Posts Tagged ‘lawyer’

Joint Interest in Property is not Creditor-Proof in Ontario

Joint Tenancy Does not offer Creditor Protection


joint interest

Ontario Real Estate Source

By Brian Madigan LL.B.

We looked at a case where a joint interest in a matrimonial home effectively thwarted bankruptcy.  But, that was a peculiar case. In Re: Cameron, it was the bank which placed the deceased’s estate in bankruptcy, months after he had passed away. That was too late!

Had the bankruptcy taken place during the lifetime of the deceased joint tenant, then the one-half interest in the property would have been available to satisfy the debts owed to creditors.

This is due to the fact that the bankrupt’s assets are conveyed to the Trustee. This conveyance severs the joint tenancy and the property is now held as tenants-in-common. This statutory severance allows the creditors to seize and liquidate the bankrupt’s interest.

As you know, for joint tenancy to continue, four unities must be present:

1)     Unity of Interest

2)     Unity of Possession

3)     Unity of Time

4)     Unity of Title

However, if there is really no expectation of bankruptcy, and the widow acquires the title by survivorship on death, then the deceased no longer holds title, and it’s too late for the bank to take proceedings.

Here’s an excerpt from the reasons for Judgment by Judge Mesbur:

·        “When a joint tenant becomes bankrupt and the joint tenancy is severed, the bankrupt’s half interest in the property as a tenant in common then vests in the Trustee, and is available for the creditors.  In a case such as this, the joint tenancy is never severed, there is nothing to vest in the Trustee, and nothing is available from the property for the creditors.

·        When one joint tenant dies, its interest in the property is extinguished, and the rights of the remaining joint tenant or tenants are correspondingly enlarged.  The enlarged interest immediately vests in the remaining joint tenant or tenants.

·        The characteristic of an estate in joint tenancy is that the joint tenants have the same interests … and upon the death of one of the joint tenants the entire estate remains in the survivor in whom the whole estate immediately vests.”

In Re: Cameron having property registered in joint tenancy actually worked quite favourably.

But, you have to remember, that you have to be “dead” to take advantage of the opportunity.

For someone who is concerned about their creditors, joint tenancy does not afford protection during their lifetimes, only after death. So, this is not a good estate plan.

Take the reasonable precaution to ensure that property is held in the name of the spouse who does not have an exposure to creditors. That step works well during one’s lifetime and afterwards as well.

It is also noteworthy to remember that the joint interest is available to execution creditors. Those who have judgments may obtain an execution. It is not simply a remedy available in bankruptcy.

Be sure to obtain legal advice from a lawyer or solicitor practicing real estate law or estate law before making a determination with respect to title.

See the decision of Judge R. Mesbur in the Cameron Estate ats. Bank of Nova Scotia (31 October 2011, Ontario Superior Court).

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.


Change the Bully Offer Rules ~ RECO Election 2012

Brian Madigan Candidate

Ontario Real Estate Source

By Brian Madigan LL.B.

As many of you know, I have offered to let my name stand as a candidate for election as a Director of the Real Estate Council of Ontario for a three year term commencing in June 2012.

Let’s look at an issue which I believe is topical for the 2012 election?

There are offers commonly known as “Bully offers” which present a problem for the industry. Few participants are on the winning end. As part of the process, the existing ethical obligations apparently suggest that by placing the client in a higher position than the profession as a whole, that the consumer is well-served.

To me, the result is the opposite. The consumer loses faith in the integrity of the system. Those who breach the rules are encouraged and those who follow the rules become disgruntled.

Consumers and the public understand the rule of law and the basic system of fairness. What they do not understand is the bully offer loophole.

In my view, there are times when a professional must honour a professional code of ethics first and follow the client’s instructions thereafter. This occurs every day in the legal and medical professions. It is a matter that should be honoured here too.

As the real estate business moves from an “industry” to a “profession”, the Professional Standards and Code of Ethics need to form the primary responsibilities of the registrants.

While in any given situation it would be wise to seek legal advice from a lawyer, I would suggest that appropriate amendments to the Code of Ethics be made under the Real Estate and Business Brokers Act, 2002 be made to ensure that a professional’s responsibilities are primary.

The related and important consequence would be the elimination of the bully offer loophole. This will add to the inherent integrity of the system, ensure fairness and encourage the consumer to respect the registrants and the profession.

A seller would then be able to set up rules related to the presentation of offers, and everyone would be obligated to follow those rules, without the risk that a “bully offer” might arrive earlier. There should be no breach of ethical obligations if the registrant simply followed the seller’s rules and guidelines.

Here’s the political promise: if I am elected I will support the appropriate amendments to the Real Estate and Business Brokers Act, 2002, to place adherence to the Professional Code of Ethics as the primary duty of the registrants.

The effect in my view will be “increased professionalism”.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.

Purchaser Fails to Prove Concealment of Defects

Purchaser Proceeds with Repairs at Own Risk

Ontario Real Estate Source

By Brian Madigan LL.B.

This is a rather interesting situation. The vendors, the Rotas, owned a rather large estate home in Schomberg, Ontario.

Shortly after the purchasers, Mr. and Mrs. Ricchio moved in, there was some water present in the basement. They claimed that the vendors had fraudulently concealed this information. They claimed that there were water penetration problems which the vendors failed to disclose.

The matter came on for trial in the Superior Court of Justice (in Newmarket) over a period of ten days in 2011 before Judge Mulligan.

The purchasers undertook significant renovations to the premises shortly after they moved including replacing the kitchen. They replaced the windows and the eavestrough and renovated the basement. Outside they repaired the weeping tile, constructed a new stone entrance, installed a pool, gazebo and basketball court.

Some pooling of water was found in the basement on the carpeting.

Prior to the closing of the transaction, the purchasers had a home inspection. No problems were noted, however, afterwards the same inspector returned and commented that the wetness would have occurred regularly over the years, but it would not have been evident at the time of the initial inspection since that took place during the dry season.

Oddly, the home inspector was not shown the renovations undertaken by the purchaser immediately after closing including both the eavestrough and windows.

The trial Judge rejected the evidence of the home inspector as an “expert” however allowed the testimony as a fact witness. The home inspector had an interest and the evidence may very well have been self-serving. The interesting issue is that the new eavestrough which could easily have been the problem was not pointed out to the home inspector. The new evidence pointed to the liability of the vendors, while there was, of course, nothing to this effect contained in the initial report.

The trial Judge did not prefer the evidence of Mr. Ricchio. He believed he lacked candour and could have been more forthright in his testimony. The purchasers refused to permit anyone to examine the premises afterwards.

The trial Judge held that the presence of water in the basement was caused by the window and eavestrough installations of the purchasers.

It was still necessary to determine whether there was any active concealment of a defect which could give rise to liability.

Judge Mulligan confirmed that the doctrine of caveat emptor still applies inOntario.

A purchaser accepts the risk of a patent defect, but should there be a latent defect, then this may give rise to liability.

In this case, it is noteworthy that a Seller Property Information Statement had been completed by the sellers. However, it was never brought to the attention of the buyers and did not form part of the agreement of purchase and sale.

Judge Mulligan concluded that the presence of water was not a latent defect and indicated further that there was no evidence of concealment by for example the installation of new carpeting or new drywall. In fact, the downstairs had been continuously used by the vendors’ daughters as their residence.

Specifically, Mulligan J. said in respect to possible concealment:

  • Examples may include replacing the carpet,
  • removing and replacing drywall and repainting it, or
  • making changes to the external property to improve drainage to keep water away from the edge of the house.
  • There is no evidence that any of that occurred here.  In other situations,
  • there may be evidence of previous water problems through evidence
  • from neighbours, previous contractors, or previous real estate agents who may have had some awareness of a problem.
  • Again, there was no evidence of that sort here.


Clearly, there are some straightforward conclusions:

  • A 10 day trial is unduly expensive
  • Attempting to prove fraudulent concealment is difficult
  • A lack of candour and co-operation will work against you
  • The listing agent should have indicated that there was an SPIS
  • The buyer’s agent should have asked for an SPIS
  • The SPIS, if available, should have been made part of the agreement

This ended up being a very expensive lesson for everyone involved. It is possible, that there were other claims made against other parties who were not included in this lawsuit, ie. the agents and the home inspector, but we really don’t know that.

If very difficult situations, the parties would have been well-advised to have their lawyers involved at the outset, that is, during the negotiations, rather than over a ten day period at trial.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.

The Reason to Buy Title Insurance

title insurance

The Value of Title Insurance

Ontario Real Estate Source

By Brian Madigan LL.B.

I thought that it might be wise to comment on the value of a title insurance policy.

In this case, Poplawski v. McGrimmon (2009), Anna Poplawski purchased a title insurance policy from Stewart Title. There were serious defects in the property. The basement flooded and there were septic and well issues, and issues with framing, the roof and the foundation.

Possibly, if full searches had been done, these issue might have been discovered. But, they weren’t. And, that was in part the purpose of the title insurance policy. Save money on the searches and buy title insurance instead.

In this case, Stewart Title paid out the full amount of the title policy, namely $340,000 and initiated the lawsuit for recovery of its losses. It has the right to subrogate, that is, the right to sue in the name of the insured if it pays under the policy.

Here is a brief summary about title insurance made the Master MacLeod in Motions Court:

“Title Insurance

[8]          Title insurance has become increasingly common in Ontario over the past decade or so.

It is now increasingly a standard feature in residential purchases. 

It is marketed as covering both title defects and “off title” searches traditionally completed by lawyers on a real estate purchase.

By purchasing title insurance it may be possible to avoid the cost of a survey or various searches and to in effect “paper over” certain defects. 

I am simplifying of course and the particular coverage in any given case will depend on the wording of the policy in question, the options or endorsements purchased and other factors. 

In any event, this was a Stewart Title “Gold” policy in which both the plaintiff and the lender, First Line Trust, were insured parties. 

Structural problems with the buildings or other improvements on the property are not of course problems with title to the land and the provisions of the policy that are engaged are those that deal with the “off title” searches.

[9]          Title insurance does not cover physical defects in the building as such.

Largely the insurance coverage protects the marketability of the property from defects that would have been revealed by proper searches.

The policy in question does cover “adverse circumstances” that would have been revealed by “a local authority search of the land at the policy date”.

The policy also provides protection from regulatory action such as municipal work orders or demolition orders as a result of defects in the improvements on the property that existed prior to closing. 

It is not necessary to be more precise for present purposes.

The important point is that title insurance is available only indirectly to fund repairs or reconstruction and only under circumstances in which the policy is engaged. 

[10]      Apparently on discovery it was revealed that Stewart Title has advanced the entire face amount of the policy of $340,000.00 to First Line Trust.

Since this is equivalent to the purchase price paid for the property, it would appear this has fully retired the mortgage. 

Even if the house is worthless, the plaintiffs now have the land free and clear of the mortgage debt. 

The claim is for almost double the purchase price and includes consequential damages so the plaintiffs are arguably not made whole by the insurance proceeds. 

More importantly the plaintiffs do not concede that any part of this payment should be a credit against either damages for breach of contract or in tort. 

The important point is that the title insurer has paid out the policy, receipt of those funds has been disclosed, and the insurer is exercising its rights of subrogation.”


If you ever thought of not having title insurance, this case should convince you otherwise. How would the purchaser be able to sustain such a major loss, let alone finance the lawsuit for recovery of compensation?

In addition, the plaintiff in the lawsuit may be able to recover for other losses that were over and above what was covered under the insurance policy.

Also, engage a solicitor, lawyer or experienced conveyancer in the selection of the right policy for you.

And, remember, this policy only cost a few hundred dollars!


Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888

Providing the Solicitor with a Copy of the Agreement in Ontario

When to Deliver?

Ontario Real Estate Source

By Brian Madigan LL.B.

The procedures that are to be followed are not entirely clear, however, this is an area where it’s easy to make a mistake.

First, there are three (3) requisition dates in the standard form agreement of purchase and sale in Ontario. And, from the time the offer is accepted, the time is running on all three. So, you need to make sure that the buyer’s solicitor gets a copy of the agreement as soon as possible. It is the buyer’s solicitor who must search title, conduct secondary searches and submit requisitions on title. The seller’s solicitor also needs a copy, but perhaps not with the same degree of urgency.

The key issue here, is that you don’t want the buyer’s solicitor and then the buyer complaining that the agreement was delivered late and there was no time to search title etc.

While the Act and the Code of Ethics are both silent on the point of the responsibility to ensure that the solicitors are provided with copies of the agreements, negligence can easily arise in respect to the communication.

Make sure that you know the name of the solicitor. Fax a copy or e-mail a copy, or do both as soon as possible. Take this task upon yourself to avoid any potential difficulty.

If the client or customer refuses to name the solicitor, then document their responsibility to inform their solicitor. You should also confirm the requisition dates and emphasize their importance. If something is missed, then the buyer will be back to you.

Your obligation arises under some provisions of the Code, best interests, conscientious service, service from others (4,5,8).

The obligation is also reinforced later in steps to be taken, written agreements, copies, deliveries, and the prevention of errors (23, 27, 28, 29, 39).

Again, no one section sets this out, but the communication rules as between the registrant and the buyer (or seller) need to be clear. If they are not clear, then that is a problem for the registrant.

Under the title search time limits are three matters: work orders, present use and insurance that have time limits based on the satisfaction or fulfillment of conditions.

So, the issue here is an obvious one. Don’t shorten up this time period without the solicitor’s full knowledge and consent. This can easily occur since many agents provide a copy of the initial agreement and then follow slowly with the amendments and waivers etc. The time to deal with work orders, present use and insurance can be triggered by the satisfaction or fulfillment of conditions.

As you are probably aware, most legal offices use all the time they have available. What they don’t want to find out is that the agent shortened the time limit from Friday to Tuesday, and it’s already Thursday.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial  properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888

Lawyer’s Responsibility to Provide Business Advice

Lawyer’s Obligations in a Real Estate Transaction

By Brian Madigan LL.B.

(Ontario Real Estate Source)

Increasingly, in the times of litigation, people want to know how to sue their lawyers. While it used to be that the lawyer was atrusted friend, now, legal services are just another commodity to be purchased, and they should come with a warranty.

If something goes wrong, then take it back to the store for a replacement. If there is something wrong with the property, then the lawyer must have made a mistake.
A few years ago, the Ontario Court of Appeal looked at the role of a solicitor in a real estate purchase. Judge John Laskin wrote the following:

Ontario Court of Appeal (1999, Wong v. Hui)

• A lawyer’s duty to a client will vary depending on the client’s instructions and the limits on the lawyer’s retainer.

• Here, Hui was given an executed agreement of purchase and sale by his clients and instructed to close the transaction.

• The agreement warranted the rental income on the building for a year after closing.

• But the warranty was given only by the vendor, a numbered Ontario company, and thus if the rent was not as warranted the respondents could look only to the numbered company for relief.

• The giving of a warranty by a numbered company should raise a red flag for a reasonably prudent lawyer.

• Ordinarily a lawyer should discuss this warranty with the client and warn the client of the risk of non-recovery should the warranty be breached.

• Mr. Lamont said as much and Hui led no expert evidence to the contrary.

• Indeed, if the respondents had retained Hui before they signed the offer, I would have no hesitation in holding that Hui should have raised with his clients the possibility, even the desirability, of obtaining security for the warranty and sought their instructions on whether to try to negotiate some form of security, be it a holdback on the purchase price of a vendor take back mortgage.

• But the respondents did not retain Hui until after they had signed the agreement of purchase.

• Having not sought his advice beforehand, they then sought to hold him liable for failing to improve on the deal they had negotiated without him.

• In Mr. Lamont’s opinion, Hui still had a duty to try and obtain security for the warranty.

• The trial judge echoed that opinion when she said “[n]o lawyer should presume that no rights can be negotiated.”

• In my view, the trial judge was not sensitive enough to the limitation on Hui’s retainer implicit in his being consulted after the agreement had been signed.

• Mr. Lamont’s opinion may represent a counsel of perfection, but I find it hard to admonish Hui, let alone make a finding of negligence against him, for failing to try to negotiation something to which is clients had no legal entitlement.

• Cases may arise where a duty of this kind should be imposed on a lawyer, but the court should at least take into account the timing of the lawyer’s retainer.

• I do not, however, rest my concern about Hui’s duty to negotiate security on any distinction between business advice and legal advice.

• Hui submitted that he had no duty to negotiate security for the warranty because this was a business matter, not part of a lawyer’s retainer.

• I do not accept this submission. Although ordinarily clients retain lawyers for legal advice not business advice, on some transactions the two are intermingled and no clear dividing line can be drawn.

• Thus, a lawyer may well have a duty to give advice on the financial or business aspects of a transaction, depending on the client’s instructions and sophistication, and on whether the client is relying on the lawyer for that kind of advice.

• As I have said, had the respondents consulted Hui before signing the agreement, they could reasonably have looked to him for advice on the risk of relying on an unsecured warranty by a numbered company, be it characterized as business advice or legal advice or a mixture of the two.

• But they consulted Hui only after they had assumed this risk by signing the agreement… The respondents believed that they had made a good deal; they did not want to get out of the transaction; and at no time did they ask Hui to improve the terms of their agreement.

• Thus, I am doubtful whether Hui had the duty imposed on him by the trial judge.


In this particular case, a client sued his lawyer Mr. Hui for failing to negotiate a better deal. At trial, the client was successful. Expert testimony had been given in this case by Mr. Lamont a pre-eminent real estate lawyer indicating that the lawyer should make an attempt to negotiate a better deal.

The Court concluded that was the counsel of perfection, and perfection was not a contract term.

So, the obvious clear message for consumers is to retain a lawyer early in the transaction, the sooner the better, because that increases the lawyer’s liability. Real estate agents should encourage their clients to retain lawyers early.

Also note that the lawyer may provide both legal and business advice. The Court thought that the two were often mixed.

In many situations, real estate agents believe that the lawyer’s role is restricted to legal advice and that they are the sole and only ones who deal with business matters. That is not the case according to the Ontario Court of Appeal. Lawyers can be held liable for both. But, in this case Mr. Wong had not retianed Mr, Hui early enough.

Consider the case of a real estate agent who delays, stating ‘let’s get the agreements signed first”. Now, the lawyer’s retainer is limited. And, the same person who was prepared to sue their own lawyer in this case, will sue their real estate agent for this failure (whatever it may be).

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888

Minors Buying Real Estate

Minors and the Real Estate Acquisition

By Brian Madigan LL.B.

(Ontario Real Estate Source)

Generally, the law does not wish to have minors entering into contracts, without proper guidance.

Consequently, the law requires that a minor may only contract for something that is a necessity. That is a very restricted definition and varies from one person to another. Food and lodging easily come to mind as necessities and possibly education. In these cases, the ordinary contract rules will apply.

Expensive items and anything which is not a necessity then invoke the rules which are designed to protect minors: that is, the contracts are:

1) unenforceable as against the minor, and
2) voidable by the minor.

Basically, that means the contract can be enforced by the minor, but not the other contracting party. Also, there is a election to either confirm or revoke the contract once the minor reaches legal age (18 years in Ontario).

So, unless it’s a real big deal, then you are better not to bother trying to do business with a minor. The exception of course, is that if they are extremely talented and you want to take the chance. Sports and entertainment contracts are frequently negotiated with minors. Sign them up and hope they won’t leave. Get their parents to sign up too! That helps, but doesn’t alter the law.

If you have signed the best 17 year old hockey player, you will find that when they reach 18 they might move on and sign up, legally this time, with someone else.

When you are dealing with a minor who is wealthy, they may in fact enter into a contract which is enforceable under the ordinary rules as a necessity for cars, boats and real estate. The difficulty for the other party is that you wouldn’t really know for sure.

From the perspective of enforceability, the only way to protect yourself is to have a Court approval and confirmation of the transaction. This is the route selected by insurance companies that want to make a payment to a minor. It is often referred to as an “Infant Settlement” and requires the consent of the Public Guardian and Trustee and approval by the Court. It doesn’t work for sports contracts, but it will work for real estate.

Minors own real estate because their parents bought real estate and placed it in their names. This frequently occurs with families who do not reside in Canada. In other situations, the minor might inherit property from an estate.

In a situation where a minor is involved in a contract for real estate, it is always wise seek advice from a lawyer. The proposed transactions are too tricky, and too unique to take any risk.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, Royal LePage Innovators Realty