Latent Defects -- Real Estate Law

When are Latent Defects actionable?

I recently argued an appeal in the area of latent defects in real estate transactions.  This is one complicated area of the law.  This posting, as with all posts, should be verified with a lawyer familiar with this area of law.  Also, this posting deals mostly with commercial real estate transactions, as opposed to residential.

The Alberta Court of Appeal has drawn a clear distinction between “concealment” and “non-disclosure”.  Concealment requires a positive step to hide a defect in land coupled with an intention to withhold knowledge of the defect from the purchaser.  Non-disclosure or mere silence is just a failure to volunteer information that might be of interest to the other side.  Absent a duty to disclose, non-disclosure generally has no legal consequences, except in rare cases.  The non-disclosure of a defect in the premises is generally not actionable unless there is a covenant in the contract that the defect does not exist.  Non-disclosure is not the equivalent of concealment: Motkoski Holdings Ltd.  v. Yellowhead (County), 2010 ABCA 72 at paragraphs 59 – 60, 63-64

The test in Alberta seems to be:

1. Is the defect complained of a latent defect?
2. Did the vendor have knowledge or was it reckless as to the existence of latent defects?  If so, was there active concealment of the defect OR was there non-disclosure and a covenant in the contract that the defect does not exist OR did the vendor make a misrepresentation as to the latent defects and did the buyer reply upon the misrepresentation?
3. Did the defects make it unfit for habitation or take away from the purchaser’s use, occupation or enjoyment of the premises?

The Fine Print -- Contract Law

Great Article on reading the fine print:

http://business.financialpost.com/2012/09/17/why-you-should-read-the-fine-print/

It is important for people and businesses to read all of the contracts that they sign.  If you do not understand what you are reading then speak to a lawyer.  The contract lawyers at Courtney Aarbo regularly assist small and medium sized businesses with contracts.

A few dollars at the front end of a negotiation can save a lot of money later.

Child's Wishes in Residency -- Family Law Information

When do children get to decide which Parent they want to live with?

The theme of recent posts is the misunderstandings that people have in the area of family law that have acquired some general acceptance in society.  Family law and divorce lawyers deal with these misconceptions all the time.

One misconception is the age at which children get to decide which parent they want to live with in a separation.  Many people believe that it is 12 years old.  This is not necessarily true.

The age of 12 is an important date, but 12 year old children do not get to decide where to live.  Family law lawyers are told by child psychologists that at about the age of 12 children can acquire enough cognitive development to be asked the question.  In other words, their opinion becomes relevant, but it will be not determinative at 12 or even 13.  Also, children develop at different rates so some 12 years may not have formed the cognitive development to even be asked the question. 

One always has to question, regardless of age, whether it is wise to be involving children in a parenting dispute at all.  Children cannot and should run a household.  They cannot and should not make parenting decisions.  They are children, not adults, and these are adult issues.  It is just that simple.

Before the age of 12 it is generally understood that children's opinions are not relevant.  They are too young to have any sort of say.  In fact, in my opinion, it is unfair and not in the best interests of the children to even ask.  It may do more harm than good.  Parents may think that they are doing a good thing by getting their child involved, but the psychologists I have talked to say it can actually be quite harmful.  Children will often tell both parents the exact same thing, that they want to live with them.  At that age saying that is not a contradictory statement: they do want to live with both parents. 

I attended a conference on this topic a couple years back and psychologists tend to agree that young children tend to make statements that adults may view as contradictory, but to the child they are not.  Children will often tell their parents what they want to hear.  They love the their parents and want to please them in a very stressful time such as separation.  Also children tend to sympathize with the parent in which care they are at that particular moment time.  If they feel a parent is stressed and wanting them to answer is a specific way then they will answer a question the way they feel the parent wants them to answer.  They are telling the truth, but they may be saying the same thing to both parents.  This will create a great deal of stress for young children and it is not in their best interests to be brought into this situation.  If parents then use this information to justify denying access or change access or bring court applications then this can cause serious distress to a child.

Alberta has a great program for spearating parents called the "Parenting After Separation Course".  It is free and mandatory in many circusmtances if the parents are in the court system.  It teaches important lessons for parents. 

Matrimonial Property Valuation -- Family Law Information

When to Value Matrimonial Property for the Purposes of Division

One thing I like to blog about are those questions you get asked all the time by clients or the misunderstandings that people have about the law that seem to have acquired "general acceptance" in society.  The problem is that these understandings are sometimes wrong.  The great thing about blogging is that you can address the same question to many people at the same time.

One issue that I have noticed a misunderstanding about is the time at which divorce lawyers value matrimonial property for the purposes of division in Alberta.  This is a family law problem that our lawyers help clients with all the time. 

This answer only applies to married couples, not common law couples separating.  Very different principles can apply to common law couples because their ownership principles are often decided under trust law, usually constructive or resulting trusts.  The reason for the difference is the Matrimonial Property Act of Alberta.  This act only applies to persons who are legally married. 

Section7(3)(a) of the Matrimonial Property Act essentially sets the date of valuation as the "date of trial".  What this means practically speaking is that the assets will be valued at the time of consideration or the last possible point in time.  Most matrimonial property disputes never make it to trial.  Trials are far too expensive for the average person, so they end up settling through some form of negotiation or mediation.  It is important to understand, however, that the assets will be valued at about the time of the settlement or the settlement meeting.  That is the last point in time where the issue is relevant.

Many people assume that the value of assets to be used for division will be set at the time of separation.  They feel that the day they breakup somehow sets the value of the asset. This is not true, unless both parties agree.  In fact, it is not even the date of divorce that is relevant.  Some people get divorced before they settle all their property disputes and they think that "this" must be the date, but no, it is the the last possible date for consideration.

The rationale for this is understandable.  The breaking up does not change the fact that the asset is matrimonial property.  It remains matrimonial property until is is divided or sold and the proceeds divided.  Until then, any market fluctuation in the value of the asset will affect division.  Why should either person be subject to market fluctuations and not the other?  The basic principle of property division under the Matrimonial Property Act is simple: subject to some exemptions, there shall be an equal division of assets acquired during marriage.  It does not matter in whose name the asset may be or in whose is in possession of the asset may be after separation.  There is a continued equalization of the asset until division.  In sum, both parties take the risk of market changes until the assets are finally decided.

It is section 7(4) of the Matrimonial Property Act that states that property acquired during marriage should be divided equally.  This is a principle that is followed quite strictly by Alberta Courts.  Section 8 of the Act does give some conditions to take into consideration when dividing equally.  Section 8(f) of the Act states that the Court can take into consideration the fact that a party may have acquired an asset after separation when deciding the division of property.  In my observation, however, it is almost impossible to invoke this provision to have the asset excluded from consideration because any assets acquired after separation generally would have required the use of matrimonial assets to purchase.  In other words, if you take an asset that was considered matrimonial property and sell it after separation to buy another asset then you are using matrimonial property to acquire the asset, so the Court will consider that asset to be matrimonial property as well.   In my observation section 8 of the Act does not provide reasons for an unequal division, but considerations to ensure an equal division.  For example, the Court will not simply divide up the face value of the asset, it will take into consideration any tax consequences or the like to ensure each party is getting a truly equal division of assets.  The purpose of section 8, in my opinion, is not to provide reason for an unequal division, but to ensure a equal division.  Unequal divisions are rare and one has to loo elsewhere for those reasons.

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.