The following is intended as a review of the Ontario HST, specifically the application of the Provincial portion of the HST to purchases of newly built residential property. For complex inquiries or questions please contact the author.

HST will apply to purchases of newly built residential homes closing on or after July 1, 2010 where the Agreement of Purchase and Sale for the property was signed after June 18, 2009. The sale of a home previously occupied by an individual as a place of residence (USED RESIDENTIAL PROPERTY) is exempt from GST and will also be exempt from HST. The HST is 13%. The Federal portion (GST) is 5%. Normally builders include the GST in the purchase price for newly built residential property and any rebates the purchaser is entitled to are assigned by the purchaser to the builder. The provincial portion of the HST is 8%. Some builders are including this 8% portion in the purchase price for newly built property and some are not. Prospective purchasers of newly built residential property should clarify during all builder consultations whether the HST and/or portions of it are or are not included in the purchase price. This article will address the costs to the purchaser where the 8% provincial portion of the HST is not included in the purchase price and is payable by the home purchaser.

Where a newly built residential home is purchased as a primary place of residence for a purchaser, a 75% rebate can be claimed by the purchaser on the 8% Provincial portion of the HST up to a maximum of $24,000.00.

Three examples will illustrate the application of the provincial portion of the HST where it is payable by a purchaser:

Home Purchase of $250,000.00

8% (Provincial portion HST) x $250,000 purchase price = $20,000
75% rebate on $20,000 = $15,000 (allowable rebate).
$20,000 – $15,000 = $5000 payable by purchaser as Provincial portion of HST, after rebates.
Home Purchase of $300,000.00

8% (Provincial portion HST) x $300,000 purchase price = $24,000
75% rebate on $24,000 = $18,000 (allowable rebate).
$24,000 – $18,000 = $6000 payable by purchaser as Provincial portion of HST, after rebates.
Home Purchase of $500,000.00

8% (Provincial portion HST) x $500,000 purchase price = $40,000
75% rebate on $40,000 (up to a maximum rebate of $24,000)
$40,000 – $24,000 = $16,000 payable by purchaser as Provincial portion of HST, after rebates.

One of the most important things for prospective purchasers to keep in mind when purchasing newly built residential property is to determine, as best as possible, all costs related to the purchase over and above the purchase price. It should be clear to prospective purchasers that where the provincial portion of the HST is NOT INCLUDED in the purchase price of a newly built residential property the purchaser should determine the cost and budget accordingly.

Thank-you for reading. Please contact the undersigned for further inquiries. We would ask that you consider our firm for any future real estate, wills and estates, and/or corporate law assistance you, your clients, or your family may require.

142 Simcoe Street North
Oshawa, ON L1G 4S7
ph: (905) 436-9015
fax (905) 436-6098

Wills and Powers of Attorney: Why You, Your Spouse, and Family Need Them

This article is intended to provide information to everyday people regarding Wills and Powers of Attorney.  These documents are a necessity for every adult and should be drawn up with a lawyer.  I will address Wills at the beginning of the article and the second half will address Powers of Attorney.

One of my areas of practice is Wills and Estates.  Often the most time consuming and expensive files that I act on arise where someone passes away without a Will.  Too often people discuss the need to draw up documents with their lawyer only to put it off for another day.  What happens when someone passes away without a Will?

The Succession Law Reform Act of Ontario governs the administration of Estates where people pass away without a Will.  When a Will is drafted Executors are chosen to be in charge of the Estate. For married people the Executor is usually your spouse and an alternate is selected in the event your spouse predeceases you or cannot act.  If a person passes away with no Will the Succession Law Reform Act will dictate who will be the executor of your estate and in charge of its administration.  If you do not get along with a certain family member during your life it will not matter, the Succession Law Reform Act could dictate that family member as the executor of your estate.  Similarly with your beneficiaries, depending on who is alive at the time of a person’s death, the Succession Law Reform Act will dictate the beneficiaries of your estate.  It will not matter if you have a child or family member you have not spoken to in years, the Act could name that person as a beneficiary.  The legal work involved when someone passes away without a will is expensive.  More documents and consents from family members are often required.  This results in extra fees to the Estate. The irony is that many people do not want to make a Will as they fear the cost will be too high.  In the end, passing away without proper documents costs the Estate much more money in legal fees.  What is the process of getting documents in place?

Before I meet with clients I generally send out a Will and Power of Attorney questionnaire to be filled out by the client(s).  The questionnaire gets the clients started on the road to determining the structure of their Wills and Powers of Attorney.  It also has a checklist that helps me to catch any legal issues that the client(s) may have overlooked but which have a serious legal impact.  One such issue would be a situation where not all of your children are biological children.  Once the checklist is complete I meet with client(s) for an Estate planning appointment. This is not an ominous appointment. Clients often bring in their young children and the meetings often turn into an interesting discussion about clients’ families and their wishes.  The appointments generally take one hour depending on the circumstances and issues discussed.  The goal of that initial meeting is to come up with a draft structure of Wills and Powers of Attorney. We also generally discuss finances and which assets pass through your estate and which do not.  I explain probate (Estate) taxes to the clients as well. I discuss with clients any specific bequests they would like to provide to family members. Guardians are named for any minor children.  This is especially important for parents to avoid controversy in the event both spouses pass away with minor children.  We discuss the clients’ wishes with respect to burial or cremation.  I also discuss with the clients more complex planning issues such as the consequences of providing funds to a disabled beneficiary who receives regular monies from the Ontario Disability Support Program (ODSP). I am able to draft documents wherein money for a disabled beneficiary can be placed into a trust.  This is important as a disabled beneficiary who directly receives money from an estate may lose his/her benefits under the ODSP program. 

Following the Estate planning appointment my assistant and I work on draft Wills and Powers of Attorney for the client(s) according to the specific instructions I have received.  These drafts are sent to the client by email or regular mail to review. The clients are able to review the documents at their convenience. Following the review of the documents changes can be made and an appointment is set up for the clients to come in to sign the documents. At the signup appointment all documents are signed by the clients and the lawyer and assistant witness all the documents. I generally have the clients leave my office with all signed documents on the day of the signup appointment.  The documents are best kept in an unlocked fire proof box in a safe place in the clients’ home.  Wills are only one half of the work I do on behalf of clients; Powers of Attorney are just as important.

There are two types of Powers of Attorney I complete for clients: Power of Attorney for Property and Power of Attorney for Personal Care.  Power of Attorney documents are used when someone is still alive but cannot make decisions for some reason.  Primarily the documents are used when an illness causes a person to be in a state where they cannot express their wishes for their care or their property.  In certain circumstances a Power of Attorney for Property can also be used where a person is out of the country.  Similar to appointing executors to be in charge of an Estate, a person selects their Powers of Attorney to make decisions on their behalf.  Often a spouse and an appropriate alternate is selected.  I discuss with clients the importance of the documents and how exactly they can be used.  I have often heard clients say that because they are healthy they do not need Powers of Attorney.  This is an incorrect assumption.  I have seen previously healthy clients become incapable due to strokes or dementia.  Vehicle accidents are also something people fail to consider.  What happens if you do not have Powers of Attorney?

In the event a person does not have a power of attorney Ontario’s Public Guardian and Trustee steps in to Act as Guardian. If a family member or spouse wishes to step in and Act as Power of Attorney a complex application must be submitted to the office of the Public Guardian and Trustee. This is expensive in terms of legal fees and it is often a frustrating process for family members who have the best interests of their incapable family member at heart.  By executing Powers of Attorney with a lawyer dealing with the Public Guardian and Trustee can be avoided.  I also address specific issues within the Powers of Attorney such as a no heroic measures clause that will address what is to happen when it is inevitable that a person is going to pass away and whether a medical professional should declare the person incompetent in order for the documents to be used.

Prior to concluding this article I will address an unfortunate development in the Estate planning field.  Several clients have stated that they do not need to make documents with me or discuss estate planning because they purchased a do-it-yourself Will and Power of Attorney kit from their local bookstore.  The clients tell me they filled out the forms themselves. This is problematic for many reasons. These kits fail to address many important issues. Here are just a few:

-          If your children are your beneficiaries what happens if one of your children predeceases you? What happens if your predeceased child has children, being your grandchildren.

-          Clients often fail to consider the legal meaning of words such as “may” vs. “shall”

-          Will kits often have bequests that are too general or confusing to carry out; if you named a charity as a beneficiary was it properly named using the registered name of the charity?

-          Will kits are fill in the blank forms, what is to stop a deceitful family member from writing in some additional information after the document has been executed?

-          Will kits will often not address issues surrounding disabled beneficiaries or how to provide for stepchildren.

-          A lawyer will include notes in the file regarding a person’s mental capacity at the time the document was executed, a will kit will not do this. A family member could possibly challenge the will and claim the person lacked the mental capacity required to execute the document. 

The above are only the tip of the iceberg when it comes to problems with do-it-yourself Will kits.  It is best to see a lawyer for proper estate planning.  The cost for documents is inexpensive compared to the cost of dealing with issues that arise when a person passes away having not executed any documents.  I typically charge $300 for a single person for Wills and Powers of Attorney and $500 for spouses plus applicable taxes.  This includes two appointments and all work surrounding the drafting of the documents.  My clients feel a sense of relief once their Wills and Powers of Attorney are drawn up and signed. In the end a minimal cost now will save much larger costs in the future.  

Thank-you for reading.  Please contact the undersigned for further inquiries.  We would ask that you consider our firm for any future real estate, wills and estates, and/or corporate law assistance you, your clients, or your family may require. 

 142 Simcoe Street North

 Oshawa, ON  L1G 4S7

 ph: (905) 436-9015

 fax (905) 436-6098

An old Latin phrase serves as a good introduction in a discussion involving trees and Ontario landowners: “Cuius est solum eius usque ad caelum et ad inferos.”  Roughly translated this means: whoever owns the soil owns all the way to the heavens and to the depths of the Earth.  This is more of a colorful legal phrase than a true statement of law. 

In truth we do not own property to the heavens or down to the core of the Earth.  The law interprets property ownership reasonably.  The law takes into consideration the rights of homeowners versus the rights of citizens to enjoy the airspace high above homes.  Property owners, therefore, own a reasonable amount of space above their homes, being the space that can reasonably be occupied.

For clarity it is useful to review some practical situations facing the Ontario homeowner.  What does a homeowner do when faced with overhanging branches from a neighbor’s trees?  A homeowner may be entitled to remove the overhanging branches of a tree belonging to an adjoining landowner.  Overhanging branches become the property of the owner of the lot over which they are located. 

 One cannot simply cut and run, however. There are several exceptions to the above rule:

a)      Beware overhanging branches and trees that have grown from government property. There may be bylaws preventing the cutting of trees. Always check with your local municipality before trimming branches from adjoining land, whether the land is owned by the municipality or not.

b)      If the trimming of branches could cause the death of the tree the homeowner who trimmed the branch could face legal action.  Try to seek the permission of the homeowner in writing prior to trimming whenever death of the tree may occur.

 If a tree falls…….

 In the case of trees falling from your neighbor’s property onto your property:  A homeowner is entitled to be reimbursed for the cost of removing the tree. What about damage to property if the tree falls through a shed? The courts do not like to transfer liability from one innocent party to another.  A Canadian case recently examined whether homeowners carry a duty to have trees on their property examined by experts to determine the existence of illness or hazard.  The court held that reasonableness dictates that homeowners should pay attention to trees on their property and the general condition of the trees.  There is a duty on the homeowner to take action if signs of decay become visible from an ordinary and reasonable vantage point.  Expert opinion on the health of trees is not required. 

 The above scenario demonstrates the importance of keeping records. If you warn your neighbor that a tree on her lot may have an illness and may fall on to your property you should keep a written record of this conversation.  It also demonstrates that if a tree falls in a violent storm the owner of a tree will not likely be liable for damage caused.  Proper insurance may provide compensation to homeowners for their losses rather than legal action against an innocent adjoining landowner.

Thank-you for reading.  Please contact the undersigned for further inquiries.  We would ask that you consider our firm for any future real estate, wills and estates, and/or corporate law assistance you, your clients, or your family may require.  

  142 Simcoe Street North

Oshawa, ON  L1G 4S7

 ph: (905) 436-9015

 fax (905) 436-6098

TIPS FOR HOME BUYERS AND SELLERS 

142 Simcoe St. North, Oshawa, ON, Ph. 905 436 9015, Fax 905 436 6098

1. Get pre-approved for financing from a mortgage broker or financial institution before seeking out homes to purchase.
2. Use a qualified real estate agent to help you find and buy the right home.  There is no cost to use a real estate agent when you are purchasing a home (either new or lived in).  You should have an agent that works only for you, not the seller.
3. Use a qualified and insured home inspector to inspect the home prior to purchase. A satisfactory home inspection should be a condition of completing the purchase.
4. Budget all your costs prior to the purchase of a home, including banking, legal fees, moving, necessary renovations, yearly municipal taxes, and provincial land transfer tax. Toronto has a Municipal Land Transfer Tax that will further increase costs.
5. Use title insurance when purchasing a home.  Your lawyer will assist. Title insurance is a one-time payment that can lower your overall costs. It protects you against title fraud the entire time your own your home up to a 200% increase in value of your home.
6. Find a lawyer you are comfortable with.  The least expensive law firm may not be the best fit for you.  Your signup appointment prior to the closing of your purchase or sale should be completed with a lawyer rather than with a legal assistant. 
7. When purchasing a home, the lawyer should advise you of any issues revealed in a title search such as restrictive covenants or easements affecting title to the property.
8. Your lawyer will help you decide who should become the registered owner of the property being purchased.  One can own property as a joint tenant, usually with a spouse, where ownership will pass to a surviving spouse on death.  Property owners can also own property as tenants-in common.  Usually, business partners choose this form of ownership where the ownership of the partners stays in their estate on death.
9. When purchasing or selling a home, contact all utility providers (hydro, water, gas) before closing.
10. When listing your property for sale, be sure it is clean. Fix minor defects that may decrease the property value. Do not simply cover serious defects, such as a leak or a foundation crack, with paint. You could face legal action following a sale for concealing a defect. Speak to your lawyer or real estate agent if you have any questions.
11. Check with your lawyer when purchasing to see if there are any tax benefits available, such as a first-time buyers exemption for land transfer tax.

 Thank-you for reading our Tips for Home Buyers and Sellers.  We would ask that you consider our firm for any future real estate, wills and estates, and/or corporate law assistance you or your family may require.

Land Transfer Tax In Ontario

First Time Buyers vs. Home Purchasers who have Previously Owned Property

The following is intended to be only a brief review of the Land Transfer Tax in Ontario. The intended readers are primarily real estate and mortgage professionals.  For complex inquiries or questions please contact the author. 

Land transfer tax is paid in Ontario when a person purchases an interest in Land.  Land includes buildings for the purpose of calculating the tax, for example, a high rise condominium.  Land transfer tax is based on the amount paid for the land and any amount remaining on any mortgage or debt assumed to buy the land.

The higher the amount paid to buy the land or value of any mortgages assumed, the higher the land transfer tax. Without going into the formula used to calculate the tax here are some examples of land transfer taxes payable based on different home purchase prices.

Pursuant to the Land Transfer Tax Act, individuals who have previously owned an Eligible Home as defined by the Act, anywhere in the world, must pay land transfer tax.   

 FIRST TIME BUYERS

 Individuals and spouses who are first time home buyers under the Land Transfer Tax Act may qualify for a $2000.00 exemption from the tax. Whether the property is being purchased by and individual or by spouses, the maximum exemption per property is $2000.00.  Prior to the closing of their purchase, first time buyers will execute an affidavit swearing to their status as first time buyers.  The lawyer submits this document on behalf of the first time buyers.

 The following are examples of the application of the Land Transfer Tax Act and the land transfer tax exemption rules surrounding first time buyers:

Scenario: A single first time home buyer purchases a home for $150,000.00. 

Result: Normally the land transfer tax payable is $1225.00. As a first time buyer the purchaser is entitled to an exemption up to $2000.00, the land transfer tax payable is therefore $0.00.

Scenario:  A single first time home buyer purchases a home for $350,000.00. 

Result: Normally the land transfer tax payable is $3725.  Deducting the $2000.00 exemption results in land transfer tax of $1725.00 payable.

Scenario: First time home buyer married couple purchases for $350,000.00.

Result:  Same as above for a single person. The maximum exemption is $2000.00. Therefore land transfer tax payable is $1725.00.

Scenario: A married couple purchases a home for $350,000.00.  Wife is not a first time buyer but husband is.

Result: The Land Transfer Tax Act prescribes that if a first time purchaser has a spouse, that spouse cannot have owned a home, or had any interest in a home anywhere in the world, while he or she was the purchaser’s spouse. If this is the case, no refund is available to either spouse. For the purposes of the Land Transfer Tax Act, Spouse is defined as people married to each other or unmarried people who have lived together continuously for a period of not less than three years or have been in a relationship of some permanence if they are the natural or adoptive parents of a child.  For example, if the couple does not fit the definition of Spouse as they have been living common law for only a year, or if a home was owned by the home owner spouse not while the couple fit the definition of Spouse, then the first time buyer, in the case of joint tenancy ownership, can qualify for up to 50% of the total land transfer tax exemption.  In the case of the above purchase, the land transfer tax payable is $3725.00, we deduct one half of the maximum exemption and therefore land transfer tax payable is $2725.00. 

Scenario: Husband and wife as first time buyers want to purchase a home. They do not qualify for a mortgage on their own.  The wife’s mother wants to help her daughter and son in law purchase the home.  The bank insists that the wife’s mother go on title to the property as a part owner if she will be using her credit and employment history to help her daughter and son in law qualify for a mortgage.

Result: The parties should consult their lawyer. A possible scenario would be for the husband and wife to take title to the property as joint tenants.  This ownership would be over a 98% share of the property. The wife’s mother will take title to the property as a 2% tenant in common owner.  This ownership strategy allows the husband and wife to take advantage of the of their land transfer tax exemption as much as possible. For example, if the purchase price on the home is $200,000.00, the land transfer tax payable is normally $1,725.00. The wife’s mother, as a 2% owner, pays 2% of the total land transfer tax being $34.50.  The first time buyer husband and wife take advantage of their land transfer tax exemption and owe $0.00 in land transfer tax.

Scenario: Husband and wife have never owned a home in Canada.  They are new Canadians and moved here from South America. In South America they owned a modest home.

Result: The Land Transfer Tax Act prescribes that a person qualifying for an exemption cannot have owned an Eligible Home anywhere in the world. Therefore there is no exemption available.

Scenario: A husband and wife have never owned a home. They wish to purchase in Ontario. They own a time share property in Florida along with 15 other couples. They visit the property only once every 2 years in the off season. 

Result: The Land Transfer Tax Act states that the first time buyers cannot have owned an Eligible Home, it is important to check the definition of Eligible Home in the Act. One of the definitions of Eligible Home in the Act is “A share or shares of the capital stock of a cooperative corporation if the share or shares are acquired for the purpose of acquiring the right to in-habit a housing unit owned by the corporation.”  This is an unfortunate example of the application of the Act. Consultations with Government officials have confirmed that time share interests void one’s right to a land transfer tax exemption. A home purchaser may appeal to the Government for special consideration but the tax must be paid up front and there is no guarantee of the success of the appeal. 

Thank-you for reading.  Please contact the undersigned for further inquiries.  We would ask that you consider our firm for any future real estate, wills and estates, and/or corporate law assistance you, your clients, or your family may require.  

 142 Simcoe Street North

 Oshawa, ON  L1G 4S7

 ph: (905) 436-9015

 fax (905) 436-6098