Restrictive Covenants on Title ~ Shed in Cottage Country

(Ontario Real Estate Source)

By Brian Madigan LL.B.

Question:

I am confused when it comes to what represents a valid title objection for the buyer to terminate an agreement.

In the case of a cottage property which has a shed built at a distance of 70 feet from the shoreline but the buyer finds out later when his lawyer is doing the title search that there is a restrictive covenant on the property that prohibits the construction of any buildings within 100 feet of the shore line.

Because this restrictive covenant is not being complied with, the buyer has in this case a valid objection to title and may terminate the agreement.

Answer:

The first question here is to determine whether or not it is material. The next question, assuming that it is material, is to determine if there are any remedies. The seller has the right to offer remedies first. Assuming none are acceptable, then the agreement can be declared to be at an end.

Question:

But what about if there was no shed? Would the buyer have to purchase a property if he/she finds out later from the lawyer that there is such a restrictive covenant?

Answer:

Please read the standard form title clause. It says the buyer agrees to accept restrictive covenants that are being complied with. That means “no breaches”. No shed, of course, means “no breach”. Without saying anything else, this buyer will have to accept the title, even if it comes as a surprise.

Remember, that you can change anything you want, so change this clause so that the buyer at least gets the opportunity to decide whether or not the restrictive covenant is acceptable.

Question:

Also what about if you sign an agreement of purchase and sale as a buyer and you find out later from your lawyer that there is a right of way (or any other important restriction on title which was not disclosed on MLS).

Answer:

This sort of matter shows in the public record. Search it first so that
there are no surprises. If you don’t want to pay for the search ahead of time, then change the agreement, because you are otherwise stuck if you use the standard wording.

When the buyer finds out from his lawyer, he will be annoyed. Then, when the lawyer says the he’s stuck with it because that’s the way you worded the Offer, he won’t be too pleased with you.

Question:

Do you have to buy or would this be a valid objection to terminate the
agreement?

Answer:

As indicated, you are stuck with this. Change the Offer. Not everything is on the MLS.


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
www.OntarioRealEstateSource.com

Buying Life Insurance from Banks or Refreshment Counters

(Ontario Real Estate Source)



By Brian Madigan LL.B.

Who would ever buy life insurance from a bank? That would be rather unusual.

But, it actually happens quite often. Banks offer life insurance to match the outstanding debt on a mortgage or personal loan. But, it’s not like buying life insurance generally.

The bank’s representative is not qualified or licensed to sell life insurance. That doesn’t mean that they are not trying to get you to buy it. Frequently, they make a commission or bonus based upon your purchase.

So, let’s say you buy it. That means you get to pay premiums until you die. So far, so good. You “qualified” to pay the premiums. But, now you’re dead, does your beneficiary get any money. Now, that’s a totally different question. This would be a good time for the bank to start the underwriting process to see if you are insurable.

That process should have been undertaken right at the outset. The underwriting process should begin at once as it does with most insurers. If there is going to be a potential problem, then the insurer AND THE INSURED both need to know about it from the outset. If there is a slight medical problem, then that issue can be identified and a higher premium assessed.

In this way, both parties are protected. The insurer receives the higher premium appropriate to the increased risk, and the insured knows absolutely that he has life insurance coverage, and can plan his affairs accordingly.

The arrangement is fair to both parties.

Not so with the banks! They just collect premiums and then deny coverage when it is too late. Great scheme!

There really should be a law preventing unlicensed people from selling insurance.

So, the moral of the story is: don’t buy life insurance from a bank. And also, just in case you’re thinking about it: don’t buy life insurance from the people behind the refreshment stand at the movies.

I was going to say that “you’ll live to regret it”, but what I really mean is “your beneficiaries will live to regret it.”


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
www.OntarioRealEstateSource.com

Investment Real Estate in Brampton

(Ontario Real Estate Source)

By Brian Madigan LL.B.

This reduction in the asking or listing price now offers substantial investment opportunities.

11 Peel Avenue has now been reduced to $549,999.00

This makes the property an exceptional value for prospective purchasers.

Want to know if you can afford it?

Have a look at:

11 Peel Website

Contact me at 905-796-8888 and request a Financing Statement


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
www.OntarioRealEstateSource.com

Toronto Real Estate Market Performance ~ July 2011

(Ontario Real Estate Source)

By Brian Madigan LL.B.

ORES Real Estate Index for July 2011

Here is the "ORES REAL ESTATE INDEX" which tracks the average resale prices of single family homes and condominiums in the Greater Toronto Area (GTA). It also tracks certain benchmark comparisons such as the price of oil and gold, as well as the Consumer Price Index.

In addition, the stock market indices for Toronto, and the three largest US markets are also compared.

For ease of comparison, everything we look at is worth 100 points on the Index as of 1 January 2005. That time period compares favourably with the five year average used as a standard benchmark comparison in the mutual fund industry.

As of 31 July 2011, here is the Index representing average prices with the June 30th May 31st numbers appearing in brackets for comparison:

Real Estate

142.08……….(147.42)...(150.25).....GTA single family homes

Other market comparisons

380.71……….(351.96)...(359.21).....gold (price per ounce)
217.65……….(216.79)...(233.62).....oil (price per barrel)
140.65……….(144.51)...(149.97).....TSX index
142.08……….(147.42)....(150.25).....ORES Index single family homes
113.77……….(114.53)...(113.77) .....CPI index
133.65……….(134.48)...(137.48).....NASDAQ index
115.76……….(118.35)...(119.82)......Dow Jones index
109.40……….(111.80)...(113.880.,....S&P Index

Using the Index

Just a quick note on reading the information. Have a look at the ORES Index for Real Estate (single family homes). As of the end of May, the index stood at 142.08. That's a 42.08% increase in 79 months. That means the increase is 0.532% monthly, or it could also be expressed as 6.39% annually. The performance here is shown without annual compounding for the sake of simplicity.

The other statistics are reported in a similar fashion for the ease of comparison.

Observations (on the Index)

As we use index, there are several notable comments:

• Commodity prices are just commodity prices

• There is no other "extra return" for commodities

• The same is true for the CPI

• The CPI is a benchmark to see whether you are keeping pace with inflation, that number is 113.77; increases have been modest and inflation appears to be under control; this is significant.

• For a realistic performance goal, you should aim for CPI plus 3.5% annually

• Stocks provide dividends in cash or extra stock. This return is additional to that shown in the stock market indices

• The stock market Indexes only measure the survivors. So, in 2009, both GM and Chrysler would have been dropped due to the bankruptcies

• If you held GM and Chrysler, you lost everything, but two new companies moved in to replace them in the Indexes

• Real estate offers a return in terms of occupancy. You can rent out the property and receive income, or occupy the property and enjoy it yourself

Comparative Observations Using the New Index

• Gold was the best performer, reaching 380.71 overall, but declined this past month

• Oil was the most volatile, (it dropped in half over our measurement period), but the good news for the economy is that oil has declined slightly this past month

• Real estate was the most stable, with solid predictable returns at about 6.39 % annually

• Our own stock market posted reasonable gains, and is now ahead of single family homes over the measurement period, however, don't forget that the TSX is still well off its highs and is substantially resource based

• All three US stock market indicators now show positive numbers, and may truly be a better overall indication of the true state of the North American economy.
Conclusion

For steady, predictable, measured gains pick real estate. It's a solid performer with lower risk (less volatility) and generally moving in a positive direction.

And remember, when it comes to real estate, it's never "wiped out" completely, like GM or Chrysler stock. So, unless you're sitting on the edge of a tsunami, you'll still own something when the storm is over.

For a benchmark of success, there's 1,000 years of history to point to a rate of return in real estate being about the equivalent of 5% per annum, simple interest (non-compounded). That means that real estate doubles in value every 20 years. There are a lot of companies (now bankrupt, including CanWest Global, and many US Banks) that would have been happy with that return.

The present rate of return although high by historical standards appears to be sustainable in sought after locations like the GTA. At the moment, over our measurement period we are looking at a 1.39% annual premium over the benchmark 5%.


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
www.OntarioRealEstateSource.com

ORES Real Estate Index for May 2011

(Ontario Real Estate Source)


By Brian Madigan LL.B.

Here is the "ORES REAL ESTATE INDEX" which tracks the average resale prices of single family homes and condominiums in the Greater Toronto Area (GTA). It also tracks certain benchmark comparisons such as the price of oil and gold, as well as the Consumer Price Index.

In addition, the stock market indices for Toronto, and the three largest US markets are also compared.

For ease of comparison, everything we look at is worth 100 points on the Index as of 1 January 2005. That time period compares favourably with the five year average used as a standard benchmark comparison in the mutual fund industry.

As of 31 May 2011, here is the Index representing average prices:

Real Estate

150.25.....GTA single family homes
140.35.....All condos in GTA
145.24.....Downtown Central Condos
134.15.....East condos
141.50.....West condos
137.33.....North condos

Other market comparisons

359.21.....gold (price per ounce)
233.62.....oil (price per barrel)
149.97.....TSX index
150.25.....ORES Index single family homes
113.77 .....CPI index
137.48.....NASDAQ index
119.82......Dow Jones index
113.88.,....S&P Index

Using the Index

Just a quick note on reading the information. Have a look at the ORES Index for Real Estate (single family homes). As of the end of May, the index stood at 150.25. That's a 50.25% increase in 77 months. That means the increase is 0.653% monthly, or it could also be expressed as 7.83% annually. The performance here is shown without annual compounding for the sake of simplicity.

The other statistics are reported in a similar fashion for the ease of comparison.

Observations (on the Index)

As we use index, there are several notable comments:
• Commodity prices are just commodity prices
• There is no other "extra return" for commodities
• The same is true for the CPI
• The CPI is a benchmark to see whether you are keeping pace with inflation, that number is 113.77; increases have been modest and inflation appears to be under control; this is significant.
• For a realistic performance goal, you should aim for CPI plus 3.5% annually
• Stocks provide dividends in cash or extra stock. This return is additional to that shown in the stock market indices
• The stock market Indexes only measure the survivors. So, in 2009, both GM and Chrysler would have been dropped due to the bankruptcies
• If you held GM and Chrysler, you lost everything, but two new companies moved in to replace them in the Indexes
• Real estate offers a return in terms of occupancy. You can rent out the property and receive income, or occupy the property and enjoy it yourself
• Actually, I should have mentioned that if you held gold bullion, you could sit in a room, count it, and enjoy that experience too. I'm not quite sure how to measure that. You'll have to ask King Midas or Goldfinger!

Comparative Observations Using the New Index

• Gold was the best performer, reaching 359.21, eclipsing earlier peak achieved in April
• Oil was the most volatile, (yes it dropped in half over our measurement period), but recent increases do not offer good news
• Real estate was the most stable, with solid predictable returns at about 7.83% annually
• single family homes continue to show a better overall return than most condos
• Our own stock market posted reasonable gains, and is now ahead of single family homes over the measurement period, however, don't forget that the TSX is still well off its highs
• All three US stock market indicators now show positive numbers, and may truly be a better overall indication of the true state of the North American economy.

Conclusion

For steady, predictable, measured gains pick real estate. It's a solid performer with lower risk (less volatility) and generally moving in a positive direction.

And remember, when it comes to real estate, it's never "wiped out" completely, like GM or Chrysler stock. So, unless you're sitting on the edge of a tsunami, you'll still own something when the storm is over.

For a benchmark of success, there's 1,000 years of history to point to a rate of return in real estate being about the equivalent of 5% per annum, simple interest (non-compounded). That means that real estate doubles in value every 20 years. There are a lot of companies (now bankrupt, including CanWest Global, and many US Banks) that would have been happy with that return.

The present rate of return is sustainable in a sought after location like the GTA. Currently, that is about 1.6% annually in excess of the longer term predictable returns.

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
www.OntarioRealEstateSource.com

So You Want to Help a Friend Finance His Business?

(Ontario Real Estate Source)

By Brian Madigan LL.B.

Let's assume that for some reason you feel compelled to offer and assist someone who needs financing for their business.

What security do you want?

Well, you should get everything you can!

In the case of a business, this truly does mean everything. Because, the parts have little to no value.

So, my first advice is: don't get involved.

My second advice: take a collateral security on a non-business asset, like a house or a car. You can always sell a house or a car.

Finally, if you must offer the loan, here is what might be available:

1) Chattel mortgage, upon specific chattels for major purchases, big ticket items, tools of the trade,

2) Assignment of Leases upon specific chattels for major purchases, big ticket items, tools of the trade,

3) accounts receivable,

4) assignment of book debts,

5) General Security Agreement,

6) Assignment of Leases upon business premises,

7) Assignment of Options to Lease upon business premises,

8) Assignment of Agreements to Purchase upon business premises,

9) Assignment of Options to Purchase upon business premises,

10) A pledge of the shares of the operating company,

11) A pledge of the shares of the holding company,

12) An assignment of the suppliers' accounts,

13) A pledge of any intellectual property,

14) An agreement to be named as an additional insured on the insurance policy

15) An agreement by the insurer to waive its rights of subrogation,

16) An agreement to the assignment of the telephone number,

17) An agreement to the assignment of the website,

18) An Authorization to examine the books,

19) An Authorization to examine the bank accounts,

20) An Authorization to examine the HST returns,

21) An Authorization to examine the Income Tax returns,

22) An Authorization to examine the Workplace Safety assessments and payments,

23) A personal guarantee of the owner, proprietor,

24) A personal guarantee of the spouse of the owner proprietor,

25) A copy of all suppliers' contracts, including books of accounts, inventories and entitlements.

Of course, I'm still telling you that you should have second thoughts about this. But, you should have the above security for starters!

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
www.OntarioRealEstateSource.com

Use Sunflowers to Stop Erosion

(Ontario Real Estate Source)

By Brian Madigan LL.B.

You sometimes need a cheap way to prevent erosion over an embankment.

So, what works?

Call a contractor and the concrete retaining wall will cost you $10,000 to $20,000. It's a good fix, but then again this is just a cottage property and you only use it 10 weekends throughout the summer.

The retaining wall which is obviously the best solution will just have to wait until you win the lottery.

So, what works in the meantime?

PLANT Sunflowers!

They grow rather tall in 2 months, and they have a great root system. Nevermind what they look like; it's the root system you're after.

Within 4 to 6 weeks the top of the bank will stop eroding and the root system of the sunflowers will have stabilized the land. That will allow you to plant bushes or trees. They work too, but not quite as fast as sunflowers.

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
www.OntarioRealEstateSource.com

Landlords Face Risk of Tenants" Bank Financings

(Ontario Real Estate Source)

By Brian Madigan LL.B.

If you are a Landlord you may expect from time to time to have to engage in some form of battle with your tenants. But what about the secured lenders?

In commercial premises, the tenant may have acquired some of the chattels by financing them. Most of the time, the lender will take something as security. And, they may take that major purchase.

Landlords often think that anything attached to the real property is theirs. They think that it is a fixture. Not so! The ordinary rules related to the law of attachment do not apply, if there has been some sort of security registered against the item under the Personal Property Security Act (PPSA). However, it all depends on the timing.

If the security is registered before the item is affixed; it will remain as a chattel.

If the security is registered after the chattel has been affixed; then it's too late. It's already a fixture, and has become part of the Landlord's property.

Naturally, this will effect re-financings and the sale of businesses.

Landlords should pay strict attention to what items the tenant is bringing on site. It can delay enforcement proceedings substantially. And, don't forget, secured parties being banks and other financial institutions have lots of money to litigate.

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
www.OntarioRealEstateSource.com

Commercial Landlords Should Consider Restoration Deposits

(Ontario Real Estate Source)

By Brian Madigan LL.B.

Here's the problem. The Landlord is looking for tenants to occupy its industrial complex. Most of the units are about 3,000 sq. ft. in size.

It's difficult enough to find good tenants, so what happens when the tenant's business requires something that occupies most of the unit? Consider the large ovens of an industrial baker, an MRI, a large paint booth for custom painting, massive printing equipment, industrial freezers and compressors.

These items require customized facilities, and special venting, and related accommodations. The cost of acquisition and installation may be the responsibility of the tenant. But, this is the time when the tenant has money.

What happens 5 years into a 10 year lease, when the tenant is out of money? In all likelihood the asset has been pledged to the bank or finance institution as security. If the security was registered under the Personal Property Security Act, that means it remains as a chattel and the secured party has first claim over the asset.

But, it will cost $50,000 to remove! The secured party is under no obligation to remove it and the Landlord has limited remedies.

Eventually, the Landlord may simply have to absorb the cost, remove the chattel and chalk most of it up to experience.

The solution? Actually, that was easy. At the outset, get a deposit for the cost of removal or get the tenant to post a "performance bond". Remember when the tenant had lots of money, lots of enthusiasm and lots of optimism right before they moved in, that was the time for the Landlord to deal with this matter.

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
www.OntarioRealEstateSource.com

Marriage in Ontario ~ Real Estate Implications

(Ontario Real Estate Source)

By Brian Madigan LL.B.


The legal responsibility for marriage is divided between the federal and provincial governments. The province is responsible for the “solemnization of marriage”.

What does that mean?

There is a Marriage Act in Ontario. Essentially, that means the procedural rules related to marriage.

In Ontario, you must be 18 years of age, which is the age of majority, or 16 years of age with the consent of both parents in order to marry. There are two routes, either through the issuance of a marriage licence or the publication of banns, a rather ancient and religious authorization. Over time, the role of marriage in society has become more civil and less religious.

The Marriage Act states:

“No person may solemnize the marriage of any person who, based on what he or she knows or has reasonable grounds to believe, lacks mental capacity to marry by reason of being under the influence of intoxicating liquor or drugs or for any other reason”.

It is rather interesting that permanent lack of capacity due to the failure to develop to maturity for any medical reason, or the loss of capacity due to physical injury is dealt with in the same section as “drugs and alcohol”.

Naturally, the candidate must be free to marry, that is, either no prior marriages, or any such marriage would have been dissolved (possibly by divorce) annulled, or ended due to the death of the spouse. These “facts” all need to be proved prior to the issuance of a marriage licence, or placed upon inquiry by the publication of banns.

There must be at least two witnesses present at the ceremony. A register is then signed by the married couple and the two witnesses. Whether the marriage takes place civilly or in accordance with the customs of a church or religious congregation, the “register” is the property of the Province of Ontario. The person solemnizing the marriage, then issues a “marriage certificate”, which constitutes official evidence of the marriage.

The old common law action for “breach of promise” was abolished in Ontario on 1 August 1978.

There is an important provision which deals with property. This provision means any property. So, that includes both real and personal property.

See, section 33:

“Recovery of gifts made in contemplation of marriage

33. Where one person makes a gift to another in contemplation of or conditional upon their marriage to each other and the marriage fails to take place or is abandoned, the question of whether or not the failure or abandonment was caused by or was the fault of the donor shall not be considered in determining the right of the donor to recover the gift.”

It is quite common for couples to live together prior to marriage. It is also quite common for them to purchase a house or condominium while they are still “living together”.

This section of the Marriage Act seems to have little to do with the solemnization of marriage. Nevertheless, it does still fall within the jurisdiction of the province which is “property and civil rights”.

This provision simply eliminates the consideration of “fault” in the determination of the entitlement to conditional gifts of property in contemplation of marriage.

It does not deal with entitlement. It simply makes matters “no-fault”, which is a principle enunciated in the Family Law Act and the Divorce Act.

It is a provision that real estate agents should consider, particularly if they are providing advice to young couples purchasing property together.

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
www.OntarioRealEstateSource.com

Marriage Laws in Ontario

(Ontario Real Estate Source)

By Brian Madigan LL.B.

You might wonder about the laws that apply to marriage in Ontario.

In accordance with the Constitution Act, 1867 (formerly the British North America Act), legislative powers relating to marriage between the federal and provincial governments were divided between the federal and provincial governments.

•· The federal government has exclusive jurisdiction over "Marriage and Divorce": s. 91(26).

•· The provinces have exclusive jurisdiction over the solemnization of marriage: s. 92(12).

Federally, there is one Act, known as "Marriage (Prohibited Degrees) Act.

It imposes certain restrictions upon the entitlement of parties to marry one another based upon degrees of consanguinity. The key operative provision is as follows:

"No person shall marry another person if they are related lineally, or as brother or sister or half-brother or half-sister, including by adoption."

This simply means ascendants and descendants may not marry at all. Collaterals may marry provided they are not of the second degree which would be brothers and sisters.

The Ontario Court of Appeal changed the long standing definition of marriage on 10 June 2003 in Halpern vs. Attorney General of Canada.

The Court sumarized the issue as follows:

"The definition of marriage in Canada, for all of the nation's 136 years, has been based on the classic formulation of Lord Penzance in Hyde v. Hyde and Woodmansee (1866), L.R. 1 P.&D. 130 at 133: "I conceive that marriage, as understood in Christendom, may for this purpose be defined as the voluntary union for life of one man and one woman, to the exclusion of all others." The central question in this appeal is whether the exclusion of same-sex couples from this common law definition of marriage breaches ss. 2(a) or 15(1) of the Canadian Charter of Rights and Freedoms ("the Charter") in a manner that is not justified in a free and democratic society under s. 1 of the Charter."

The Court concluded:

1)the rights of the applicants (same sex couples) were violated, by preventing them from marrying one another, contrary to the Charter of Rights and Freedoms.

2)the new reformulated the common law definition of marriage is "the voluntary union for life of two persons to the exclusion of all others".

The matter of marriage, its qualifications, restrictions, definition, prohibitions, conditions, rights, and entitlements has not been made subject to further review.

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
www.OntarioRealEstateSource.com

Can a Landlord Prevent a Tenant from having Pets?

(Ontario Real Estate Source)

By Brian Madigan LL.B.

I know you're going to like this answer:

"yes" and "no".

The Residential Tenancies Act in Ontario allows for pets. There is a specific pet rule.

"No pet" provisions void

14. A provision in a tenancy agreement prohibiting the presence of animals in or about the residential complex is void.

And, just to be on the safe side, the Act contains an override provision:

Provisions conflicting with Act void

4. Subject to section 194, a provision in a tenancy agreement that is inconsistent with this Act or the regulations is void.

So far, so good. If you have a pet and you are a tenant, the landlord has to go along with it?

But, what if you decide to have a reptile? What if you want to raise a 25 foot Ananconda? Is that permitted? What about the safety and security of the other tenants?

The saving provision here, is "nuisance". So, as long as the pet does not constitute a nuisance, then it can stay.

Most of the time, little "yappy" dogs would be fine.

The next question, before you decide to head to the pet store should be whether or not the complex is a condominium. If it is, and the condo declarations does not permit pets, then the answer is "no". No one, including the owner of the condo can have a pet in the complex.

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
www.OntarioRealEstateSource.com

Seller Must Disclose Refundable Tax Grants and Concessions

(Ontario Real Estate Source)

By Brian Madigan LL.B.


SPIS ~ Bond and Richardson

This is a case in the province of New Brunswick involving the use of the Property Condition Statement and the liability of the agent who assisted the vendor in the completion of the document.

The case is interesting from a procedural perspective. Mr. Bond purchased a property which was subject to certain deferred taxes under the Farm Lands identification Program (FLIP). If Mr. Bond changed the use of the property these deferred taxes would become payable.

So, he sued his own lawyer Ms. Richardson for negligence. His lawyer then sued the vendor for improperly completing the Property Condition Statement. The vendor then sued his own agent for improper advice concerning the completion of the document. All matters were heard in one proceeding.

The purchaser grew up on the property which is the subject of the sale. His family sold the property in 1975 and he saw it advertised in 2003. He contacted the agent, Paul Langlais who agreed to act in a dual agency capacity for he and the vendors, Mr. and Mrs. Kerr.

The FLIP program is designed to keep property as farming lands. If the use changes, the owner is responsible for the current taxes and 15 years of deferred taxes. Mr. Bond wishes to use some of the lands for a commercial auction which is his business. This change in use would trigger 15 years of back taxes. In the interim, Mr. Bond leased out the land for farming.

Liability of the Purchaser's solititor

The Court concluded that the purchaser's solicitor had failed to properly check the taxes prior to closing and this constituted negligence. Mr. Bond has suffered damages as a result of that negligence in that he is restricted in the use he can make of his property without incurring a cost and, by her failure to advise him of the deferred taxes, Ms. Richardson deprived him of the opportunity to reduce, eliminate or even negotiate those costs prior to closing.

Liability of the Vendors

There is also the matter of the vendor's liability, since the purchaser's solicitor claimed over as against them.

James Kerr, the vendor testified that he and his wife lived on the property for 15 years. It was registered in the FLIP when they bought it in 1988 and it was still in the program when they sold it in 2003. He regarded it as a tax break. He testified that all he knew about the program was that it resulted in lower taxes for him and that he was not aware that he would have to pay taxes back if the use of the property changed. He further testified that at the time of the sale to Mr. Bond he was not aware that Mr. Bond may have to pay the deferred taxes.

As part of the agreement, the vendors agreed to sign a Property Condition Statement.

In the first section of the Property Condition Statement, which deals with general information about the property, the vendors answered "no" to the following two questions:

4. Are you aware of or have you been charged any local improvement levies/charges?

5. Have you received any other notice or claim affecting the property from any person or public body?

The trial Judge said " the purpose of that Statement is disclosure. If they didn't have a duty to answer the questions both honestly and accurately that purpose would be defeated and the Statement would be meaningless."

And, the Judge made the following comment:

"It is clear......, James and Carole Kerr, made misrepresentations to Mr. Bond when they completed the Property Condition Statement. Mr. Kerr was aware of the FLIP taxes and while he regarded them as a benefit as opposed to an encumbrance, that did not excuse him from disclosing their existence, particularly when he answered the questions on the Property Condition Statement about whether or not he had received any notices from a public body affecting the property and whether or not the property was under the jurisdiction of any Conservation Authority. Both of those answers were clearly wrong and Mr. Kerr knew or ought to have known they were wrong since he knew from the time they bought the property that it was registered in the FLIP and he executed a document in 1997 in which he opted to continue to have the property registered in the FLIP."

The trial Judge determined that there was no intention to deceive it was an oversight. So, even though there was no finding of fraud, there was still a negligent statement. This statement met the 5 part test set out by the Supreme Court of Canada in Queen and Cognos to establish liability.

The Judge also commented that there was a special relationship between the parties, that is, they were negotiating an agreement, and that gave rise to a positive duty to provide honest and accurate answers:

"The representor's belief in the truth of his or her representations is irrelevant to the standard of care."

On the issue of the completion of the PCS, the Judge observed the following:

"In my view, if Mr. Kerr, in completing the Property Condition Statement, had given some thought to those questions he answered incorrectly, it is more likely than not that he would have realized that the FLIP should be disclosed in answering them.

I find that he did not exercise the care that an objective, reasonable person would have exercised in order to ensure the answers he gave were accurate and he was therefore negligent.

Mrs. Kerr was also negligent because she merely relied on the answers given by Mr. Kerr in signing the statement and made no effort on her own to ensure that the answers were accurate."

Liability of the Real Estate Agent

Paul Langlais had only been an agent for 2 years when he came across this situation. He was unfamiliar with farm properties, and although he obtained a tax statement referring to the FLIP, he knew nothing of the program or its deferred tax provisions.

The Court concluded:

· By failing to make himself and his clients aware of this essential and pertinent fact in a timely manner I find that Mr. Langlais failed to write the agreement in compliance with Article 6 of the Standards as it is not clear and understandable because it does not set out whose obligation it is to pay the deferred taxes.

· It follows, and I find, that Mr. Langlais failed to comply with the standard of care required of a realtor as set out in the Canadian Real Estate Association's Standards of Business Practice and thereby breached the duty he owed to Mr. Bond.

· I further find that Mr. Bond has sustained damages as a result of that breach. It follows, and I find, that Mr. Langlais was negligent.


Accordingly, the Court awarded a judgment in favour of the full amount of the deferred taxes to the purchaser. On the third party claim, the purchaser's solicitor was entitled to claim two thirds from the vendors and the real estate agent, the result being that the solicitor, the vendors and the vendors' agent each bore one third of the loss.

COMMENT:

This case again stresses the importance of the PCS. Be careful, when you are providing responses. If you are a realtor, you must counsel your client in terms of its execution. And, the mere fact the purchaser's lawyer made a mistake was not enough to relieve the vendors or the real estate agent from liability.


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
www.OntarioRealEstateSource.com

ORES Real Estate Index for April 2011

(Ontario Real Estate Source)

By Brian Madigan LL.B.

Here is the "ORES REAL ESTATE INDEX" which tracks the average resale prices of single family homes and condominiums in the Greater Toronto Area (GTA). It also tracks certain benchmark comparisons such as the price of oil and gold, as well as the Consumer Price Index.

In addition, the stock market indices for Toronto, and the three largest US markets are also compared.

For ease of comparison, everything we look at is worth 100 points on the Index as of 1 January 2005. That time period compares favourably with the five year average used as a standard benchmark comparison in the mutual fund industry.

As of 31 April 2011, here is the Index representing average prices:

Real Estate

147.74.....GTA single family homes
139.21.....All condos in GTA
144.82.....Downtown Central Condos
140.52.....East condos
137.88.....West condos
131.10.....North condos

Other market comparisons

358.97.....gold (price per ounce)
257.94.....oil (price per barrel)
151.51.....TSX index
147.74.....ORES Index single family homes
113.39 .....CPI index
139.33.....NASDAQ index
122.12......Dow Jones index
115.44.,....S&P Index

Using the Index

Just a quick note on reading the information. Have a look at the ORES Index for Real Estate (single family homes). As of the end of April, the index stood at 147.74. That's a 47.74% increase in 76 months. That means the increase is 0.628% monthly, or it could also be expressed as 7.54% annually. The performance here is shown without annual compounding for the sake of simplicity.

The other statistics are reported in a similar fashion for the ease of comparison.

Observations (on the Index)

As we use index, there are several notable comments:

· Commodity prices are just commodity prices

· There is no other "extra return" for commodities

· The same is true for the CPI

· The CPI is a benchmark to see whether you are keeping pace with inflation, that number is 113.00; increases have been modest and inflation appears to be under control; this is significant.

· For a realistic performance goal, you should aim for CPI plus 3.5% annually

· Stocks provide dividends in cash or extra stock. This return is additional to that shown in the stock market indices

· The stock market Indexes only measure the survivors. So, in 2009, both GM and Chrysler would have been dropped due to the bankruptcies

· If you held GM and Chrysler, you lost everything, but two new companies moved in to replace them in the Indexes

· Real estate offers a return in terms of occupancy. You can rent out the property and receive income, or occupy the property and enjoy it yourself

· Actually, I should have mentioned that if you held gold bullion, you could sit in a room, count it, and enjoy that experience too. I'm not quite sure how to measure that. You'll have to ask King Midas or Goldfinger!


Comparative Observations Using the New Index

· Gold was the best performer, reaching 358.97, eclipsing earlier peaks achieved mid January

· Oil was the most volatile, (yes it dropped in half over our measurement period), but recent increases do not offer good news

· Real estate was the most stable, with solid predictable returns at about 7.54% annually

· single family homes continue to show a better overall return than most condos

· Our own stock market posted reasonable gains, and is now ahead of single family homes over the measurement period, however, don't forget that the TSX is still well off its highs

· All three US stock market indicators now show positive numbers, and may truly be a better overall indication of the true state of the North American economy.

Conclusion

For steady, predictable, measured gains pick real estate. It's a solid performer with lower risk (less volatility) and generally moving in a positive direction.

And remember, when it comes to real estate, it's never "wiped out" completely, like GM or Chrysler stock. So, unless you're sitting on the edge of a tsunami, you'll still own something when the storm is over.

For a benchmark of success, there's 1,000 years of history to point to a rate of return in real estate being about the equivalent of 5% per annum, simple interest (non-compounded). That means that real estate doubles in value every 20 years. There are a lot of companies (now bankrupt, including CanWest Global, and many US Banks) that would have been happy with that return.

The present rate of return is sustainable in a sought after location like the GTA. Currently, that is about 1.6% annually in excess of the longer term predictable returns.

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
www.OntarioRealEstateSource.com

Seller Property Information Statement ~ Boychuk and Bulter

(Ontario Real Estate Source)


By Brian Madigan LL.B.


SPIS ~ Boychuk and Butler

This is another case involving the improper completion of a Property Condition Disclosure Statement and the remedies that are available afterwards. This document is similar to the Seller Property Information Statement used in Ontario.

This case was determined in the Small Claims Court of Nova Scotia February 2007.

The Boychuks entered into an agreement of purchase and sale to acquire a residence owned and occupied by the Butlers in Dartmouth. It should be noted that Mrs. Butler was a licensed real estate agent and acted for herself and her husband in connection with the sale.

The agreement contained the following provision:

"3(b) This agreement is subject to the Seller providing to the Buyer within 24 hours of the acceptance of this offer, a current Property Condition Disclosure Statement, and that statement meeting with the Buyer's satisfaction. The Buyer shall be deemed to be satisfied with the statement unless the Seller or the Seller's agent is notified to the contrary, in writing, on or before (date) Jan 30/06. The Seller warrants it to be complete and current, to the best of their knowledge, as of the date of acceptance of this agreement, and further agrees to advise the Buyer of any changes that occur in the condition of the property prior to the closing date. If notice to the contrary is received, then either party shall be at liberty to terminate this contract. Once received and accepted, the Property Condition Disclosure statement shall form part of this Agreement of Purchase and Sale."

A Property Condition Disclosure Statement dated January 8, 2006, was completed by the Sellers and was provided to the Buyers as required under the terms of the agreement.

The home had been purchased by the Sellers in July 2002. In 2003, they experienced dampness in their yard. They contacted Ralph Crowell, who is a local installer of septic fields and septic tanks. Subsequently, they contacted two other contractors. Remedial work to the septic system was undertaken in both 2003 and 2005.

The agreement and closing took place during the winter conditions of 2006 (30 March), so the septic system could not be properly inspected at that time. By the summer of 2006, a contractor reported that there was a complete system failure and the septic system required replacement.

The Court looked at the issue of negligent mispresentation. There is a five part test before a claimant will be successful:

(1) there must be a duty of care based on a "special relationship"
between the representor and the representee;

(2) the representation in question must be untrue, inaccurate, or misleading;

(3) the representor must have acted negligently in making said misrepresentations;

(4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and

(5) the reliance must have been detrimental to the representee in the sense that damages resulted.

There is a review and analysis of the facts and the law in the Judgment:

"(76) According to paragraph 3(b) of the Agreement in this case, the Property Condition Disclosure Statement forms part of same once received and accepted.

(77) Applying the five part test .... I find firstly that there is a duty of care based upon the relationship between the parties.

(78) The next issue is whether the Sellers made to the Buyers a representation that is untrue, inaccurate or misleading.

(79) The Sellers rely upon the fact that the Property Disclosure Statement contains additional comments at paragraph 11 as previously noted. In fact paragraph 11 does contain a statement that french drains had been installed around the rear of the property in the summer of 2004 and spring of 2005.

(80) From their perspective, however, the Buyers submit that the provisions of the Property Condition Disclosure Statement relating to the septic disposal system note no previous problems with the existing system or upgrades having been carried out to the system in the last five years. In addition, paragraph 5 of Addendum Form 101, Schedule 4, contains a specific statement that the Seller warrants "to the best of their knowledge" that the septic disposal system is in good working order and has not presented any problems during their ownership and this warranty explicitly is stated to survive the closing.

(81) On the whole, I find the statements in the Property Condition Disclosure Statement to be misleading to potential purchasers. Anne Butler is a licensed Real Estate Agent. Despite her lack of personal experience with septic waste disposal systems, she clearly was aware that the water and drainage problems they were having were related to the septic field.... The drainage repairs were undertaken by them as a means of attempting to fix the issues they were having with their septic system. No explanation was given concerning why the information about the french drains was noted under additional comments in the area of "Structural" in the Property Condition Disclosure Statement. Paragraph 6A. and B. specifically refer to structural problems, unrepaired damage or leakage in the foundation, roof or walls and make no reference to problems with the septic system.


(82) The third step of the test is to determine whether the representor acted negligently in making the representation. I do conclude that the Vendors were negligent in making such representations in the manner in which they were made. It would be expected of a Vendor in this case, and even more so where Ms. Butler is a licensed Real Estate Agent, to note the drainage repairs in the area in the Property Condition Disclosure Statement concerning "Sewage Disposal" which would alert potential purchasers to possible problems with the system, such that they would inquire further. To include this information in the area of "Structural" would imply to a potential purchaser that the repairs were undertaken to deal with a problem of leakage in the foundation, roof or walls of the house. They would not be alerted to the possible problems with the septic system which the Sellers in this case were fully aware of.

(83) I find in this case that the Sellers were at the very least careless when preparing the Property Condition Disclosure Statement by failing to connect the drainage repairs to possible problems with the septic system.

(84) ....... to place this information under the "Structural" section of the Property Condition Disclosure Statement could easily mislead a potential purchaser into believing that the aforesaid repairs concerned structural issues with the foundation, roof or walls. This was particularly important in this case as the Sellers had in fact undertaken major structural repairs, including replacement of leaking windows before listing the property for sale.

(85) In reaching my conclusions on this point, I have also taken into consideration that a failure to provide information may constitute a misrepresentation as much as a positive misstatement.

(86) The fourth step of the test is whether the Buyers in this case relied in a reasonable manner upon the negligent misrepresentation. Once again, I have no hesitation in finding that this is the case. A buyer would reasonably conclude from the way that the Property Condition Disclosure Statement was prepared that the installation of the french drains was to deal with structural issues not possible problems with the sewage disposal or septic system.

(87) Step five of the test is clearly proven as the Buyers discovered that the system had failed entirely shortly after the snow melted from the ground."

The trial Judge allowed the purchasers' claim for the cost of the replacement of the septic system, but reduced the amount of the damages by 50% by reason of betterment.

COMMENT:

This case again points out the difficulties with the completion of the form. Here, one of the vendors was a real estate agent and was therefore held to a higher standard than might otherwise have been the case. While there was no real attempt to deceive, the document was filled out carelessly.

It should be observed that in this particular case the Property Condition Disclosure Statement (PCDS) was elevated to form part of the contractual terms of the agreement itself.

The test of correctness of the answers was measured from the purchasers' perspective. What would a normal purchaser think, given the responses. The Court did not consider whether the answers might be good responses from a technical point of view on the part of the vendors.

It should also be noted that the vendor, being a real estate agent was held to a higher standard.

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
www.OntarioRealEstateSource.com

Seller Property Information Statement (SPIS) ~ Sask and Brooke

(Ontario Real Estate Source)

By Brian Madigan LL.B.

This was a case heard in the Supreme Court of British Columbia and it involved the Property Condition Disclosure Statement, which is similar to Ontario’s Seller Property Information Statement.

Briefly, the plaintiff as purchaser acquired a condominium unit for $133,000 but the unit leaked, as did others in the complex. Obviously, this problem had become well known in Vancouver. No one wants to buy, particularly with so many others available. The value had dropped to $22,000 and the purchaser, Sask faces a special assessment of $60,000 for her share of common ownership repairs.

In a nutshell, this is a mess!

Naturally, the condominium owners are suing the builder but that will take time. In this case, Sask claims that the vendors made false or negligent representations in the Property Condition Disclosure Statement (PCDS).

The trial Judge expressed the issues in the case as the following questions:

1. Did Michael Brooke and Ursula Wenzel misrepresent the condition of their condominium at the time of sale?

2. Was Shirley Sask induced to purchase the condominium by those misrepresentations?

3. What damages has Shirley Sask suffered?

The agreement of purchase and sale included several conditions including financing, perusal of the strata council minutes and the sellers' Property Condition Disclosure Statement.

In many cases, the PCDS is made to form part of the agreement by attching it to the agreement as a Schedule or Addendum. Here, it was simply a condition.

The sellers answered "No" to the following questions:

H. Are you aware of any structural problems with the premises or other buildings on the property?

K. Are you aware of any damage due to wind, fire, water?

M. Are you aware of any roof leakage or unrepaired damage?

The preamble to the document is worth noting, according to the trial Judge:

"THE SELLERS ARE RESPONSIBLE FOR THE ACCURACY OF THE ANSWERS ON THIS DISCLOSURE STATEMENT AND WHERE UNCERTAIN SHOULD REPLY "DO NOT KNOW". THIS DISCLOSURE STATEMENT CONSTITUTES A REPRESENTATION UNDER ANY CONTRACT OF PURCHASE AND SALE IF SO AGREED IN WRITING BY THE SELLERS AND BUYERS."

In addition, there is a statement that appears in the document above the seller's signature:

"The sellers state that the above information is true, based on the sellers' current actual knowledge as of the above date. Any important changes to this information made known to the sellers will be disclosed by sellers to buyers prior to closing. The sellers acknowledge receipt of a copy of this disclosure statement and agree that a copy may be given to prospective buyers."

Further, just above the buyers' signature on the same document is the following disclaimer:

"The buyers acknowledge that they have received and read a signed copy of this disclosure statement from the sellers or the sellers' agent on the 24th day of February, 1997. The prudent buyers will use this disclosure statement as the starting point for their own inquiries. The buyers are urged to carefully inspect the property and, if desired, to have the property inspected by an inspection service of their choice."

The Judge in analysing this case said that "The more important questions concern the extent to which the sellers represented the condition of the property and the extent to which Shirley Sask relied upon their representations.

A copy of the disclosure statement, dated February 17, 1997, was given to Shirley Sask before she signed the contract of purchase and sale on February 24th, and the sale was subject to Sask "perusing & approving" the strata council's minutes, bylaws, and financial statements.

Sask has not proved reliance upon the disclosure statement in isolation from the strata council minutes which were provided to her at the time of sale. Sask has failed to prove that the sellers intended to mislead her in any way, particularly when the disclosure statement is read in conjunction with the strata council minutes.

It should be noted that the strata council minutes detailed the problems and expenditures of the condominium in respect to the premises.

The tort of negligent misrepresentation is now an established principle of Canadian law: Queen v. Cognos Inc. (1993), 99 D.L.R.(4th) 626 (S.C.C.). Five requirements must be met:

(1) there must be a duty of care based on a "special relationship" between the representor and the representee;

(2) the representation in question must be untrue, inaccurate, or misleading;

(3) the representor must have acted negligently in making said misrepresentation;

(4) the representee must have relied, in a reasonable manner, on the said negligent misrepresentation;

(5) the reliance must have been detrimental to the representee in the sense that damages resulted.

In this case, the first three requirements were met including negligence on the part of the sellers in making the statements.

The trial Judge stated:

"However, whether or not the sellers were negligent in purporting to confine their representations to the condition of their own unit is not, in my view, determinative of this claim. In light of their concurrent provision of minutes from strata council meetings where leakage problems were discussed, the sellers' disclosure obligations were fulfilled in a manner that should have alerted a prudent purchaser to the need to make further inquiries."

And further commented:

"In my view, the fourth requirement of the mentioned test in Queen v. Cognos Inc. has not been met, as I cannot conclude that Shirley Sask acted in a reasonable manner by relying upon the property condition disclosure statement without reference to the information provided in the strata council minutes. The sale was subject to a condition precedent that contemplated perusal and approval of the strata council's minutes, bylaws and financial statements, and in complying with that condition the sellers were effectively providing Shirley Sask with the history of water leakage problems in the complex. In light of her opportunity to review those documents, Ms. Sask had the right to refuse to close the transaction as a consequence of that information, but chose not to do so.

On the whole of the evidence, it has not been proven that the sellers misrepresented the condition of unit #206, and the claim is dismissed".

COMMENT:

So, this is an interesting case. The sellers made a misrepresentation. That misrepresentation was made negligently, but the Judge concluded that all in all, the purchaser did not rely on that the document that contained the errors.

There was ample opportunity for the purchaser to find out the correct facts from the strata council minutes. As a result, there was no liability on the part of the vendors. However, rather than being saved by the signing of the Property Condition Disclosure Statement, they were in fact saved because there was a condition in the agreement permitting the purchaser to peruse the strata council minutes, and the correct information could be found there. The mere fact that the Purchaser failed to look, is her fault, and does not establish liability on the part of the vendors.

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
www.OntarioRealEstateSource.com

Toronto House Prices in 2011

(Ontario Real Estate Source)

By Brian Madigan LL.B.

The market always moves up sharply in the Spring, but over the winter months the market moved up 6.82%.

In January, the average price of a single family home in the GTA was $427,037. At the end of March, it reached $456,147. That’s a 6.82% increase.

The two most active months traditionally have been April and May. So, watch out for further increases. Then we are in for the start of a slowdown. Prices will decline slightly in June. Of course, “all things being equal”, and they never are!

January Is Often a Market Indicator

The month of January is always a key indicator of the trend in the market for the entire year.

At least, that’s what they say!

Let’s have a look at some previous Januarys, and see what happened:


January............ Entire Year

2004……….up……….up

2005……….up……….up

2006 ……….up……….up

2007……….up……….up

2008……….down……….down

2009……….down……….up

2010……….down……….up

2011……….down……….yet to be determined

We are essentially looking at the results in 7 years, and in 5 of those years, the month of January was an indicator of the overall trend.

However, look a little further. Is that just coincidence? Other than 2008, the year of the commencement of the recession, all markets were up. That is 6 up and 1 down. Yet in 2 out of 6 years, January provided the wrong indicator. However, there was some comfort in January 2008 turning against the tide and pointing to a down market, with the stock market later to crash in the month of October.

Sometimes, the rule works and sometimes it doesn’t. You be the Judge!

February is Always a Good Month

Again, another “truism” among real estate agents, or is it?

Let’s have a look at Februarys since 2004 and compare them to Januarys. Are the average prices in the GTA for single family homes (the key market indicator) up or down?

February

2004……….up

2005……….up

2006 ……….up

2007……….up

2008……….up

2009……….up

2010……….up

2011……….up

So, whether it’s an “old wives’ tale” or not, it does seem to work. And, it is important to note that it was even the case in 2008 with the onset of the recession.

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
www.OntarioRealEstateSource.com

Toronto Property April Mid-Month Report

(Ontario Real Estate Source)

By Brian Madigan LL.B.

Here are the mid-month numbers for April. This month is always a key indicator of what is going to happen in the Spring market and over the year.

We will look at Toronto, the rest of the GTA and the combined figures and compare them to the previous year.

Sales for April (mid month) 2011 (2010 in brackets)

1,760..........Toronto (1,837)

2,684...........Rest of GTA (2,764)

4,444...........Combined (4,601)

Average Prices for April (mid month) 2011 (2010 in brackets)

540,229..........Toronto (470,532)

445,746...........Rest of GTA (403,514)

483,165...........Combined (430,271)

It is important to remember as a qualifier that these figures represent recorded transactions. They do not track comparative house values.

So, what do these statistics show? There is a shortage of listings. That is apparent. If there is no corresponding increase, then there should be some upward pressure on prices. If there is an increase then the additional listings will ameliorate the market somewhat.

For further interest this is the report from TREB:

GTA REALTORS® RELEASE MID‐MONTH RESALE HOUSING FIGURES

TORONTO, APRIL 18, 2011 ‐‐ Greater Toronto REALTORS® reported 4,444 sales during the first two weeks of April 2011 - a three per cent decrease compared to the first two weeks of April 2010. The number of new listings was down by 21 per cent compared to the same period last year.

"Sales activity was quite strong during the first two weeks of April. If this level of activity is sustained for the remainder of the month, we could see April transactions close to last year's record result. Positive economic news has kept households confident in their ability to purchase and pay for a home over the long term," said TREB President Bill Johnston.

The average selling price for firm deals reported through the first two weeks of April was $483,165, representing a 12 per cent increase over the average price of $430,271 reported during the same period last year.

"The number of homes listed for sale so far in 2011 has been below expectations. Market conditions have tightened, resulting in increased competition between home buyers and accelerating rates of average price growth," said Jason Mercer, TREB's Senior Manager of Market Analysis.

"The strong rate of price growth reported for the first two weeks of April should entice more households to list their homes for sale. This would result in more balanced market conditions and more moderate rates of price growth," continued Mercer.


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
www.OntarioRealEstateSource.com

ORES Real Estate Index for March 2011

(Ontario Real Estate Source)

By Brian Madigan LL.B.

Here is the "ORES REAL ESTATE INDEX" which tracks the average resale prices of single family homes and condominiums in the Greater Toronto Area (GTA). It also tracks certain benchmark comparisons such as the price of oil and gold, as well as the Consumer Price Index.

In addition, the stock market indices for Toronto, and the three largest US markets are also compared.

For ease of comparison, everything we look at is worth 100 points on the Index as of 1 January 2005. That time period compares favourably with the five year average used as a standard benchmark comparison in the mutual fund industry.

As of 31 March 2011, here is the Index representing average prices:

Real Estate

141.16.....GTA single family homes
137.89.....All condos in GTA
146.99.....Downtown Central Condos
131.96.....East condos
134.99.....West condos
131.99.....North condos

Other market comparisons

336.41.....gold (price per ounce)
241.56.....oil (price per barrel)
153.37.....TSX index
141.16.....ORES Index single family homes
112.16 .....CPI index
134.84.....NASDAQ index
117.44......Dow Jones index
112.24.,....S&P Index

Using the Index

Just a quick note on reading the information. Have a look at the ORES Index for Real Estate (single family homes). As of the end of January, the index stood at 141.16. That's a 41.16% increase in 75 months. That means the increase is 0.548% monthly, or it could also be expressed as 6.59% annually. The performance here is shown without annual compounding for the sake of simplicity.

The other statistics are reported in a similar fashion for the ease of comparison.

Observations (on the Index)

As we use index, there are several notable comments:

· Commodity prices are just commodity prices

· There is no other "extra return" for commodities

· The same is true for the CPI

· The CPI is a benchmark to see whether you are keeping pace with inflation, that number is 116.00; however in January it was 111.59, so this is the largest single month increase since we have tracked this Index from 1 January 2005. Although increases have been modest and inflation appeared to be under control, this is significant.

· For a realistic performance goal, you should aim for CPI plus 3.5% annually

· Stocks provide dividends in cash or extra stock. This return is additional to that shown in the stock market indices

· The stock market Indexes only measure the survivors. So, in 2009, both GM and Chrysler would have been dropped due to the bankruptcies

· If you held GM and Chrysler, you lost everything, but two new companies moved in to replace them in the Indexes

· Real estate offers a return in terms of occupancy. You can rent out the property and receive income, or occupy the property and enjoy it yourself

· Actually, I should have mentioned that if you held gold bullion, you could sit in a room, count it, and enjoy that experience too. I'm not quite sure how to measure that. You'll have to ask King Midas or Goldfinger!


Comparative Observations Using the New Index

· Gold was the best performer, reaching 336.41, eclipsing earlier peaks achieved mid January

· Oil was the most volatile, (yes it dropped in half over our measurement period), but recent increases do not offer good news

· Real estate was the most stable, with solid predictable returns at about 6.59% annually

· single family homes continue to show a better overall return than most condos

· Our own stock market posted reasonable gains, and is now ahead of single family homes over the measurement period, however, don't forget that the TSX is still well off its highs

· All three US stock market indicators now show positive numbers, and may truly be a better overall indication of the true state of the North American economy.

Conclusion

For steady, predictable, measured gains pick real estate. It's a solid performer with lower risk (less volatility) and generally moving in a positive direction.

And remember, when it comes to real estate, it's never "wiped out" completely, like GM or Chrysler stock. So, unless you're sitting on the edge of a tsunami, you'll still own something when the storm is over.

For a benchmark of success, there's 1,000 years of history to point to a rate of return in real estate being about the equivalent of 5% per annum, simple interest (non-compounded). That means that real estate doubles in value every 20 years. There are a lot of companies (now bankrupt, including CanWest Global, and many US Banks) that would have been happy with that return.

The present rate of return is sustainable in a sought after location like the GTA. Currently, that is about 1.6% annually in excess of the longer term predictable returns.

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
www.OntarioRealEstateSource.com

GTA First Quarter Maintains Steady Pace

(Ontario Real Estate Source)

By Brian Madigan LL.B.

How is the real estate market this year? That's a simple enough question. While many will respond by referring to the latest week or the latest month, the true measure of the 2011 market, at this time is to look at the first quarter numbers and compare that to other first quarters in previous years.

Sometimes, some of the February sales take place in January and sometimes some of them take place in March. Such "fine tuning" can distort the results and lead to erroneous conclusions.

Let's see how many homes have sold in the first quarter of the year since 2004:

2004..........19,392

2005..........18,238

2006..........20,050

2007..........21,397

2008..........17,721

2009..........14,897

2010..........22,667

2011.........19,865

The average number of first quarter sales is 18,278. That means that the first quarter in 2011 is 3.04% higher than the average over the last eight years. In fact, there are four higher, so this year is right at the median.

You will notice that 2009 is quite low. That was at the height of the recession, and the markets have now recovered.

What does this mean? It simply indicates that the market is strong and continues to be steady and predicable. Wild swings, soaring prices and crashes really don't help anybody. Unfortunately, that has happened in many US markets, but, not here. Prices, by the way are higher than they have ever been.

So, oddly enough, this is one of those times, when it's both good to buy and good to sell.

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
www.OntarioRealEstateSource.com

March was 11% Better than Average

(Ontario Real Estate Source)

By Brian Madigan LL.B.

The sales in the GTA for single family homes are reported by the Toronto Real Estate Board to be the second best March ever.

March was a good month, but how good?

Let's see how many homes have sold in the month of March since 2004:

2004..........9,076

2005..........7,904

2006..........8,707

2007..........8,518

2008..........6,631

2009..........6,171

2010..........10,430

2011..........9,262

The average number of monthly sales in March is 8,337. That means that March 2011 is 11.09% higher than the average over the last eight years. It is risky to go back much further than that since the population was smaller.

However, it is even riskier to compare it to March 2010. That would show an 11.19% decrease. There were 1,168 fewer sales in the month of March 2011, than the month of March 2010.

That's really not that many, and it doesn't spell doom.

You have to remember that there was a world wide financial crisis in October 2008. The stock market had lost half its value. When 2009 started off the automotive industry was on the brink of bankruptcy. People weren't buying homes. The economy settled down following the government bailouts and the housing market normalized.

There was a lot of pent-up demand from the Spring of 2009. Some waited a few months, while the others waited an entire year. Consequently, March 2010 was a trend setting month in a year that recorded the highest number of sales ever.

So, what does that mean? It simply means that March 2010 was a great month. It doesn't mean that March 2011 was a bad month showing numbers that are 11.19% off the 2010 record.

If you look at the numbers closely, you will see that it was rather steady and normal. You always have to look behind the headlines. All in all, this looks good for an active Spring market.


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
www.OntarioRealEstateSource.com

Is it Time to Buy or Sell Real Estate in Toronto?

(Ontario Real Estate Source)

By Brian Madigan LL.B.

Frequently, real estate buyers and sellers wonder whether they have missed the market. Sometimes, they have.

So, what would you say about mid April 2011?

The market has shown steady growth and sales. The first quarter numbers show that the pace is steady and the more recent March numbers have been the second best on record. And, something which is particularly important for sellers, the sale prices have never, ever been higher.

Let's see what percentage of homes have sold in the first quarter of each year since 2004:

2004..........23.22%
2005..........21.67%
2006..........24.13%
2007..........25.69%
2008..........23.19%
2009..........16.69%
2010..........25.69%
2011……..yet to be determined

The sales in the first quarter of each year approximate 22.89%. That’s a little shy of 25% which might otherwise be expected. But remember, that’s mostly winter months in the GTA with lots of inclement weather. It also includes the March break.

Well more than half the transactions will have taken place by the end of June, so for sellers, this is certainly a good time to list your property.

For buyers, the prices might be a little higher and the competition might be a little higher, but this is the time when the better properties are on the market. And, if you are planning to stay for a while, you really want the right house.


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
www.OntarioRealEstateSource.com