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Real Estate

Real estate development is a major engine of the Canadian and international economy, and those in the field know how much value is added by a lawyer with real experience in the process. Shibley Righton LLP has been handling major real estate developments and transactions, and related dispute resolution, corporate, and tax issues, for almost fifty years. We've been at this during the boom times, and the hard times, and we've learned a thing or two along the way.

The professionals who make up our real estate team have experience in matters involving:

  • land assemblies, condominiums, commercial and industrial projects, limited partnerships, joint ventures, and a broad range of other development activities and structures
  • restructuring development projects and protecting the rights of mortgage holders and other creditors in a project context
  • purchases and sales, corporate acquisitions, commercial leasing, zoning and municipal matters, mortgage financing and remedies, and other transactions for residential and commercial property owners and franchise businesses to not-for-profits and public and private schools.

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Megan Mackey Head Shot

The Ontario Court of Appeal (OCA) handed consumers a victory when it upheld a lower court’s ruling demanding that condo developers explain what they’re selling by using plain language in disclosures, says Toronto real estate lawyer Megan Mackey, who represented the plaintiff in the matter.

Condo developers can’t just technically meet disclosure requirements under the Ontario Condominium Act, says Mackey, partner with Shibley Righton LLP.

She tells AdvocateDaily.com that she hopes the ruling will set a new expectation for easier-to-read condo disclosure documents.

The OCA ruling supported the plaintiff’s position by upholding an earlier Superior Court of Ontario decision that found disclosure has to be clear, transparent and easy to understand, says Mackey.

“The section in the Condominium Act about disclosure is really long, and it has many requirements, but there are technical ways to meet those requirements,” she says. “And then there are practical ways.

“This decision sends a message to the developer community that technically meeting the requirements of the Act may not be enough. Practically speaking, what is being disclosed needs to be readable.”

The case demonstrated how a developer tried to take advantage of condo purchasers, which is why condo lawyers will appreciate the OCA’s decision, says Mackey.

“The overall message from the court is that developers don’t have carte blanche to start extracting money from buyers on top of the purchase price, or creating what I call ‘income streams’ for themselves,” she says "unless the financial repercussions of those aspects of the purchase are disclosed to consumers in readable language."

In this case, the developer apparently got into financial trouble but saved this particular project and created income streams, where a buyer not only purchased a unit, “but actually bought into an obligation to make ongoing payments to the developer for the next 25 years,” Mackey says.

That was difficult for the condominium buyers because they felt they were done making payments to the developer after settling on the purchase price and closing costs, she says.

“But in this case, there were ongoing payments which were significant” for heating, ventilation and air conditioning equipment (HVAC), Mackey says.

The HVAC appliances cost the developer $575,000, but the cost to consumers was based on a price about four times more than that, she says. Although the consumers were eventually told how much they would have to pay for the HVAC appliances, they were not told that the developer inflated the price after the purchase agreements had been signed.

The court found that was unacceptable, says Mackey.

"The developer also required consumers to make ongoing payments to compensate the developer for surplus parking and storage units that no one wanted. Purchasers were not told this would affect their monthly carrying costs for their condominium units," she says.

“When you buy a condo, the developer, by law, must disclose a number of things, including what the monthly expenses are going to be,” Mackey explains.

The developer estimates the expenses in the first year of operation and the disclosure allows a buyer to determine if they can afford the unit and the monthly fees, she says.

“Disclosure of your ongoing ownership costs is important because some consumers buy into condos knowing what they can afford. Unless they know what the monthly condo fees are going to be, they can’t accurately make that calculation.”

Mackey says some developers create income streams that won't kick in until the second year to keep them out of the first-year budget.

“So, these purchasers see their ongoing costs, and they don't realize that in the second year, the costs are going to jump by $100 a month, for example,” she says.

Documents in a condo purchase can be confusing — to the point where lawyers have difficulty understanding them, Mackey says.

“When you buy a condo, you get the disclosure package, and it's enormous,” she says. “It’s usually more than a hundred pages of documents. They’re in fine print. They're confusing. You're getting a draft declaration. You’re getting draft bylaws.”

Mackey says the Superior Court judge’s ruling "can be seen as quite critical” of the way things are done by some condominium developers.

She says the decision was clear — information should be conveyed to the consumer “in such a way that they can understand what they are buying. That was significant in our view because it was the first time the unreadability of these statements got a comment from the bench.”

The OCA was coy in its ruling, however, saying it wouldn’t directly discuss readability but nevertheless suggested disclosures should be readable, Mackey says.

“Given the motion judge’s finding that the disclosure was confusing, it is unnecessary to consider … criticism that she found the disclosure of the material changes was insufficient because it was not made in ‘simple, readable language,’” Justice Russell Juriansz ruled. “Suffice it to say that the documents a developer uses to make revised disclosure must be readable and free of unnecessary complexity.”

Mackey says, "While there are many consumer-friendly developers who stand behind their products and have great reputations, unfortunately not all condominium builders pay attention to the consumer’s experience."

She hopes that all developers will now feel obligated to make their documents “readable and free of unnecessary complexity. We would like that to be the new standard.”

Date_Published
2019-04-04
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Although changes that took effect in 2016 mean that testamentary trusts are now generally subject to tax at the highest marginal rate, a notable exception is now in play — the Graduated Rate Estate (GRE), Toronto litigator Matthew Urback writes in The Lawyer’s Daily.

As Urback, an associate with Shibley Righton LLP, explains: “A GRE is a special designation that a qualifying estate may adopt. In particular, a GRE is an estate that comes about as a result of an individual’s death, on or after Dec. 31, 2015, and no more than 36 months after the death. The estate at that time must be a testamentary trust. (A series of conditions must also be satisfied in order to qualify.)”

A major benefit of a GRE, says Urback, is that it continues to enjoy graduated tax rates on income earned during this 36-month period. It also strongly incentivizes and rewards charitable giving in a will, he adds.

“Perhaps most notably, charitable donations made on death, or after death, are no longer deemed to have been made by the deceased personally. Instead, the gift is now deemed to be made by the estate,” writes Urback.

As a result of this change, he says, the estate now has a great deal of flexibility in determining when to claim the corresponding tax credit. For example, says Urback, the credit could be used either by the estate, the deceased, or both — whichever is more beneficial.

While in the best of scenarios, there should not be an issue with ensuring that the donation is made within this 36-month period, Urback says if the administration of the estate is delayed for any reason, the value of this benefit could be lost.

“The Department of Finance was mindful of these potential delays, so shortly after enactment, the rules were changed to allow for a gift now made within 60 months of the date of death to qualify as a gift made by the GRE. This change means that even though an estate would cease existing as a GRE by the end of the 36-month period, it still has another 24 months to make the gift in order to qualify and receive the accompanying tax credit,” he writes.

Ultimately, says Urback, the power and flexibility of this tax credit can be used as a crucial planning tool, but failure to take advantage of these benefits or adhere to the timeline diminishes its rewards, and income generated will then be subject to tax at the highest marginal rate.

“Keeping the timing, and the ultimate deadline, in mind is absolutely critical for estate trustees in order to maintain the advantages that come with the GRE designation,” he says.

 

Date_Published
2017-10-04
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Rent control measures could stifle market supply if the past is any guide, says Toronto real estate lawyer Peter Neilson.

The legislature at Queen’s Park recently introduced legislation that extends rent control to all private units in Ontario. The Rental Fairness Act, 2017 caps annual rent increases by landlords at an amount set by the province, with the rate for 2017 set at 1.5 per cent. The maximum increase allowed in any year under the new law is 2.5 per cent.

Rent control has a long history in Ontario, but in 1991 the provincial government exempted any units built after that year.

Neilson, a partner with Shibley Righton LLP, says the 1991 exception was made in an attempt to spur development of new rental units.

This is an excerpt of an article that appeared on AdvocateDaily.com.  Please click here to read the whole story.

Date_Published
2017-05-29
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Politicians hoping to solve the Greater Toronto Area’s housing affordability crisis with legislation should proceed with caution, says Toronto real estate lawyer Peter Neilson.

Ontario Premier Kathleen Wynne has announced plans to introduce a 15-per-cent foreign buyer tax in the Greater Golden Horseshoe Area, taking in communities all the way from the Niagara Region to Peterborough.

Buyers who are not citizens, permanent residents of Canadian corporation will have to pay the levy, which mirrors similar measures imposed last year in B.C.

Ontario’s Finance Minister Charles Sousa initially rejected the idea of copying the B.C. tax in Ontario, but has since backtracked, as house prices continued to rise. In Toronto, they hit an average of more than $900,000 in March, which represented a 33-per-cent spike over the same month in 2016.

This article appeared on AdvocateDaily.com.  Please click here to read the full story.

Date_Published
2017-04-20
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A recent Ontario Court of Appeal ruling in a commercial real estate litigation may signal better protection for buyers, says Toronto litigator Isabelle Eckler.

In Singh v Trump, 2016 ONCA 747 (CanLII), two Toronto investors sued for damages after their purchase of hotel units in the Trump International Hotel failed to produce the profit margins promised in the developer's marketing material, she tells AdvocateDaily.com.

They brought motions for partial summary judgment against the developer, which were dismissed on the basis that it was “objectively unreasonable,” for the plaintiffs to rely on the developer’s marketing material, but the appeal judge disagreed, points out Eckler, associate with Shibley Righton LLP.

“The developers were marketing the property on the basis that unit owners could take advantage of the hotel’s reservation program, which would allow them to make a profit,” she explains, noting that the case was further complicated by allegations that the developer’s profit estimates violated a breach of the Ontario’s Securities Act (OSC). “It appears that the developers wanted the Ontario Securities Commission to see the hotel units as real estate rather than securities.

This article appeard on AdvocateDaily.com.  Please click here to read the full story.

Date_Published
2016-12-19
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Any bylaws introduced to licence landlords and control the proliferation of AirBnB units in Toronto will almost certainly face legal hurdles and court challenges, says Toronto real estate lawyer Peter Neilson.

Neilson, a partner with Shibley Righton LLP, says Toronto's quest to control AirBnBs and landlords also opens up the proverbial legal can of worms, he says, since it could conceivably impinge on homeowners’ property rights.

“There are so many variables,” Neilson says. “You have a condo owner who lets out a unit through AirBnB and it’s likely no one in the building would be happy about that including the property management. But you’d have to consult the condo corporation declaration and rules to see if it is specifically barred.

This article origionally appeared on AdvocateDaily.com.  Please click here to read the complete story.

Date_Published
2016-11-22
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An Ontario Superior Court of Justice injunction issued on behalf of a family restaurant to block multi-million dollar renovations at Toronto’s Manulife Centre has given landlords, tenants and their legal counsel something to chew over, says Toronto real estate lawyer Peter Neilson

In the matter of Bloor Street Diner v. The Manufacturers Life Insurance Company, the Bloor Street Diner, a long-time Manulife Centre tenant, argued the extensive renovations planned to make way for Italian food emporium Eataly were prohibited by the terms of its lease.

Date_Published
2016-05-19
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With the announcement the federal government is boosting the minimum down payment for higher-priced homes in Canada, it will likely be the Toronto and Vancouver housing markets that will be most affected by the change, says Toronto real estate lawyer Peter Neilson.

Starting in February 2016, the Canada Mortgage and Housing Corporation will require a 10 per cent down payment on the portion of any mortgage it insures over $500,000, the CBC reports. The current five per cent rule will remain the same for the portion up to $500,000.

“Homebuyers are currently insisted to put down a minimum of five per cent to qualify for CMHC insurance — protection that lenders insist on when providing a mortgage worth more than 80 per cent of the home's value,” the article states.

Neilson, partner with Shibley Righton LLP whose practice includes the acquisition, sale, leasing and financing of all kinds of real estate, says the cutoff point of $500,000 appears deliberate. In hot markets like Toronto and Vancouver, even modest homes and condominiums can easily surpass the $500,000 threshold.

“Certainly in Toronto and the GTA, even a first-time buyer financing that amount is not unusual,” he tells AdvocateDaily.com.

Neilson says he sees the logic behind the new policy. “By only putting down five per cent, you would be vulnerable to any changes in the market — a market may not seem to be changing yet. However, certainly interest rates are going to go up at some point.”

The more you put down, the more equity you have, he says.

“If your house price stalls and interest rates go up and you have to refinance, you may suddenly be looking at paying significantly higher monthly payments. A higher down payment gives you a bit of caution against that.”

Neilson is curious to see what the long-term impact of the policy shift will be.

“The interesting question is will this have a significant effect on the market? Will it mean people will have to moderate their price range and aim a bit lower or will they just be more cautious and save a bit longer? Who knows? It’s too early to tell if this boost will cool the market because there are so many other factors involved.”

This article origionally appeared on www.advocatedaily.com

Date_Published
2016-01-04
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News that the Canadian Broadcast Corporation has to cut its budget by $115 million over the next three years has some wondering if the broadcaster will sell or lease its downtown Toronto headquarters.

The CBC released its five-year strategic plan earlier this year, and according to an article in the Toronto Star, CBC president Hubert Lacroix was quoted as saying, “We can’t invest in infrastructure that drags us down. We can’t invest our money in bricks and mortar. We have to invest in content.”

The Star reports that “the 1.4-million-square-foot headquarters at Front and John Sts. is considered prime Canadian real estate” and is “valued at hundreds of millions of dollars.”

As businesses like the CBC look to save money and cuts costs, Toronto real estate lawyer Peter Neilson says that leasing less space or leaseback arrangements are common ways for a company to refinance and reduce costs.

Click here for the full story

Date_Published
2015-03-11
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Jessica Vickerman's article "Deconstruction new home warranties" appeard in the December 20th edition of The Lawyers Weekly

Date_Published
2014-01-10
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Matthew Urback's article about if the Residential Tenancies Act gone too far in protecting the tenant was published in appeared in Lawyers Weekly

Date_Published
2013-08-30

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