Friday, March 23, 2012

The Use of Seals for Real Estate Deals

History of Signing Documents under Seal

Ontario Real Estate Source

By Brian Madigan LL.B.
A common question that arises in respect to real estate transactions, is the use of the seal.

Here is a little bit of history about the use of the seal in the first place. It did not arise out of contract law, so that is one reason why some people have difficulty understanding its use.

"Why are some contracts “sealed” and others are not?

In order to have a contract, you need to have an “agreement” that the Courts will enforce. Not all statements that are made, result in enforceable promises. Remember, all the promises made at election time!

Sometimes, it is necessary to determine which promises should be enforced. Really, there are basically three types of contracts:

• Those that have consideration (something offered, something given up)
• Those under seal (without consideration)
• Those that have consideration and are under seal (the most common type)

The legal seal is evidence that a promise is intended to be a legally enforceable promise. A promise might otherwise simply be a gift. A promise together with consideration is a legally enforceable contract. That premise arose out of the modern law of contracts. When I say “modern” I mean the last 700 to 800 years.

The concept of documents being executed under “seal” preceded modern contract law. Documents executed under seal were considered to be legally binding and enforceable promises.

Seals were used in
Babylonia in 3200 BC to identify and authenticate the author and the agreement. Seals were commonly used by nations to settle disputes following war. The red wax seal (symbolizing blood) was used by Caesar. The first usage of seals in modern times was the period immediately following the Norman Conquest in 1066. From that time until 1215, seals were all the rage. They were the equivalent of cellphones. Everyone had a seal. This was your identification and served to indicate that you had the legal capacity to enter into a promise that was legally enforceable. It didn’t have to be a contract. You would be taken as a “man of your word” because you had a seal.

The poorer class, of course, didn’t have seals. They would “prick their right thumbs” with a sharp object to draw blood and impress a document with their thumbprints. Later, Courts would recognize this activity as being the equivalent of executing a document under seal.

By 1215, the modern day usage of seals was introduced to
England by the signing of the Magna Charta, often viewed by historians as the first bill of rights, the first constitution and the birth of the common law.

There continues to be a special class of documents executed under seal. A promissory note is enforceable for 6 years, but a promissory note executed under seal is enforceable for 20 years. In essence, the practice grew out of an ancient system of authenticating documents rather than contract law. So, naturally there are some differences with the rules.

The limitation is usually longer. Basically, why get a promissory note that will only last 6 years, when one under seal will last 20? And, don’t forget that a mortgage is a promissory note.

It became commonplace for everyone to want just about everything executed under seal. All important documents were under seal. That was the way Kings and
Queens did business. All deeds were executed under seal. That, of course, is no longer the case, but it was until 1985 in Ontario.

More recently, Courts have begun to erode the special status of documents under seal, by holding many other contracts to this higher standard.

Most standard form legal contracts include the words "signed, sealed and delivered" just above signatory line. You will find that in the standard form agreement of purchase and sale. The black dot is the location for the seal to be affixed. Seals today are small red circular dots with glue on the back. They should be affixed. However, any indication of an intention to execute the document under seal is sufficient. So, if you circle the black dot in ink,  that will work and be just as good.

The custom at the present time is that just about all formal agreements documenting business transactions are executed under seal."

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 RE/MAX West Realty Inc., Brokerage 416-745-2300.

Monday, March 19, 2012

Termination of Utilities Clause where Building Permit Is Required

Termination of Utilities Clause where Building Permit Is Required

Ontario Real Estate Source

By Brian Madigan LL.B.

In Toronto’s hot real estate market some people are looking for lots not buildings. But, there are no lots, just properties in decent locations with old buildings upon them.

So, if you are going to buy one of those properties you will face a problem. You require a demolition permit in order to get going. And, in order to obtain that permit you will have to prove that you have terminated the utilities. If they are still “on”, your application will be premature. Don’t forget that only the registered owner can apply for that permit.

If you would like to get things going, at least so there will be no waiting once the property has been acquired, then you will need a clause like this:

“The parties agree that the buyer shall be entitled to make application to the municipality and to any and all utilities providing service(s) to the property, immediately after the execution of this agreement in the name of and on behalf of the seller, for the termination of all such utility services including hydro, water, gas, sewage, cable TV, telephone etc., and the seller, if required by such utility, shall pay for all such outstanding services to the date of termination, Provided that any termination fees shall be paid by the buyer. The seller will execute any and all such documents as may be required by the municipality and/or the utilities to give effect to this provision.”

Put the above clause in the Offer, and once you have closed you may already have the demolition permit in hand.

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 RE/MAX West Realty Inc., Brokerage 416-745-2300.

Tuesday, March 6, 2012

ORES Real Estate Index for February 2012

ORES Real Estate Index for February 2012

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 29 February 2012, here is the Index representing average prices with the January 31st , December 31st, November 30th, and October 31st  numbers appearing in brackets for comparison:

Real Estate

155.51…..(143.45).....(139.70)…..(148.67)…..(147.97)…..GTA single family 

Other market comparisons 

431.79…..(407.76).....(357.92)…..(408.18)…..(402.57)… (per ounce)
242.47…..(223.98).....(224.82)…..(228.30)…..(211.99)…..oil (per barrel)
TSX index
155.51……(143.45).....(139.70)…..(148.67)…..(147.97)…..ORES sgl fam
114.62…..(114.15).....(114.81)…..(114.72)…..(114.53)…..CPI index
143.86…..(136.43).....(126.32)…..(127.05)…..(130.16)…..NASDAQ index
123.47…..(120.43).....(116.49)…..(114.83)…..(113.97)…..Dow Jones index
115.61…..(111.10).....(106.46)…..(105.56)…..(106.10)…..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 February, the index stood at 155.51. That's a 55.51% increase in 86 months. That means the increase is 0.646% monthly, or it could also be expressed as 7.75% annually.

Performance can always be difficult to interpret but the longer the period, the more accurate the number becomes. There can, of course, be many short term swings.
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 114.62; 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 overall is still the best performer, reaching 431.79, nothing else comes close
· Oil was the most volatile, (it dropped in half over our measurement period), but we are seeing upward momentum this past month
· Real estate was the most stable, with solid predictable returns at about 7.75% annually
· Our own stock market posted reasonable gains, but still falls behind 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. The S&P matches inflation, the Dow is now measurably under the Nasdaq which now exceeds our own TSX


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 2.75% 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 RE/MAX West Realty Inc., Brokerage 416-745-2300

Monday, March 5, 2012

Miississauga By-Law To Protect Mature Trees

trees removal
Mississauga Seeks to Protect its Urban Forest

By Brian Madigan LL.B.

Under discussion by the councillors of the city of Mississauga are new rules for forest management.

Basically, the city wants to tighten the rules to prevent homeowners from chopping down trees on their own properties.

The by-law now, apparently, is viewed as too open, and not restrictive enough.

The proposal to protect mature trees of 38 centimetres in diameter (just less than 15 inches across its width).

However, in order to protect the larger trees, you must prevent the removal of smaller trees. So, the proposal deals with the removal of any tree 30 centimetres in diameter (this is about 11 ¾ inches). A permit for removal would be required. Presently, there is no such requirement.

But, that’s just the beginning, they get even smaller. If you want to remove 5 or more trees, over 15 centimetres in diameter (just under 6 inches wide), then you would require a permit.

The present by-law allows removal of a healthy tree, conditional upon replacement. There is an option, rather than planting a new tree, the homeowner could pay restitution to the City’s replacement tree planting fund in the amount of $410. This would no longer be an option.

The new requirement would be one new tree for every 15 centimetres. This means a 45 cm tree would require the planting of three new trees.

Substantial fines are to be imposed upon those who fail to follow the by-law.


We will have to watch this by-law as it travels through the system. It does however point to the issue of having a landscape plan drawn up professionally before you start planting.

When the trees are all small saplings at the nursery, they all look "cute", but a decade later some are still small saplings and others have grown to over 25 ft. and in another 10 years to 50 ft. In some cases they are just overgrown and much too close to one another. Proper spacing is a fundamental issue.

The other problem is that they may be too close to the house, the garage, the swimming pool or the neighbour’s property, not to mention the underground gas lines, electrical lines, phone lines, cable lines, water pipes, sewer pipes and other below surface obstacles.

Clearly, it is best to be on top of this issue.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in MississaugaToronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.