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.