When selling home, truth is the best policy – Bob Aaron

When selling home, truth is the best policy

I’m not sure why it happens, but when ordinary, honest citizens are selling their homes and large amounts of money are involved, they sometimes succumb to an overwhelming temptation to become less than candid in signing the paperwork for the transactions.

Two recently released court cases are prime examples of this phenomenon.

Scott and Sharon Gardiner were buying a property on Church St. in Harrow, a small community not far from Lake Erie in southwestern Ontario.

Future Homes and Real Estate Inc. acted as dual agents for the Gardiners, and for Nathan Mulder, the seller.

For the buyers, one of the most important features of the house was the hot tub, and they made it known that they would not submit an offer for the full asking price unless the hot tub was working. At the purchasers’ insistence, the agent inserted into the offer a clause which reads, “The seller declares the hot tub is in good mechanical working order.”

At the time the agreement was signed, the seller confirmed to the real estate agent that the hot tub was working, although he later admitted that it had not been operated for several years.
Predictably, after closing, the hot tub was filled with water and found to be inoperative.

Normally, when a real estate transaction closes, the buyers accept the house in full satisfaction of the obligations in the purchase agreement, unless the contract expressly states that those obligations – often called representations or warranties – will survive after the closing.

In this case, the buyers sued the seller because of the defective hot tub. They lost at trial in the Small Claims Court.

The Gardiners then appealed to Divisional Court in February, and Justice Anthony Cusinato later ruled that the representation or warranty about the hot tub in the agreement did not die on closing, but survived. The seller clearly understood, said the court, that the buyers wanted the tub to be in good mechanical order both before and after closing.

The court’s decision was based on the fact that all parties knew that the buyers’ intention was that the hot tub clause would survive after closing as a “collateral condition” of the agreement.
Damages were assessed at $4,500 plus costs, with the seller and the real estate agent responsible for 50 per cent each. It appears that the agent was found jointly liable for his role in negotiating and drafting the offer.

The second case took place in Fall River, Halifax County, N.S., where Christopher Lang purchased a large six-bedroom house with an outdoor swimming pool for $327,500.

A clause in the agreement of purchase and sale contained a warranty that the seller never had any problems with the drilled well on the property and that the water supply was sufficient for the normal household needs of a family of four. The agreement also contained a warranty that the accompanying property condition disclosure statement (PCDS) was “complete and current.”
A question in the PCDS asked whether the seller was aware of any problems with water quality, quantity, taste or water pressure. The sellers, Gary and Lauren Knickle, answered “no” to that question.

As is typical in property information statements, both in Ontario and Nova Scotia, the form cautions buyers that the information is believed to be accurate but may be incorrect. There is also a disclaimer stating that the real estate agents involved assume no liability or responsibility for the accuracy of the disclosure.

The day after the purchasers and their children moved into the house, the well went dry and there was no water supply. A new well had to be drilled at considerable expense.
Last year, Lang sued the Knickles for breach of contract. Following a seven-day trial, Justice Gordon Tidman ruled in favour of the buyer and awarded damages of $26,393 for Lang’s actual expenses in drilling a new well, plus an additional $20,000 for loss of enjoyment of the house and reduction in its property value.

The court ruled that the representations made by the sellers as to the water quantity from the well were “untrue, inaccurate and misleading,” and that they were negligent in representing that there were no water quantity problems.

Justice Tidman provided an interesting comment on the disclaimer in the disclosure form. “The Court is satisfied,” he wrote, “that this disclaimer is for the benefit of the realtor only and not for the vendor. If that were not clear by and in itself, the (preceding) paragraph …makes it clear that the vendors are responsible for the truth of their statements…”

For buyers and sellers of resale homes, the lessons from the cases of Gardiner v. Mulder and Lang v. Knickle are these:

Sellers should never sign what is called a Sellers Property Information Statement (SPIS) in Ontario. The forms are complicated and call for legal conclusions, which are risky for non-lawyers to complete. I’ve heard from many real estate agents and their local boards who disagree with me, but I’m convinced that following my advice is, by far, the safer route.
Sellers signing SPIS forms should keep the name of a good litigation lawyer handy. They may well need it.

Buyers should always make their own investigations. These include a home inspection and where there is no municipal water service, a well driller’s certificate and a potability test.
Both buyers and sellers should bear in mind Justice Tidman’s comments that the disclaimer on the disclosure form “is for the benefit of the realtor only.”

It’s always a good idea to have an agreement of purchase and sale reviewed by a real estate lawyer before it is signed. There’s no such thing as a “simple real estate deal.”

Failing to be completely truthful when signing a property disclosure statement or a warranty in a sale agreement can be very risky, and very expensive.

Just ask Nathan Mulder or Gary and Lauren Knickle.

Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.Visit the column archives at www.aaron.ca/columns/toronto-star-index.htm.

Affordable Housing?

Affordable Housing. Is this an idea whose time has come and gone? Or is it a “concept” that needs our attention more than ever?

My father (a business owner for most of my life) beleives that home ownership is one of the key factors in developing a healthy and strong self image for people. I subscribe to the thought that everybody should have the ability to come “home” after a hard days work and hang their hat and spend time with family and freinds. Whether through renting or ownership this should be available to everyone.

The question then is, should affordable housing be a combination of affordable rental units and affordable ownership units?

I am a believer in the “free” market. Capitalism. However, I like the term Rich DeVos coined called Compassionate Capitalism. No, I don’t want to see people living on the streets. But I also don’t want to see people have a house “given” to them by the government. This job belongs to charities like Raising the Roof. Why? Maybe it’s because I’ve had to fight to enter into the housing market…and it’s a fight I continue to endure because I want to do it on my terms.

However, today’s market begs us to look at this problem again. Why? Take a look around you. The Canadian housing market is white hot! Prices for new homes and re-sales continue to climb to record levels. Mortgage rates are still low. And now we have 50 year ammortizations, interest only loans, and God-knows-what-other-bells-and-whistles.

The point is this: to buy a house is more expensive than it’s ever been regardless of interest rates. Second, rental prices are skyrocketing as well! Third, I really don’t have a clue what the solution is.

But maybe you have some thoughts that you’d care to share? We would really like to hear from YOU…….

Housing Market Outlook – 2007 Second Quarter

CMHC has just released its 2007 Second Quarter Housing Market Outlook. Some of the things they are forecasting is a market correction in the housing market in 2007/8. But don’t call it a crash please. They like to call it a soft landing. Maybe they read my notes from Benjamin Tal’s talk? Maybe. The following are factors that they/me/Benjamin predict will impact the housing market which will result in a ‘soft landing’:

  • Strong Canadian economic growth
  • Strong Immigration
  • Strong Canadian dollar and modest GDP growth
  • Job growth
  • Consumer confidence

So there you have it. Everything seems nice! To read the report for yourslef please click on the following link:

http://www.cmhc-schl.gc.ca/odpub/esub/61500/61500_2007_Q02.pdf

That’s all for now!

Karim Kanji

Sustainable Condo

On April 24th-25th, the Toronto Real Estate Board held their annual Realtor Quest at the Toronto Congress Centre. Realtor Quest offers Realtors an opportunity to earn valuable CE credits, networking opportunities with fellow Realtors and a wide range of vendors and associated services.

This year there was an amazing display called The Sustainable Condo. According to their website, “The Sustainable Condo, a full size display suite, demonstrates how human comfort and environmental responsibility can be acheived by combining smart, innovative design with state-of-the-art green building technologies, materials and products that are available and affordable now, from local suppliers and manufacturers.”

I highly encourage everyone to visit www.SustainableCondo.com and see for yourself what this amazing project is all about!

If you are a Realtor, I think this is something your present and future clients may be demanding and or looking for. If you are an avid environmentalist, then this is something you’ll love! Or if you’re just like me, someone who is interested in how a “sustainable” living environment can actually work, then this project will captivate your imagination.

I thank you for reading.

Karim Kanji

Media Release:

Media Release:

May 15, 2007:

Karim Kanji of RealCash Bancorp Inc. (www.RealCashCanada.com) will be participating in the Annual Easter Seals Drop Zone SuperHero Event on Monday September 17th 2007.

Karim will be experiencing the adrenaline rush rappelling down 16 stories from the rooftop of 175 Bloor Street East!

Easter Seals is a charity which helps Kids with disabilities be Kids! As many of you know, many Realtors proudly support Easter Seals. In fact, Century 21 Real Estate Canada is a proud supporter of Easter Seals and their Drop Zone Event.

Please visit the following secure website to donate:

https://secure.e2rm.com/registrant/personalPage.aspx?EventID=7832&LangPref=en-CA&RegistrationID=303167

Thank you!

Karim Kanji
RealCash Bancorp Inc.
1.800.265.2694

Benjamin Tal – May 3rd 2007

I know many of you have been holding your breath for my report so here it is…in point form!

  • admits that today the economic climate is more or less….confusing!
  • his advice is to stop reading newspapers!
  • U.S. housing market is down 20% this year
  • U.S. economy is slowing although the U.S. housing market is only 5% of the whole U.S. economy.
  • $850 Billion in housing spending has contributed to only 5% growth in U.S. spending.
  • there will be a definite inpact on interest rates as the market slows.
  • U.S. FED has been vague in their economic ‘language’.
  • housing spending is now only $100 Billion so there has been a drop of $750 Billion!
  • Housing Wealth Effect: feeling good about growth in value of my real estate (paper wealth) so I start to spend money!!!!
  • sounds like a recesion BUT wages are increasing for first time in 2 generations
  • result – soft landing not a market crash.
  • in the past the saying was, as the U.S. market goes so does the world.
  • today only 15% of the world is American. China is 30% of the world economy.
  • India and China are driving business.
  • wealthy Chinesse middle class.
  • India and China are ‘Keeping up with the Joneses!”
  • Chinesse consumer (not American) is driving the market for Chinesse goods.
  • Huge demand for consumer commodities
  • Canada is a resource Superpower!
  • TSX weighted 40% in commodities.
  • claims the 1999 crash in Real Estate was caused by bad monetary policy error.
  • inflation has always followed an oil shock. But NOT today. WHY? globalisation and the WalMart Effect are keeping prices low, interest rates then stay low, and finally mortgage rates stay low!
  • WalMart is China’s 6th largest trading partner.
  • WalMart forces suppliers to cut prices which is anti-inflationnary.
  • Lower bargaining power for labour.
  • Canadian $ a Petro $.
  • A high Canadian $ is anti-inflationnary.
  • strong Canadian job growth.
  • 250,000 new jobs inpast 6 months in Canada.
  • high employment….as GDP falls?!
  • quality and type of jobs is a factor.
  • huge growth in self-employment segment.
  • by 2012 – 20% of Canadians will be self-employed.
  • low exposure in Canada to Real Estate because of no tax incentive.
  • low exposure to interest only loans.
  • low sub-prime exposure as well.
  • demographics don’t tell a story for housing bust
  • sees a doubling of real estate prices in next 20 years.

That’s all folks!

Karim Kanji

1.866.440.3721

Success Story – Part 1

One of my favourite things is to meet “young” people who are either successful or well on their way to becoming successful. Well, I just met one of these people today. His name is Lee and he hails from Edmonton, Alberta. We met randomly and I asked if he would be willing to share some of his story. Here it is, in his words. I hope you enjoy!

Hi Karim,sure! Well lets see. As Inigo would say “Let me explain. No there ees too much. Let me sum up.”

My name’s Lee, I’m a computing scientist by education, and a beach volleyball player at heart. And here is the story.

Well back in 2002 I was working at Nortel and our site got shut down, so I had two choices: either find a new job in Montreal, or fly back home to Edmonton and look into real estate while trying to find a job. I like a challenge, so I went for option B. I also knew there was a game company back home that I wanted to work for called Bioware, so I figured hey, might as well apply, and see what happens right? So lo and behold after 3 months of hard work applying I got the job. so this is May 2002 approximately.

I knew my brother had been doing well in real estate, so I figured I’d buy my first house, and try and find a rental property. By that Christmas I had enough money saved up to put my first 10k onto my first house (yes the one I would live in silly). The first night I slept on the floor because it was so cool to own my first house. And by the end of the month, I had rented out all 3 rooms in the house to students because I lived near the university, and I wanted to treat my house like a rental property: i.e. the house should pay for itself.

Also at the outset I joined an investment group called REIN, and I got my first joint venture partner from there and we bought a duplex together in february of the next year. Now, this is the part where I almost got crushed: by the time we got keys on the place, someone had broken in, the pipes burst on the main kitchen floor on one side and did about 15,000 dollars damage to the place. I was thinking at this point “I’m screwed!” Well luckily, with the help of my Dad and few friends we got the place all torn out, I borrowed some money to get it fixed up, and we rented it out. It took about 3 months to fix the place up, working 9 to 6 at the day job and 7 to 11 at night and weekends doing renos, but we got it done. The duplex was mostly break even in the first year, but I made enough in equity to buy out my investor because she was moving to the states, so I refinanced the place, and paid her out.

Then two years passed… I did diddly except work at my job for 80 hour work weeks. Don’t get me wrong, I loved it, but I could see that this was not the way to get out of the rat race. At the time we got a really big payout from work so I had enough money to live off of for a year as long as I kept my tenants, which was awesome. So in Christmas of 2005 I decided to quit my job, and buy some houses. Now don’t get me wrong… this is probably insane, and if you knew me, well, its probably par for the course. Anyway, in the next 7-8 months I put offers in on places and closed on investors and bought 10 places. Of course, its very motivating when you know the only money you have left is slowly dwindling away in your savings account because it costs money to live (oy! whats up with that anyway?!).

Now I’m sitting on 11 properties, 2 more of which I’m managing, and I have enough partners now to purchase my first apartment building. Who knew? The equity is doing quite well in all of them, but I’ve got minimal cashflow… thus why I’m moving into the bigger leagues.

For anyone interested in learning more about me, I’ll put more details on my website in the next week: www.buyalbertarealestate.com. Come say hi, and pass on my contact info if you know anyone who is interested k? I’ve got 3 houses right now at 90k down that will return the same in the following year. Who likes 50-80% returns on their money in a year?! Sign me up!

I hope this is what you had in mind Karim, if you need anything else, don’t hesitate to call or email me k?Ciao for now,~Lee

Do you know of any other success stories? Let me know at karim@bellnet.ca.

Have a great day!

Karim Kanji

Mother’s Day is coming up…..

….so before I get crazy busy let me share with you some thoughts……

Mother’s Day.

It’s the day when, as a society, we purchase red roses, boxes of chocolate and Hallmark cards in our attempts to thank Mom for putting up with us.

I think we should thank our mother’s everyday. Thanks for changing our diapers many years ago. Thanks for driving me to soccer practice and those out of town hockey tournaments. Thanks for letting me cry on your shoulder when my best friend moved out of town. Thank you for babysitting our first child. Thanks for everything you’ve done and continue to do.
So, on Mother’s Day, take some time in between listing appointments to call your mom and tell her how much you love her. If she’s in town, go and visit her. If she has left this world, close your eyes and thank her in your heart.

And then after Mother’s Day, remember to take some time as often as possible to tell Mom, “I love you.”

Happy Mother’s Day to you and your Mom!

Regards,

Karim Kanji

Deposit or Downpayment….

Many times I hear the age old debate about the use of a Real Estate Professional. “I can sell my own house! I don’t need a real estate agent.” I’m sure many of you have heard this arguement. However, there are so many clauses, laws, by-laws, and other waiver and amendment type stuff. It’s enough to make a civilian go nuts!

So, it comforts me when I come across information that attempt to clear the muddy world of real estate. Carolyne Lederer (www.carolyne.com) has written a very detailed and comprehensive piece on Deposits and Downpayments. Please take a read. I’m sure you’ll like it!