received from the property during his years of ownership. How is all this tracked? In every real estate deal in Canada, the seller is required to provide a sworn declaration that, on closing, he will not be a non-resident of Canada. When such a declaration is made, the seller may receive the full purchase price from the buyer and he has until April 30 of the following year to pay the taxes. However, if the seller is not a resident, then the taxes must be paid early, as described above. Real estate agents should explain this process immediately to clients selling a property in order to ensure that lawyers and accountants are aware in advance that tax filings must be made before any deal closes. If you are buying from a non-resident, you should also ask questions to make sure that there is nothing that might delay your anticipated closing. Foreign citizens might make a profit buying and selling Canadian real estate, but they will not escape Canadian taxes. In all cases, seek professional advice before signing any agreement to sell a property.

LAND BOUNDARY DISPUTES WITH NEIGHBOURS… WORTH THE FIGHT? A lot of Toronto real estate is in close proximity to one another. When fences are involved, boundary disputes can become commonplace. Toronto real estate lawyer Bob Aaron says in his most recent column that his own Toronto-area practice is beginning to see more boundary dispute cases. If land boundary issues go to court, they can be very costly. He also writes about how costly it can be if both parties don’t act reasonably and rationally in a land boundary dispute case, the court costs can be more expensive than the actual value of the disputed piece of land: “Four years ago, a heated disagreement arose between two Delta, B.C., neighbours whose rear yards are back-to-back. Colleen Burke’s house is located on 67th St. in Delta, and the house directly behind her on 66a St. belonged to Brad and Marlene Keefe. Title to the houses is registered on an 1893 subdivision plan. Originally, the rear fences of all of the houses in the block ran along the same north-south line, which was marked in the old subdivision plan. But in 1988 and 1989, Warren Barnard, a newly-minted land surveyor, surveyed some of the lots in the area. He incorrectly concluded that the rear fences did not correspond with the true boundary lines between the adjoining lots, and were in fact out by about 12 feet. It appears there was some confusion over the location of the original survey markers for the 1893 subdivision. As a result of the erroneous Barnard surveys, some of the neighbours moved their fences and some did not. At that point, the rear fences in the block were no longer in alignment.” Read the rest of his column, and the expensive conclusion, here.

Selling your House in Toronto

Learn How to Sell a House Fast & Profitably

Selling

It is arguably the real estate market will slow during this season. This is good for real estate agents and property investors who have worked very hard to help clients buy and sell houses but not so good for buyers and sellers.

If you’re in the market to buy a house in December and January can be a good time to take a bargain on a house because there are not many buyers. It can also cause a problem for home buyers because the number of homes available is generally lower during the holidays as home sellers do not want to travel during this time.
The cold also affected the property market.

The colder it is outside the home buyers are at least buying a new house greater and the lower number of open houses real estate agents have. During the months when the weather is hot, the number of houses for sale increases as the number of homes sold each month.

Does this mean you should wait to sell your house before spring? Well, if you can wait it might be a good idea too, but many homeowners must sell their house now.

The truth, that’s life happens and there are many reasons a home you expect to stay in seven to ten years suddenly becomes a home you can stay in two or three years.
Homeowners who must sell their home fast are usually one of the following reasons: foreclosure, job transfer, divorce, relocation, family illness, selling, etc. There are many homeowners have reasons to sell a house, but if you experience any of the issues mentioned above you are more likely to need to sell quickly.

The problem with need to sell a house quickly in today’s market, real estate is many homeowners have no equity and so selling a home can be very difficult. If you owe more for your mortgage than your house is worth may seem impossible to sell your home. The truth is that you still have options of selling a house. You can have a real estate professional or investor completes a short sale, the option of renting your house until the market rise, or you can rent your home until the market rises and selling then.

It is important that if you’re interested in selling a home, you discuss all your options with a real estate professional. Real estate can be a difficult thing to handle especially when you have an emotional attachment to the house. All options of your discussion with someone who is an expert and has no emotional attachment can help facilitate the process of selling a house.

www.PeterTarshis.com

Heritage Toronto Moment: Government House

Urban Toronto has partnered with Heritage Toronto to capture a moment in Toronto's past. On a weekly basis, we highlight historic photos of the city's people, places and events, and tell the stories behind them.

There's no doubt how much has changed in the City of Toronto over the past 100 years physically, socially, culturally or otherwise.

This photograph, taken in 1912, offers a window into the times. It depicts Government House, a stately structure that was the home of the Lieutenant Governor of Ontario. Government House was located on the southwest corner of Simcoe and King Streets, an important intersection that was often referred to as “Legislation, Education, Damnation and Salvation!”


Heritage Toronto Moment: Government House

Throughout the history of the province, there have been numerous homes for the Lieutenant Governor. Built between 1866-1870, this new residence of the Lieutenant Governor became a showpiece for the area. It was designed by Gundry and Langley featuring a picturesque tower, sloped mansard roof, as well as dormer windows. It was built in red brick and Ohio Limestone in what the architect Henry Langley called “in the modern French style of architecture which has been adopted largely in American cities and is rapidly getting into favour in England.”

In the far right of this aerial view facing Simcoe Street can be seen the carriage porch, a feature of domestic architecture that by 1912 would soon be phased out with the advent of the automobile. On the south side of the structure is an elaborate façade above which was the state bedroom suite on the second floor that looked out onto carefully manicured grounds. Further to the left is a greenhouse. Inside Government House were numerous spaces including a dining room, reception room, business office, drawing room, guest suite, and morning room.

By the turn of the 20th century the King and Simcoe area was much changed and a new location for Government House was being sought. In 1912, the building was extensively photographed prior to its demolition, including the exterior seen here.

Many years after Government House was demolished, Roy Thomson Hall was built on the site.

Many thanks to both Gary Switzer of MOD Developments and Maya Bilbao for putting together the photos and research.

Making an Offer

When it comes time to make an offer you will require current market information and assistance in drafting your offer. You will need a Real Estate Professional.

A Real Estate Professional will communicate your Offer to Purchase to the seller, or the seller's representative, on your behalf. Sometimes there may be more than one offer on a property at the same time. A Real Estate Professional can guide you through this process.

"HELPING YOU IS WHAT I DO"

Peter Tarshis

Royal LePage Real Estate
55 St. Clair Ave. West
Toronto, M4V 2Y7

416.921.1112 office
416.921.7424 fax
1.800.622.9536 toll-free

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