Mortgage Assumptions -- Real Estate Law

Warning on Conventional Mortgage Assumptions in Real Estate Transactions in Alberta

It used to be the case in Alberta that mortgage companies had little to say when new purchasers wished to finance their transactions by assuming the seller’s conventional mortgage.[i] This is no longer the case.

Mortgage companies are now almost invariably including ‘due on sale’ clauses in all residential mortgages.

The clause means that if a mortgage is to be assumed, the seller must first notify the mortgage company with information about the purchaser (no doubt information about the purchaser’s credit worthiness), and obtain written approval from them. If approval is not obtained, the mortgage company can demand immediate payment in full.

We recommend the following steps be taken writing up a real estate contract involving assuming a seller’s mortgage;

1. Ensure that if financing is planned to occur by a mortgage assumption, the seller must first notify the mortgage company of this intention, and the purchaser will have to provide information to that company.

2. Include as a condition to the transaction that the mortgage company allows the assumption by the purchaser. The condition should also require the seller and purchaser to contact the mortgage company in a timely fashion, and provide whatever information the mortgage company reasonably requires.

A further difficulty may be encountered where for example parents go on the title with a child to help out the child to obtain new financing where the child would not otherwise qualify. In this situation often the parents believe that shortly after the close of the purchase, they can transfer the title to their child with that child in effect assuming the mortgage for him or herself. In this situation the ‘due on sale’ clause may very well result in the mortgage company refusing the ‘assumption’ and requiring payment in full of the mortgage.

We recommend that parents and children be made aware that in the above situation the parents will need to stay on title for the longer term, until their child can qualify without them.

We hope this information is useful in structuring real estate sales and purchases. 

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[i] Different considerations apply for CMHC insured mortgages

Do I Need a Will? -- Wills and Estate Law

Do I really need a will?

Everyone needs a will, even single people with no children.   The rare exception may be single persons with no children and no assets, but most people will likely acquire some assets or have children in his or her lifetime.  Thus, even if one does not have any assets or children now then one should still have a will if they are planning on acquiring assets or having children in the future.

If you do not have a will then your estate will go “intestate”.  This means that someone will need to come forward and bring an application at the courts to have your assets administered in accordance with inflexible rules as to how assets should be divided.  Also, the government will decide who will raise your children.  It is a very costly process and takes much longer to administer. 

It is possible to draft your own will or use a kit acquired from a stationary store, but in my experience these very often create problems.  There are rules that must be followed.  There are rules that govern the validity of a will and there are rules about where your money should go.  For example, have you ever heard of the “Rule Against Perpetuities”?  It states that a gift in a will must vest within a life in being and 21 years.  If the rule is not followed the gift or the will could fail. 

The point is that people are not completely free to do whatever they want with their money on death.  There is a priority list of who must be paid and relatives who must be cared for upon death.  If any one of these rules are not followed then a will could be found to be invalid or go “partially intestate” (partially invalid).  Also, there are tax implications to just about everything that is done in a will (or not done!).  

Most lawyers do no charge a lot of money to prepare a will.  The cost to correct errors and omissions on self-drafted wills can cost many thousands of dollars and pit family member against family member.  Poor drafting can lead to an estate paying more tax than necessary.    Thus, for a small price to have a will drafted, you can possibly save many thousands in litigation costs, tax bills and family strife.

Finally, doing up a professional will allow the following goals to be accomplished in a manner that can be relied upon:

-          Pick the person(s) who will administer your estate and specify what compensation, if any, he or she should receive.

-          Pick a guardian for your children.

-          Make gifts to different people, or in different proportions than provided for by the Wills and Succession Act which says that everything goes to your spouse (or adult interdependent partner) if you don’t have children, and a combination of your spouse (or adult interdependent partner) if you do. This can be essential for blended families (second marriages).

-          Prevent people from having a share in your estate that might otherwise be entitled to a share.

-          Delay past age 18 when someone will receive a part of your estate.

-          Create a trust for someone, including a discretionary trust for disabled family members.

-          Give someone a life estate in something.

-          Chose alternate beneficiaries of gifts, trusts, or the residue of your estate.

-          Create mirror wills where you and your spouse decide how to plan your estates together.

-          Give to charities.

Citizen's Arrest -- Criminal Law

An Act called the “Citizen’s Arrest and Self-defence Act” has received Royal Assent and will come into force on proclamation. 

In 2009, a shop owner chased down a repeat shoplifter, tied him up and held him in the back of a van until the police were able to attend.  The shopowner was charged with forcible confinement and assault and while he was found not guilty, the public outcry prompted political action.

Citizen’s Arrest

Under the current citizen’s arrest provision, there are three circumstances when a citizen may make an arrest:

 1. the citizen finds someone committing an indictable offence;

 2. the citizen believes that someone has committed a criminal offence and is escaping from and freshly pursued by a police officer; or

3. the citizen is a property owner or in lawful possession of property or someone authorized by the owner or person in lawful possession and finds someone committing a criminal offence in relation to that property.

The new provision only affects the third circumstance by adding that a citizen may arrest someone within a reasonable time after the offence is committed if the citizen reasonably believe that it is not feasible for a police officer to make the arrest.  As a result, a citizen may arrest someone even if they do not “catch them in the act”.  

This new provision addresses the issue of a shopowner who makes an arrest after pursuing a shoplifter. However, arresting someone who is not caught in the act raises a new issue because the citizen may not correctly identify the suspect and inadvertently arrest an innocent person. 

 Self-defence

Self-defence can be divided into two main areas: defence of self or others and defence of property.

The Criminal Code currently has nine provisions that deal with self defence and they are notoriously complex and difficult to understand.  The Act will repeal all of the previous sections and replace them with one provision for each of the two areas of self-defence. 

In regard to defence of self or others, the new provision states that a person is not guilty of an offence if:

1. that person reasonably believes that force or a threat of force is being used against him or another person;

2. the act is done for the purpose of defending himself or another person from the force or threat of force; and

3. the act is reasonable in the circumstances.

The new provision also sets out factors that a court must consider in determining if a person has a defence.

In regard to defence of property, a person who commits an act in self-defence must be someone who is in peacable possession of property or someone acting under the authority of or lawfully assisting a person who is in peacable possession of property.  The person against whom the act is committed must be about to enter, or entering the property, about to take or has just taken property, or is about to damage or destroy property.

In all cases, the act must have been committed for the purpose of preventing someone from entering the property, taking property or causing damage to property, or to remove that person from the property.

The current legislation provides that the person who commits an act in self-defence must use “no more force than necessary” in all circumstances except in the case of protecting a dwelling house from a break and enter when a homeowner may use “as much force as necessary”.  This language will be changed to say that the act must be “reasonable in the circumstances”.

The change in language is unlikely to affect the position of the courts in Canada that deadly force is not reasonable in defence of property alone. 

When is a Release effective?  A decision out of Ontario has received a lot of press this week: Rubin v. Home Depot Canada Inc., but it does not seem to change the law much in my opinion.  Having said that a clarification and/or restatement of the law is never a bad thing.  Also, it is good when such cases get press because both employers and employees get informed.

A long term employee nearing retirement age was fired without warning.  Home Depot offered him more than the statutory minimum but not nearly what he would get for comm on law damages for wrongful dismissal.  He was asked to sign the release right away.  Shortly after signing, the employee realised he made a big mistake.
Anytime that someone accepts money for the settlement of a legal dispute they will be asked to sign a release.  This is standard operating procedure.  In employment law, however, releases often get challenged.  The reason is because terminations tend to be very emotionally charged experiences.  The decision to terminate can be a long time in the making, but the employees are not usually part of that process .  Employees are often surprised and shocked when they find out.  Since their employment affects their ability to pay their rent, buy food and live their life, it can be a traumatic experience.  If an employee is asked to sign a release at the same time as being terminated then they may not be thinking clearly.  The release can be challenged.

Employers can be a bit too quick to ask for a release from their employees.  Perhaps they want the matter all tied up quickly with no loose ends.  Perhaps they are also ill informed about the law or stressed themselves about the termination process.  Many small employers do not have human resource departments or a lawyer on speed dial.  They find firing an employee very stressful (although not as stressful as the one being fired).  I am not sure this would apply to Home Depot, however.  Large corporations with professional human resource advisers and their own lawyers should really know better. 

The Court looked at the following factors to determine if the release was unconscionable:

1. what is grossly unfair
2. was there legal advice
3. overwhelming imbalance of bargaining power
4. other party knowingly taking advantage of this vulnerability.

The Court overturned the release and awarded a generous 12 months severance package, in addition to the 28 weeks already paid by the employer.

New Mortgage Rules -- Real Estate Law

New Mortgage Rules were announced this week in Canada.  The new rule is that mortgages that are insured through CMHC must have an amortization of 25 years or less.  What does it mean to you?  If you have an existing mortgage with an amortizaton of 30 or 35 years then you are not likely affected.  You can renew your existing mortgage under the amortization previously agreed to, but if you refinance (increase the amount of your mortgage at a later date) you will need to come under the new rules.  If you have already signed your real estate contract, you are likely fine. The government as of now seems to be implementing this to deals signed after the announcement.  If you are putting down more than 20% then your mortgage does not require CMHC insurance, therefore, the new rules do not apply to you.  This will only affect new mortgages insured through CMHC.

The real estate Lawyers at Courtney Aarbo can help you with these and any other real estate law questions.  Please do not hesitate to call us at 403-571-5120.

Employment Law questions: can post-termination conduct constitute just cause?  To answer this question one must distinguish between after-acquired knowledge and post-termination conduct.  After acquired knowledge of misconduct that exists at the time of dismissal may be relied upon in support of summary dismissal.  Post-termination conduct can only be relied upon in very limited circumstances.

This principle was recently confirmed in Gillespie v. 1200333 Alberta Ltd, 2012 ABQB 105.

In this case the employee was terminated for personality conflicts at work.  It was later discovered that she breached the non-dislcosure agreement she signed.  The Court found that the post-termination breach of the agreement did not constitute grounds to support just cause.  Nevertheless, it also stated that the non-disclsoure agreement still had meaning.  It drew a distinction between the employment contract and non-disclosure agreement.  By doing so, the court was saying that the employer could not use the post-termination breach of the non-disclosure to justify just cause, but it be used to form a separate action on the breach of that agreement.

In R. v. Tse, 2012 SCC 16, the Supreme Court of Canada considered whether a wiretap provision of the Criminal Code was constitutional.  The provision states that a peace officer can intercept a private communication without getting authorization from a judge in situations that are urgent.  It was argued that this provision violates the right of Canadians to be free from unreasonable search or seizure under the Charter of Rights and Freedoms.

In this case, the police chose to intercept telephone calls without obtaining permission from a judge after they were contacted by a woman whose parents had been missing for three days.  She told them that she had received a call from her father asking for money and believed that her parents had been kidnapped.  The police obtained valuable information from the wiretap before they obtained an authorization from a judge.

The Court found that the provision does in fact strike a reasonable balance between an individual’s right and society’s interest in preventing serious harm.  However, the provision does not include any means to hold the police accountable after the interceptions have been made.  The police are not required to provide notice to persons whose communications are intercepted.  In addition, they do not need to report to Parliament on the use of the provision like they are required to do when they receive authorization from a judge. For these reasons, the provision was found to be unconstitutional.   Parliament has been given twelve months to redraft the provision to make it constitutionally compliant.