B.C. Supreme Court rules in mother-daughter housing dispute

A RECENT B.C. Supreme Court battle should serve as a caveat for relatives thinking of jointly buying property.

Gavel_0

Reblogged from The Georgia Straight | Carlito Pablo

This one pitted a daughter against her mother in connection with a home purchase where they did not put their agreement in writing.

In a July 18, 2014, ruling, Justice Barry Davies reminded us about the pitfalls of “undocumented or under-documented inter-generational ventures entered into amongst family members”.

As Davies observed in his reasons for judgment: “All too often…the best of intentions result in sorrow.”

In the case filed by Catherine Ann Cerenzie and her husband against the woman’s mother, Mary Teresa Duff, “what is lost by all involved…is far more than money.”

“The real loss,” Davies wrote, “is the love and trust which gave rise to the venture in the first place and which likely will never be regained.”

Wading through conflicting testimonies, Davies was able to piece together a narrative around the purchase and eventual sale of 1064 Buoy Drive in Port Coquitlam.

The property was purchased by Duff and her daughter in 2008 out of the younger woman’s desire to have a stable home for her three children. When mortgage financing of $464,000 was first approved, it was contemplated that both Duff and Cerenzie were to be the mortgagors.

“It was only later, after Mrs. Duff advised Mrs. Cerenzie that she would eventually qualify for lower property taxes, that the Buoy Drive Home was conveyed only to Mrs. Duff rather than jointly to her and Mrs. Cerenzie, with Mrs. Cerenzie then becoming a guarantor rather than a co-borrower on the mortgage obtained for its purchase,” Davies recalled.

Duff made a $137,000 down payment, and the Cerenzies contributed $5,000. The Cerenzie family occupied the upstairs of the house, while Duff moved into a suite on the lower floor.

Although there is “insufficient evidence of the specifics of the arrangements”, Davies noted that there was “general agreement” between the parties on buying a suitable home that they could all “collectively afford”.

One aspect of this agreement was that Duff would contribute $500 monthly toward paying off the mortgage and the Cerenzies would shoulder the balance of mortgage payments.

In the spring of 2012, Duff “began to assert sole ownership rights by unilaterally determining to sell the Buoy Drive Home”, Davies wrote.

Davies didn’t go into why there was a falling-out. He noted that there had already been “sufficient discord and recrimination in this litigation to likely irreparably poison the once good relationship between the parties”.

The Cerenzie family was evicted, and Duff sold the house.

During the trial, Duff testified that the Cerenzie family was her tenant, an assertion that the judge rejected. Davies agreed with the plaintiffs’ claim: “In this case, Mr. and Mrs. Cerenzie submit that evidence establishes that they are entitled to a share of the Sale Proceeds both by imposition of a resulting trust or by application of the equitable principle of unjust enrichment.”

The judge determined that the Cerenzies contributed a total of $83,913.86 toward the purchase of the house: their down payment of $5,000 and mortgage payments totalling $78,913.86.

Duff contributed $155,510.66, which is the sum of her down payment of $137,000 and her monthly mortgage payments.

Although Davies agreed that the Cerenzies are entitled to a share of the sale proceeds of $192,682.45, he denied their suggestion that the amount be divided on a pro rata basis or in proportion to overall contributions.

One reason is that Duff made a bigger initial investment to acquire the home, and that should “accordingly entitle her to a greater share of the Sale Proceeds”.

After some adjustments, Davies ruled that Duff is entitled to $136,800, and the Cerenzies, $55,882.45.

Davies also dismissed Duff’s counterclaim that the plaintiffs owe her for damage to the home and loans made by her to Mr. Cerenzie.

As in many cases similar to this, Davies noted, when courts are called to sort out issues, the “result will never be totally satisfactory to the parties”.

Read the original article and more here

Advertisements

Canadians may no longer be top foreign buyers of U.S. real estate

Canada with a handful of other countries has historically accounted for the bulk of foreign purchase of U.S. properties, however rising U.S. housing prices and a weaker Canadian dollar have some questioning if Canada will retain that top spot. And what other groups have been very active in buying luxury condos in the U.S. in this last year? Read on to find out!

Reblogged from The Globe and Mail

Alain Forget, the head of sales and business development at RBC Bank, is watching to see whether Canadians retain their top spot in the rankings of international buyers of U.S. properties this year.

The data, which come from the National Association of Realtors south of the border, have been slightly delayed but are expected to be released in early July. They will detail purchases between March last year and March, 2014.

Canada, China, Mexico, India and the United Kingdom have historically accounted for the bulk of foreign purchases of U.S. properties, with China and Canada showing the strongest growth in recent years, according to the realtors’ association.

But Mr. Forget says that, with rising U.S. housing prices and a weaker Canadian dollar, he’s not entirely certain Canada will retain its title this year.

“I am still confident that we will see Canadians in No. 1 or maybe No. 2,” he says. “But, for example, in South Beach and Miami, Europeans, Russians and Brazilians have been very active buyers of luxury condos over the last year.”

The Canadian dollar, which topped $1 U.S. for much of 2011 and 2012, weakened last year and has recently been trading at around 93 cents. A stronger Canadian currency makes it more attractive for Canadians to buy properties in the U.S. Many economists are expecting the loonie to slide below 90 cents in the year ahead.

The growth in U.S. home prices, which had been on a tear, is moderating but still strong. Housing prices in 20 major cities rose 10.8 per cent in April from a year earlier, according to figures released in June from the S&P Dow Jones Indices.

Mr. Forget says that, while U.S. home prices have risen significantly in the last couple of years as the market recovers from the subprime mortgage crisis, Canadian retirees can still buy cheaper homes in many southern locations than they can at home.

“I just received the statistics for the month of May for southeast Florida, places like Palm Beach and Broward County,” he says. “And the median price for a single home is $282,000 (U.S.). The median price for condos and townhouses is $135,000.”

The average selling price of an existing home in Canada during May was $416,584 (Canadian) .

Canadians accounted for 23 per cent of U.S. sales to foreigners in the realtors’ 2013 survey, up from just 10 per cent in 2007. That growth came as Mexico’s share fell from 13 per cent to 8 per cent, and the United Kingdom’s share dropped from 12 per cent to 5 per cent. China, meanwhile, rose from 5 per cent of sales to 12 per cent.

Foreigners bought about $68.2-billion (U.S.) worth of existing homes in the U.S. in the 12 months leading up to March, 2013, down from $82.5-billion a year earlier, and accounting for about 6.3 per cent of the total sales. Of the property sales to foreigners, about half were to people with permanent residence outside the U.S. while the other half were to recent immigrants or temporary visa holders.

Read original article

Questions for Property Transfer Tax (BC)

20140219-224133.jpgIf you are like me, then you probably have tons of questions about Property Transfer Tax. Do I have to pay it? What happens when I sell my house? What if I want to give my house to my children? Are there any rebates, discounts or first-time homebuyer benefits?  I’ve come across a nice article from David Simon – which is quite helpful in some of the odd particulars of Property Transfer Tax, like adding someone’s name to title – does that constitute a sale subject to property transfer tax? I’m by no means an expert nor a lawyer – should you consult your own lawyer if you have a particular situation or question? Yes. If you want to shoot me over a quick question, or get some recommendations on who you should really be speaking to, please hit up the comment section below or on my contact form.

For all you lucky Albertan’s, you’ve probably never encountered nor will you ever hear about this strange thing we call property transfer tax.

“I am often asked how a person can add someone to a title without paying property transfer tax. Usually that person contributed to the acquisition and has been helping paying the mortgage. Unless the person is a “related individual” as defined in the Property Transfer Tax Act and the transferor or the transferee has been living there as his/her principal residence for at least 6 months, then property transfer tax has to be paid. A related individual under the Act is a direct relative, e.g. son, daughter, parent grandparent. Siblings and aunts and uncles do not fall within the definition and the transfer tax has to be paid for transfers to them.

 I have been asked if a company can transfer its property free of property transfer tax to its shareholders. The answer is no as the company is a separate legal entity from its shareholders. Only if the company was holding the property in trust and the trust declaration was registered when the transfer to the company was registered, can the transfer be done free of property transfer tax.

 From an income tax point of view, the law is that on any disposition, or deemed disposition, of capital property, tax is payable on any capital gains. The main exception to this is for dispositions of a primary residence. There is no tax payable on the capital gains from a disposition of a primary residence.  A deemed disposition occurs when a person dies, there is a gift of property or there is a change of use of the property, e g. it goes from being your primary residence to a rental property, or from a rental property to being your primary residence. The gain has to be determined at that time and any applicable tax paid. So before anyone takes title to, or transfers title to, all or part of a primary residence or any other property, even if a family member is involved, they should consult with their tax advisor as to possible tax consequences. Once you do something it is difficult and potentially costly to undo it.”

Bang for your $599,000 buck

There’s a house for sale in Vancouver for under $600,000

Reblogged from The Province

In a city where affordable housing is an oxymoron, a two-storey East Vancouver character home is bound to catch some attention with its price tag.

The 1,951-square-foot home at 2622 Clark Dr. is set to go on the market Monday with a listed price of $599,000 — expected to be the lowest-priced, detached, freehold house in Vancouver.

“I expect it to be noticed,” said listing agent Mary Cleaver. “It’s a beautiful renovated Craftsman-style house in a lovely neighbourhood at a great price.”

The low price is because the three-bedroom, two-bath Grandview-Woodland property faces busy Clark Drive and is on a small 30.5-X-58-foot lot, about half the depth of typical lots in the neighbourhood.

Contrary to what some people might expect from the — relatively — bargain-basement price, the house is well-kept and lovingly maintained.

Built in 1911, its plumbing, electrical and windows were updated before the current owners bought the place in 2005 for $333,000. They have since replaced the roof, refinished the floors, installed a new kitchen and repainted the exterior, said Cleaver.

Homeowner Simon Yu, who owns a deck-renovation company, also added a wraparound deck to the home, adding an extra 600 sq. ft to the property.

The low price is rare in the city, said Cleaver, although it isn’t the only one. In January, a house in the Fraserview-Killarney neighbourhood sold for $592,000. A house off of Commercial Drive sold for $471,000 in April 2012.

Currently, the cheapest freehold, detached house listed in Vancouver is $628,000 in Hastings-Sunrise.

The Clark Drive house may be a deal in comparison with million-dollar fixer-uppers that have become the norm in the city, but statistics show Vancouver’s housing market still remains out of reach for average wage earners. An RBC report last year shows detached homes in Metro Vancouver require more than 80 per cent of median household income. A recent international survey also placed Vancouver second after Hong Kong in having the least-affordable housing.

And there are no signs Vancouver’s sky-high market is heading for a downturn. The region’s housing market is maintaining its steady pace from last year, said the Real Estate Board of Greater Vancouver, with residential sales in February jumping 40 per cent compared with February 2013.

Cleaver said the homeowners, who have two young children, were very happy in the house, but are selling it because they need more space. She’s holding an open house April 5 and 6 from 2 to 4 p.m.

“It’s a very nice, livable house, and (at that price), it is competing with apartments and townhouses,” she said.

What $599,000 will get you:

If you want even more bang for your buck, you have to look farther afield. Here is what $599,000 will get you in:

Langley: 20465-67B Ave.

A 3,248-square-foot, five-bedroom, four-bathroom house in Willoughby with gourmet kitchen and finished basement.

Maple Ridge: 10070-246B St.

Built in 2013, this four-bedroom home on a quiet street has a great room, vaulted ceilings in the master bedroom and a rec room.

Sechelt: 6220 Mika Rd.

There are panoramic sea views, oversized decks and 14-foot ceilings in this five-bedoom West Sechelt home on a 11,412-sq.-ft lot.

Read original article

Vancouver home sales jump 30% in January from a year ago, board warns people to ‘price’ home right

The message from realtors in Canada’s most expensive city is clear — price your home right if you want it to sell.

vancouver-housing

Reblogged from The Financial Post | Gary Marr

The message from realtors in Canada’s most expensive city is clear — price your home right if you want it to sell.

The Real Estate Board of Greater Vancouver said there were 1,760 sales through the Multiple Listing Service in January, a 30.3% increase from a year ago. But sales were down 9.9% decline from December.

The board’s president had a specific message to homeowners, in a press release.

“If you’re looking to sell your home in a balanced market, it’s critical that your list price is reflective of current market conditions,” said Sandra Ms. Wyatt.

Last month’s sales figures remain 7.2% above the 10-year average for the month of January. Prices have inched up a bit too. The board’s composite benchmark price for all residential properties in Metro Vancouver stood at $606,800 last month, a 3.2% increase from a year ago.

“The Greater Vancouver housing market has been in a balanced market for nearly a year. This has meant steady home sale and listing activity accompanied by stable home prices,” said Ms. Wyant, in the release.

New listings are on the rise, reaching 5,128 in January. That’s a 4.2% increase from a year ago. New listings were also 17.7% above the 10-year average for the month.

The new listings bring the total number of properties for sale across the Greater Vancouver area to 12,602 which is down 4.9% from a year ago but up 9% from December.

Read original article

What it would take for Canada’s housing market to crash, and why Pimco says it won’t

Pimco on housing

The world’s biggest bond fund manager expects a “cyclical decline” in Canada’s housing market, but says there’s little chance of a meltdown.

We touched on the comments from Pimco late yesterday, but, given the angst surrounding the residential real estate market, thought we’d go for a deeper look this morning.

Reblogged from Michael Babad | The Globe and Mail

“There has been much media attention on Canada’s housing market lately, with some forecasters calling for ‘the bubble’ to pop in 2014,” Pimco says in latest look at Canada.

“While we think the housing market in Canada is overvalued and due for a correction, the correction will likely happen over several years.”

That said, Pimco’s Ed Devlin, the chief of Canadian portfolio management, believes the decline will begin this  year, though he stresses that a correction is not “a bubble bursting in a disorderly manner.”

Several Canadian economists are also calling for a slowdown, rather than a meltdown.

One of three things would have to happen this year to spark a full-on bust, Pimco’s Ed Devlin says:

1. Interest rates would have to spike sharply, which simply isn’t in the cards. The Bank of Canada isn’t anywhere near a rate hike, and in fact has left the door open to a cut from its current policy rate of 1 per cent. “With real growth of about 2 per cent and a relatively subdued inflation forecast, we see no reason for interest rates to substantially rise in 2014.”

2. Unemployment would have to spike. While the jobless rate isn’t projected to decline – rather, it’s expected to hover around the 7-per-cent mark – it’s not forecast to surge either. “Given this macroeconomic environment, it is also unlikely that the unemployment rate will spike to 8 per cent to 10 per cent (which, we estimate, would be needed to cause a disorderly housing correction).”

3. Mortgage credit would have to be “disrupted.” Also not in the cards. “The Canadian banking system continues to provide sufficient mortgage credit to keep the housing market financed.”

Over all, Pimco sees “modestly” higher mortgage rates, tighter mortgage rules, an ongoing “modest” economic rebound, and still-stretched property values.

All of which means home prices will erode this year, and sales will slip, but that’s about as far as it goes.

Read the original article

Read the PIMCO post

Forget house prices and debt, deflation is Canada’s new bogeyman

“After spending two years watching house prices and household debt measures, investors may spend 2014 focused on inflation reports when making bets on the Bank of Canada’s interest rate outlook.”

cashregister

Reblogged from Bloomberg News

The slow pace of consumer price inflation surprised policy makers in 2013, reviving rate-cut bets and prompting the central bank to abandon its bias to raise borrowing costs. Bank of Canada Governor Stephen Poloz said in an interview last month he can’t explain the weak inflation, which is now almost a percentage point below where the bank forecast it would be at the start of last year.

“A lot of people are starting to position for CPI releases,” Mazen Issa, senior macro strategist at Toronto-Dominion Bank’s TD Securities unit in Toronto, said in a telephone interview. “Inflation is going to be one of the major stories for Canada” this year.

Statistics Canada reported Dec. 20 that annual inflation in November was 0.9%, unexpectedly staying below the central bank’s 1% to 3% target band. The difference between Canadian and U.S. two-year yields narrowed by 4.22 basis points, the largest one-day reaction to Canadian CPI data since September 2011, when inflation was above the target band.

Inflation below 1% gives the Bank of Canada “plenty of reason to be dovish,” said Camilla Sutton, chief currency strategist at Bank of Nova Scotia in Toronto. The Dec. 20 report was “a disappointment because the market thought we would go back into to that 1 to 3%” target band.

Read More … 582 more words

Does your home office qualify for deductions against household bills?

If you were self-employed this past year, now is a good time to start gathering your paperwork to file your 2013 tax return. And remember some of the expenses you incur for your home may be deductible from business income if you have an office or other work space there.

tax-time

Reblogged from KPMG Enterprise

Your home office expenses may be deductible in two situations: First, if your home is your principal place of business — that is, you do not have an office elsewhere. Second, if you have an office outside your home, your home office must be used exclusively for your business, and must be used on a “regular and continuous basis” for meeting clients, customers or patients.

It’s not always clear how many meetings you need to have in your home office to meet the “regular and continuous” requirement, but it will depend on the nature of your business and your situation.

The Canada Revenue Agency provides an example of a doctor who has offices both outside and inside his home. He uses his home office to meet one or two patients a week. The CRA says this work space would not be considered used on a regular and continuous basis for meeting patients. However, a work space used to meet an average of five patients a day for five days each week clearly meets the requirements. This example clearly shows there is a large grey area in what the CRA considers to be regular and continuous.

If you have offices inside and outside your home and you want to deduct home office expenses, be prepared with enough information to support your claim that you use your home office on a regular and continuous basis for your business.

If your home office meets the requirements, the portion of your house expenses that can be claimed as business expenses will normally be based on the fraction of your home used. You can usually exclude common areas such as hallways, kitchen and washrooms when making the calculation.

For example, if your home office is a 200 square foot room (or 18.5 square metres) and the total area of living space in your house (bedrooms, living room, dining room and the office) is 2,000 square feet (186 square metres). As long as your home office qualifies, you can claim 10% of your eligible costs.

The expenses you can claim include rent, if you are a tenant, mortgage interest if you own your home (but not the principal portion of blended mortgage payments), property taxes and home insurance. You can also claim expenses for utilities such as electricity, heat, water and gas.

But there are also some less obvious expenses that can be claimed, such as garden service, driveway snowplowing and minor repairs. You will need to keep receipts on file; do not simply estimate your expenses.

You can claim capital cost allowance (CCA) on the appropriate fraction of your home, but this is often not advisable. If you do, the CRA will take the position  that fraction of your home is not part of your principal residence and it will disallow your claim for the principal residence exemption from capital gains tax for that portion of the home when you sell. Any CCA you claimed can also be “recaptured” into income when you sell your home.

Keep in mind home office expenses can only be claimed against income from your business. As such, you cannot use home office expenses to produce an overall business loss that is applied against other income. However, losses disallowed because of this rule can be carried forward and used against income generated from the same business in another year.

Of course, supplies that relate exclusively to your home office are fully deductible and not subject to these restrictions. Those expenses would normally include a separate business phone and Internet connection, printer paper, printer or photocopier toner cartridges, computer repairs (assuming your computer is used only for your business), and so on.

Since many of the requirements for deducting home office expenses depend on your individual circumstances, it’s important to carefully document your claims so you can back them up if the CRA asks you to.

Read Original Article

Getting rid of risky property play will improve retirement

Situation: Couple has retirement portfolio with high risk investments that could fizzle
Solution: Get out of speculative investments, then invest for reliable income

fp1116_familyfinance_c_ab

Reblogged from Andrew Allentuck

In Alberta, a couple we’ll call Frank, who is 57, and Ella, who is 51, emigrated to Canada decades ago to find work and build secure lives.

Starting with nothing but their will to work, Frank in a municipal civil service job, Ella in health care, they have built up about $705,000 of net worth, most of it in their $490,000 home. They worry, however, that their income from about $184,000 of financial assets plus two civil service pensions at 65 plus CPP and OAS may not be enough to sustain their retirement. The irony is that their Canadian assets would make them very wealthy in their countries of birth. In Canada, though, they worry that their liabilities could sink their retirement.

It is a legitimate concern, for they have a $70,000 line of credit to pay off at $1,200 a month, about 18% of their $6,500 combined monthly take-home pay. The line of credit was taken out to buy into a speculative land development in which they are co-owners of undivided land rather than sole owners of a defined parcel. It is a risky investment that produces no current income. Moreover, they have $37,500 in a mortgage fund in their RRSPs which yields 10% a year. That yield implies the mortgages carry more risk than banks and credit unions accept.

Family Finance asked Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C., to work with Frank and Ella, who still have a daughter at home attending university.

“The good thing about the couple’s financial affairs is their dedication to their work and their home,” he says. “The not so good thing,” he notes, “is that they appear to have made investments in land and mutual funds on the basis of trust in advice.”

The interest on the loan to buy the property is not tax deductible, though it can be added to the adjusted cost base of the property, eventually reducing the taxable capital gain. Best bet: sell the land to pay off the line of credit and capture a capital gain which the couple believes to be about $30,000 or $20,000 after costs. We’ll assume they just get their money back, then invest in low fee mutual or exchange traded funds focused on producing dividends.

Read More … 596 more words

Five things to do if you are over-extended on your mortgage

five-things

Reblogged from Financial Post, Andrew Allentuck

Mortgage default may be rare in this country, but nearly 9% of indebted households need 40% or more of their gross income to pay their debt service charges, says the Bank of Canada Financial System Review.

If you can see problems coming, then you can take action to avoid foreclosure, which happens when lenders run out of other alternatives and borrowers can do no more to pay their debts. Here are five options to consider when you are being crushed by mortgage payments:

1. Extend amortization: If the mortgage has been paid down to 10 or 15 years, then extending it to 20 to 25 years or even to 30 years will decrease payments. In a lot of cases this will work, says Elena Jara, director of education for Credit Canada Solutions, a Toronto-based non-profit organization which offers free credit counselling.

2. Seek better terms: You can go for lower interest rates with the same or a different lender but with a potential penalty, says Bill Evans, a mortgage broker with Mortgage Architects in Winnipeg.“If you are having trouble with payments with one lender, another may not want to take you on. But if you can present a case for a new income, you can go to a so-called specialty lender such as Home Trust or Optimum Trust for a fresh look at your problem and potential solutions,” Evans says. “If you just want to alleviate the problem, timing is crucial.”

3. Renew at a floating rate: There is more risk but lower interest cost in floating rate mortgages. If you are on a fixed rate mortgage with relatively high rates and want to go to a lower floating rate, perhaps by taking the mortgage to another lender, then there may be relief when it is time for loan renewal. The present lender may add a penalty, but over time, floating rates and the often attractive rate on a one-year closed loan can offer relief, Mr. Evans says.

4. Sell it and rent: In markets with high home prices as a result of speculative building, absentee owners will often rent at relatively low cost. That makes for good deals for renters.

5. Discuss a consumer proposal
The homeowner can avoid outright bankruptcy and foreclosure of the home by talking to creditors, suggests Bruce Caplan, trustee in bankruptcy for BDO Canada Ltd. in Winnipeg. “The homeowner can make a consumer proposal in which a settlement plan is devised for the creditors. Secured creditors such as the banks or private mortgage lenders can work out new terms such as reduced payments or a payment bridge for a period of time with the homeowner,” he suggests.

Read Original and More…