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Category: Post-Closing

  • I Received the Previous Owner’s Bill. What Should I Do?

    I Received the Previous Owner’s Bill. What Should I Do?

    You’ve spent the first month living in your new home and you couldn’t be happier. 

    However, when you go to check the mail, you notice a most unwelcome surprise. The city indicates there is an amount owing from the previous owner’s bill.

    Your first thought might be malicious intent on the side of the seller, them trying to get away without properly taking care of their bills. However, chances are that this is probably not the case. The most likely scenario is that the previous owner's bill was never sent to them, or, on occasion, the municipality did not process the change of ownership in a timely manner.

    Commonly, bills such as water and property taxes are connected with the property, while utilities such as hydro and natural gas are associated with the consumer. Therefore, while a title changes ownership, water and property taxes continue to accumulate charges to the account associated with the property even as the owner’s name is changed on the accounts. This common mistake sometimes leaves the new homeowner with the leftover bill of the seller. 

    If you find yourself in the situation of having to deal with a previous owner's bill, worry not, below we’ve outlined the exact steps you should take to resolve things. 

    Key Takeaways:

    • • Water bills and property taxes are associated with a property instead of a customer like utilities. This means you will sometimes see arrears on your water bills and property taxes from previous property owners.
    • • To deal with an arrears on your water bill contact your lawyer and have them contact the seller to request payment.
    • • Dealing with property tax arrears are more common on new homes and require your lawyer to contact the builder’s lawyer to adjust. 
    • • While arrears on your bill are a common post-closing issue and are often easy to solve, it is an excellent example of the benefits of title insurance.

    What Should You Do with Arrears on Your Water Bill?

    If you notice that there are arrears on your water bill from a previous property owner, the first thing you should do is contact your real estate lawyer and provide them a copy of the bill. Your lawyer will then contact the seller’s lawyer, who will then contact the seller directly to request payment of the bill. 

    If you do not receive a reply from the seller you are left with two options. If you have title insurance, you may submit a claim to your insurer. If you already paid the bill, the title insurer will reimburse you directly.  If you did not pay the bill, the title insurer will pay the bill on your behalf. However, if you do not have title insurance, your choices would be to either take the seller to court which would be costly and time consuming, or pay off the bill yourself. 

    What Should You Do with Arrears on Your Property Taxes?

    Property tax arrears on existing homes are rarely an issue after closing because they are known and adjusted at closing. However, if they are discovered, contacting your lawyer and following a similar format as you would for the above water bill situation is the best scenario.  

    However, if the property you are purchasing is a new home, then it is likely that the property taxes need to be adjusted with the builder after closing. It typically takes several months for a new property to be assessed. Once that happens, the new owner will receive a supplementary property tax bill.

    When you receive your supplementary property tax bill, we recommend you contact your lawyer to ensure everything is in order before contacting the builder’s lawyer to properly adjust the bill between the parties.

    More often than not, the builder will pay their portion of the bill to the new owners to reimburse them for paying the entire bill. Each builder has different policies in adjusting for property taxes therefore it is usually best to leave discussions up to your lawyer when getting reimbursed. 

    Final Thoughts

    Adjusting after closing for arrears on your bills is often a common post-closing situation and most of the times can be resolved fairly quickly.

    If all sides are cooperating, then the adjustment can be taken care of quickly and seamlessly. However, it’s recommended you always consult with an expert when dealing with these issues to avoid any mishaps. If you have any further questions, rest assured that the Deeded team is here to support you in any way we can.

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  • Six Most Common Post-Closing Issues and How To Avoid Them

    Six Most Common Post-Closing Issues and How To Avoid Them

    There are few things that are more exciting than getting the keys to your new home. What you typically picture as a happy and exciting moment, can quickly turn into a stressful and frustrating mess thanks to a variety of situations that can transpire after closing. In “industry-speak” we call these post-closing issues.

    As much as we are optimists, we’d like to set the stage with both buyers and sellers.  Something will go wrong upon closing. Something will undoubtedly bother you when you close. Whether it’s garbage that the seller failed to dispose of and left behind, or the dirty toilet in the main floor powder room.  Our best advice is just be prepared, put it all in perspective, and realize that not everyone see things that same that you do.

    While there may be thousands of different ‘post closing’ situations, here are the top six we’ve encountered with our buyers or sellers. The good news is that some of these can be avoided through proactive communications and some due diligence.

    Damage to Property

    You get your keys and arrive at your new home. While the place looked spectacular during showings, now that the seller’s furniture and possessions are gone, you notice damage to the drywall. Maybe you go to the basement and see a big puddle beside the hot water tank.

    Damage to property are unfortunately common closing issues. As a typical closing takes 60-90 days from signing the purchase agreement, a lot can change in the condition of a property.  Damages that may not have been visible during showings all of a sudden appear now that the property is vacant. Sometimes even minor things like removing artwork from the walls can leave nail holes and damages that may require repairs after closing.

    post-closing damage

    How to handle:

    First, you need to know that these types of things are expected, and damages can occur intentionally or unintentionally, especially during moving. It is important to put things in perspective as to how significant these damages are before you put your time and stress into rectifying them.

    When you take possession of a property, make detailed note of any unexpected damages and if possible, take clear photos of the damaged area(s). Submit the notes and photos to your lawyer and real estate agent.  Please note that submitting these photos doesn’t guarantee that the damages will be rectified, but at the very least, you’d be starting a process where the seller’s lawyer will be notified, and the seller be given the opportunity to respond to your claims.

    Surprise! You’ve got Rented Items

    You move in and a month later, you receive a bill to pay for your hot water tank rental. Problem is, you had no idea it was rented. You didn’t sign a rental contract or even consider the possibility when you bought the place.  Now you’re stuck with monthly bills you did not plan on having.

    It is the job of the seller, and the listing agent, to disclose if there are any items in being sold with the home that are rented such as a hot water tank (or in some cases, air conditioners, furnaces and other appliances).

    There is a section within the standard Agreement of Purchase & Sale that specifies which items, if any, are rentals. Barring the inclusion of a rental item in this section, then all items and equipment are deemed to be free and clear of any encumbrances.

    So, what happens when you take possession of your new home, and find out that the hot water tank is rented? Or the furnace? Or the air conditioner?

    Well, the seller is on the hook for the contract, but will the seller now buy out the contract after the fact? What if they refuse or blame their real estate agent for not including it in the listing and/or the agreement of purchase and sale?

    How to handle:

    Before you sign an agreement of purchase and sale, ask your real estate agent to verify any rental items with the seller’s agent (who should double-check with their seller). While there isn’t a sure-fire way to avoid misrepresentation, it never hurts to double check. If there are rental items, you can request to see those agreements and/or contracts and can require the seller to pay off any contracts prior to the closing date.

    During the closing process, your lawyer typically also double-checks with the sellers’ lawyer to see if there are any rental items or contracts, however, the reliance is still on the seller to represent the facts as sometimes rental items may not be registered on title.

    If you find out about a rental item that was not disclosed after your closing, reach out to your lawyer immediately.  Your lawyer will likely reach out to the seller’s lawyer and advise of possible next steps.

    Appliances not working

    You can’t wait to cook your first meal on your new home’s gorgeous stainless-steel stove. You flip the switch and nothing happens. The stove won’t even turn on.

    Before you get frustrated and opt out for take-out food instead, remember that this happens all the time and could just be a matter of poor timing. It can also be an appliance that wasn’t in good repair to begin with.

    The agreement of purchase and sale will typically include a condition where the seller warrant’s that appliances and home systems will be in good working order upon closing.  This clause can vary in cases where you are buying a property as-is or the seller is aware of an appliance not working or excludes it from the agreement at the time of negotiation. 

    How to handle:

    Your purchase and sale agreement should include a condition that allows you to revisit the property a certain number of times prior to closing (usually 2-3 times is the norm we see). We suggest booking the last revisit within a couple of days of closing and using that revisit as an opportunity to briefly inspect the property, including the operations of major appliances. Also, if you had your home inspected, check the inspector's report for that appliances.

    If you notice anything out of the ordinary such as an appliance not working, inform your lawyer as soon as possible.

    Another option to protect yourself at closing and after closing is purchasing a home warranty policy. There are several affordable options on the market that will protect your appliances and home systems in case of breakdown or replacement, giving you peace of mind.

    Sellers Still On The Property After Closing

    Yes, it happens.  You open the door to your new home only to discover the seller is still in the midst of packing their belongings.  In the meantime, you might have your moving truck outside, charging you by the hour.

    Whether an honest mistake or just poor planning by the seller, in these situations, both lawyers must be made aware so that the property gets vacated as soon as possible.

    How to handle:

    Closings typically happen between 3-5pm in the afternoon.   Once funds have been exchanged and the property’s title is in your name, your lawyer will release the keys.   Sellers are notified to plan to vacate their properties by the afternoon, but things like forgetting to book the elevator or your seller’s moving truck not showing up sometimes do happen. 

    If you do find yourself in a situation where the seller has not left the property, keep your cool and try sorting out the situation with them.  They can also be in the same stressful situation that you are in.  While the situation wasn’t what you expected, having a calm and rational discussion may be the best way to deescalate a situation.

    The Case Of The Missing Chattels

    You move in and notice the seller removed all the curtains and curtain rods.  You are in total shock as you were under the impression that the curtains and rods come with your home.

    When negotiating your agreement to purchase, it is important to understand the difference between a chattel and a fixture.   A chattel is an item of tangible movable or immovable property except real estate and things (such as buildings) connected with real property.  An example of a chattel is a stove, fridge or a laundry machine.

    A fixture in real estate is an item that is fastened or attached to the property like a curtain rod, a light fixture, or even a bathtub (to be extreme). Fixtures are part of the property and should come with it when the buyer takes possession.

    There is a section on the agreement of purchase and sale that says “chattels included.”  That’s because all chattels are deemed to be “excluded” unless specifically included.

    There is a section on the Agreement that says “fixtures excluded.”  That’s because all fixtures are deemed to be “included” unless specifically excluded.  It is excluded unless it is specifically included in the Agreement.

    A curtain rod is a fixture.  It is screwed to the wall.  It is affixed.  It meets the rudimentary test of “nailed, screwed, or glued.  This curtain rod is included unless it is specifically excluded in the Agreement.

    How to handle:

    Keep in mind that your agreement needs to be as specific as it can and you need to pay special attention to the chattels and fixtures sections before you sign.  If you negotiate for certain chattels to be included, list them out and be specific down to the location (for example: upright freezer in basement, shelving unit on the first floor family room, etc.). 

    If you take possession and notice a chattel or fixture missing, consider its importance (it may not be worth the effort or stress to chase down a $20 lighting sconce that was removed) and inform your lawyer as soon as you can.

    Garbage and/or Junk Left On Property

    post-closing damage

    This is the number one complaint we get from buyers by far.  The sellers may have left some of their possessions, garbage or junk inside or outside the property.

    As a general rule, the buyer expects the seller to leave the property free and clear of any possessions or garbage.  However, it happens all the time.  Whether it is garbage left on the lawn days ahead of scheduled garbage pickup or the seller leaves some possessions behind.

    How to handle:

    Consider the severity of the situation and inform your lawyer if necessary.  Your lawyer will work with the seller’s lawyer to potentially rectify.

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  • Interim Occupancy – What is it and What You Need To Know

    Interim Occupancy – What is it and What You Need To Know

    When you buy a pre-construction condo, it may take a few years before the building is ready and you get to move in.

    When it’s time to move in, you might be surprised to learn that you still might not actually own your condo unit (or at least not just yet).

    The period between the occupancy date (when you move in) and when the condo the condo’s ownership transfers to you, is known as the "interim occupancy period." During this time, you will pay the builder a fee known as the "interim occupancy fee."

    Why Is There an Interim Occupancy Period?

    When a condominium is built, ownership in the condo units can't transfer from the builder to the condo buyers until the building is registered with the local municipality.

    This process typically takes a while (The average is 6 months, but for some buildings it has taken up to 2 years). Also, since units on the lower floors will be completed months before units on the higher floors, if you are buying a unit on a lower floor, it may take time before the building is fully complete, thus making the waiting period longer for you.

    As the building nears completion, the developer will notify owners of the "interim occupancy date" for each unit. The lower the floor your unit is on, the earlier your date will be, and as a result, the longer your occupancy period will be.

    How Much is The Interim Occupancy Fee?

    The fee during the interim period is generally lower than your monthly costs would be after closing. However, if you are currently renting your home or will not be selling your current home, you will have to carry the cost of two homes.  This necessitates planning for your cashflow considerations.

    The interim occupancy fee will vary with every building and the type, size and price of the unit, but will generally be calculated using:

    • • Interest (calculated on a monthly basis) on the unpaid balance of the purchase price at the prescribed interest rate
    • • Estimated monthly municipal taxes for the unit
    • • Projected common expense fees for the unit.

    Will I Pay Fees Even if I choose Not to Move In Right Away?

    During the interim occupancy period, you'll need to pay the builder the fee regardless of whether you've actually already moved into the unit or not.

    Can I Rent My Unit To Someone During Interim Occupancy?

    During the interim occupancy period, you technically do not “own” the unit. Therefore, if you wish to lease during this stage, you’ll need authorization from your builder (in writing) to do so.

    If you are planning to rent your unit, the best time to negotiate the right to rent it during interim occupancy is when you’re first purchasing the condo.

    Permission to rent during can be included in your Agreement of Purchase and Sale, if your developer agrees.

    Does the Interim Occupancy Fee Count Towards Paying Down My Mortgage?

    No it doesn’t. You will only start paying down your mortgage after the interim occupancy period.

    Will I Incur Further Fees When Closing My New Construction Condo?

    Since new construction condos typically involve two closings (an interim closing and a final closing), your legal fees will likely increase due to the additional work required.  

    What Can I Do to Better Plan For Interim Closing?

    The best way to plan is to get educated (if you’ve read this far, you already met that goal!)

    Second, remember to set aside funds to cover your interim occupancy period.  While it is hard to predict how long the period will last, planning for at least 12-months of cash flow to cover interim occupancy expenses (especially if you cannot rent the unit), is ideal.

    Third, and most importantly, having your purchase and sale agreement reviewed by a lawyer prior to signing is always a good idea and can potentially save you thousands. Deeded offers a comprehensive review of purchase agreements with a quick turnaround. Contact our team to get started.

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  • Hello New Home, Hello New Property Taxes.

    Hello New Home, Hello New Property Taxes.

    Buying a home is exciting.  Taxes are not. While this is the topic that everyone loves to ignore, buying or selling a home in Ontario does come with quite a few tax implications.  The more you know about them, the less stressed you’ll be down the road. 

    In this blog, we’ll dive into:

    • • Land transfer taxes
    • • Property taxes
    • • HST (Harmonized Sales Tax)
    • • Capital gains taxes
    • • Income tax implications

    Land Transfer Taxes

    In Ontario, the buyer is on the hook for a land transfer tax payment that is due on closing.  Given the average property price in your market, this can be a significant amount that you’ll need to plan for.  Here’s how it’s calculated.

    Ontario Land Transfer Tax:

    • • 0.5% of the value of the property up to and including $55,000
    • • 1% of the value which exceeds $55,000 up to and including $250,000
    • • 1.5% of the value which exceeds $250,000 up to and including $400,000
    • • 2% of the value between $400,000 and $2,000,000
    • • 2.5% for amounts exceeding $2,000,000, where the land contains one or two single family residences

    If you’re buying in the city of Toronto, you’ll also be paying a second land transfer tax .

    Toronto Land Transfer Tax

    • • 0.5% up to and including the first $55,000
    • • 1% of the value which exceeds $55,000 up to and including $250,000
    • • 1.5% of the value between $250,000 and $400,000
    • • 2% of the value between $400,000 and $2,000,000
    • • 2.5% of the value over $2,000,000

    Before you start creating excel spreadsheets and dusting off your calculator, our land transfer tax calculator will help you figure out what you will owe. 

    If you’re a first time buyer, you’re in luck (pending some conditions, of course,  you may be eligible to receive a refund for all or part of the land-transfer tax – click here for details of the Land Transfer Tax Refund Program.  Our calculator factors in any first-time buyer rebates, so once again, no need for number crunching on your part.

    Property Taxes

    Your property taxes will vary based on your municipality.  

    If your property is in the city of Toronto, you can check how much property taxes are by using the City of Toronto property tax calculator..  Other municipalities may offer similar calculators on their website. 

    The amount of your property tax is calculated on the phased-in property assessment value of your property, determined by MPAC (Municipal Property Assessment Corporation). You can read all about how MPAC determines the value of your property here.

    MPAC property assessments are usually lower than current market value so if paid $1,000,000 for your house, MPAC’s assessment probably has you paying taxes on a much lower assessed value.

    Depending on what you sign up for, property taxes are due in either two instalments (March and July); 6 instalments (March, April, May, July, August and September); or in 11 instalments (due every month except January). 

    Increases In Property Values Will Impact Your Property Taxes

    Do you plan to finish the basement or do a significant renovation, like an addition to your home?  You will likely be re-assessed for tax purposes and your taxes will increase.

    New Construction Homes

    MPAC usually assesses newly built homes within 6 months.  In the meantime, you may be responsible for paying the taxes on the land value of your property.  The most important thing to remember is that once the MPAC assessment is completed, the city will bill you for property taxes owed from the date of possession.   For most people, it’s a shock when they get their first property tax bill that is a lot larger than what they had expected. A good tip is to always set money aside to cover your first property tax bill.

    HST

    To say the HST is confusing is an understatement.  Here’s how we boil it down.

    Resale Homes

    • • HST is NOT payable on resale properties in Ontario
    • • If a residential property is used partially as commercial, HST would be payable on the percentage that was used as commercial
    • • HST may be payable on a highly renovated home (but rebates may apply)

    Vacant Land

    • • HST is not payable on vacant land (personal use only)

    Newly Constructed Houses and Condos

    • • HST applies to new construction homes
    • • Federal and provincial rebates are available in some cases
    • • Most builders will factor the HST and the HST rebate into the purchase price of the home, though some will not, so if you’re buying pre-construction, make sure to ask and have your lawyer review the agreement.
    • • To qualify for the rebate from the builder, the home must be the primary residence of the purchaser or one of their immediate blood-relatives and you’ll be required to submit proof if an audit ever occurs.
    • • If you are buying a property as an investor, you don’t qualify for the rebate automatically. Plan to pay the builder the full amount of the HST on closing and you can apply for a rebate after you’ve signed a one-year lease agreement with a tenant.  This basically means that you may be fronting the HST for a few months until the rebate is processed and approved.

    Commercial Properties

    • • HST is payable on commercial properties

    REALTOR Commissions and Legal Fees

    • • All REALTOR commissions are subject to HST
    • • HST is payable on real estate legal fees

    When closing your purchase or sale with Deeded, we apply the appropriate taxes to your closing and can help guide you through complex processes such as filling for an HST tax rebate or refund.

    Capital Gains Tax

    When you earn money on an investment, you’re subject to a capital gains tax on the amount you’ve profited.  

    The good news is that if your home is your principal residence (the home you live in), you won’t have to pay capital gains taxes.  You can only have one principal residence and may be asked to provide proof that you live in the house if audited.

    If you’re selling an investment property, even if a part of it has been rented in the past, you may be on the hook for capital gains tax that will be paid on 50% of the gain.  For example, if you bought a condo at $500K, rented it out for a couple of years and later sold it for $750K, you will pay taxes on $125K (50% of the $250K you made, less selling expenses).   

    Your taxes will be calculated after the capital gains have been added to your income for the year so if make $100K and followed our example, another $125K in income will be added to your overall income, putting you at a higher tax bracket.

    It is important to involve your accountant or financial planner before buying or selling an investment property to account for the tax implications according to the latest rules from the CRA>

    Income Tax

    If you are flipping your home or if that’s your full-time job, you’ll be taxed on the full income you make between what you bought and sold the property for, less your expenses.

    If you’re going to be a landlord and rent your property out, the rents you collect will be added to your income, less expenses that are associated with the rental property (like property taxes, interest on your mortgage, advertising, renovations, etc.)

    If you’re in the business of flipping houses, the CRA will want a piece of the action in the form of income tax. If flipping is your main gig or forms a substantial part of your income, the CRA will consider it active income and you’ll be taxed at the usual income tax rates.

    Our final take is this. Taxes can be complicated and every situation is different.  The best you can do is become aware of tax implications and plan ahead for them. There’s no worse situation than having to come up with an extra $50K at closing because there’s something you missed or were not told along the way.   

    It is always worth a brief conversation with your lawyer and accountant before you buy or sell a property to understand your obligations and tax liabilities.  You’d be amazed by how much a 10 minute conversation can save you.

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  • My Buyer Won’t Close. Now What Do I Do?

    My Buyer Won’t Close. Now What Do I Do?

    You’re two weeks from your move date and a dreaded phone call comes in from your lawyer.  Your buyer refuses to close. As you catch your breath and try to understand what’s going on, reality begins to set in.   

    You’ve already committed to buying a new home, the moving trucks have been booked, and in your mind, you’re imagining total financial ruin. How in the world can you get through this situation? 

    Although the majority of real estate transactions do close, there’s always a small percentage that may fall through.  Although a firm agreement is a binding contract to which each side is expected to fulfill on its terms, a lot can happen as the deal marches to a close.

    Although there isn’t a particular reason why a buyer would walk away, we’ve seen reasons such as losing their job, a drastic change in home values (between signing and closing), the inability to sell their home, or even a family dispute as some of the reasons why a buyer would walk away.

    What Are Your Rights As a Seller?

    Aside from being a very stressful situation, here is what can happen next and your rights.

    First, a firm agreement of purchase and sale is a binding contract. When a buyer won't close or does not complete an agreement without cause the buyer will be responsible for making the seller “whole”. 

    This means that the seller is entitled to be put in the same position as the seller would have been had the buyer completed the transaction as scheduled. The buyer is liable to the seller for the difference between the original contract price and the price that the seller will ultimately sell the home for, or, if the seller does not sell the home, the market value of the home at the time of the breach of the agreement by the buyer, plus any related costs incurred by the seller, such as legal, carrying, moving or accommodation costs etc.. 

    As a seller, your damages must be reasonable and foreseeable and you must do your best to mitigate the amount of damages suffered (staying at Four Seasons, is not your best option).  As soon as you sense the buyer will walk away, speak to your lawyer and Realtor to discuss your options as there may still be a way to get the deal done.

    But My Buyer Put Down a Deposit, What Happens To it?

    Buyers are generally not entitled to a return of their deposit, nor is their liability limited to the amount of they put down as a deposit. In general, as long as the deposit is not out of all proportion to the damages suffered, the seller is entitled to the deposit. 

    Getting your hands on the deposit is not just a matter of asking your real estate agent to send it to you.  In fact, it may require you to go to court. The (real estate) Broker who is holding the deposit, in trust, can only pay out the deposit on the mutual direction of the seller and the buyer, or by court order. 

    This means a buyer who fails to complete a transaction can refuse to direct the release of the deposit by the Broker and force the seller through the expense and time of going to Court for an order compelling payment of the deposit. However, the seller does not have to wait for a Mutual Release to re-list the property and in fact may be obliged to do so in order to mitigate, or lower, the damages.

    Having a deal fall apart can be a tough situation for both the buyer and the seller and the ultimate outcome is to have the deal close smoothly for both parties, avoiding the stress and uncertainty that comes with this ordeal.  But before you let your emotions run high, it is important to understand the buyer’s situation and what can be done to get the deal back on track.

    This is a time where having the right professionals working for you becomes critical. Your real estate agent and lawyer can establish a line of communication to your buyers to better understand their intentions and come up with a course of action.  In many situations expensive litigation can be avoided by understanding the interests of both sides and figuring out a way to move forward.

    If all sides are cooperating, then there is a good chance you might be able to reach a compromise solving the issue quickly and seamlessly. If you have any further questions, rest assured that the Deeded team is here to support you in any way we can.

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