Wednesday, August 8, 2012

Can You Witness a Document if You’re not there ?

By Brian Madigan LL.B.

(Ontario Real Estate Source)

A problem frequently arises in real estate transactions when people say they witness signatures, but they don't.

In Ontario, there are only three legal documents which require witnesses:
1)     Domestic Agreements,
2)     Powers of Attorney, and
3)     Wills.
Other documents are still valid without a “witness”, but on the basis of “best practices”, there should be a witness to the signature. That’s the case with real estate transactions. Any enforceable agreement to convey real property must be in writing. That is set out in the Statute of Frauds. Domestic agreements and powers of attorney can in fact serve as companion documents, even without a witness. A holograph Will, if completed properly can

Here's a quick scenario. Bob wants to sell his house, so he hires Jack, a realtor. An offer is faxed into Jack's office. Bob is on vacation out of the country. Jack e-mails Bob, and Bob gives him the fax number where he is staying. Jack faxes it over, and discusses the offer with Bob by phone. Then, Bob faxes it back to Jack's office.

It's not witnessed! So, Jack decides to witness the document, and signs his own name just above the line where it says "witness".

What's wrong with this scenario?

Jack said he witnessed the document but he didn't. That's the problem!

Now, you can appreciate that Jack's involvement was helpful. The correct and proper procedure would be to properly document Jack's involvement.

So, what should Jack have done?

Jack should "authenticate" the document. He really can't witness it, because he wasn't there. He should strike out the word "witnessed" and insert ‘authenticated not witnessed".

What's the difference? A witness needs to be personally present, and see the person sign the document in front of them. They become a compellable witness in any legal proceedings. They would be expected to comment on several aspects concerning the signing of the document. They should be able to say that the person appeared to have capacity to sign. They knew they were signing a legal document. The person did not appear to be under the influence of alcohol, drugs, medication or fatigue. In all respects, they appeared to be knowledgeable and execute the document without duress or coercion from any other party.

Authentication is somewhat different. The person was not personally present, but can state with a reasonable degree of certainty that the signature is that of a specific individual. They know the signature. They have the signature on file. The signature compares favourably with the signature on file, or they "recognize" the signature. Banks will undertake this task regularly.

You will appreciate that just because the signature looks similar that there is no real guarantee. It's just a best guess, but it's a best guess by someone who has certain business records on file, or a certain professional (or otherwise competent) recognition of the signature.

There is obviously one further step. The signature could be "guaranteed". This means that the authenticating party is absolutely certain, and offers a contractual invitation to a third party to rely upon the truth of the statement.

In the case of the Bank manager: "Authenticate" could lead to a tort liability, a "Guarantee" could lead to a contractual liability.

In Jack's circumstances, he could raise his involvement and "certification" to the next level. He could state "authenticated and guaranteed". That would be as close to actually witnessing as possible. But, you will appreciate that it still falls slightly short. He wasn't physically present, so he truly cannot say anything about intoxification or other factors that might have been an impediment to Bob's signing of the document.

In real life, all too often someone in Jack's position will simply sign above the witness line. That's risky!

 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, August 7, 2012

Be Careful Using Joint Tenancy ~ It's not Creditor Proof


joint interest
Ontario Real Estate Source

By Brian Madigan LL.B.

We looked at a case where a joint interest in a matrimonial home effectively thwarted bankruptcy.  But, that was a peculiar case. In Re: Cameron, it was the bank which placed the deceased’s estate in bankruptcy, months after he had passed away. That was too late!

Had the bankruptcy taken place during the lifetime of the deceased joint tenant, then the one-half interest in the property would have been available to satisfy the debts owed to creditors.

This is due to the fact that the bankrupt’s assets are conveyed to the Trustee. This conveyance severs the joint tenancy and the property is now held as tenants-in-common. This statutory severance allows the creditors to seize and liquidate the bankrupt’s interest.

As you know, for joint tenancy to continue, four unities must be present:

1)     Unity of Interest
2)     Unity of Possession
3)     Unity of Time
4)     Unity of Title

However, if there is really no expectation of bankruptcy, and the widow acquires the title by survivorship on death, then the deceased no longer holds title, and it’s too late for the bank to take proceedings.

Here’s an excerpt from the reasons for Judgment by Judge Mesbur:

·        “When a joint tenant becomes bankrupt and the joint tenancy is severed, the bankrupt’s half interest in the property as a tenant in common then vests in the Trustee, and is available for the creditors.  In a case such as this, the joint tenancy is never severed, there is nothing to vest in the Trustee, and nothing is available from the property for the creditors.

·        When one joint tenant dies, its interest in the property is extinguished, and the rights of the remaining joint tenant or tenants are correspondingly enlarged.  The enlarged interest immediately vests in the remaining joint tenant or tenants.

·        The characteristic of an estate in joint tenancy is that the joint tenants have the same interests ... and upon the death of one of the joint tenants the entire estate remains in the survivor in whom the whole estate immediately vests.”

In Re: Cameron having property registered in joint tenancy actually worked quite favourably.

But, you have to remember, that you have to be “dead” to take advantage of the opportunity.

For someone who is concerned about their creditors, joint tenancy does not afford protection during their lifetimes, only after death. So, this is not a good estate plan.
Take the reasonable precaution to ensure that property is held in the name of the spouse who does not have an exposure to creditors. That step works well during one’s lifetime and afterwards as well.

It is also noteworthy to remember that the joint interest is available to execution creditors. Those who have judgments may obtain an execution. It is not simply a remedy available in bankruptcy.

Be sure to obtain legal advice from a lawyer or solicitor practicing real estate law or estate law before making a determination with respect to title.

See the decision of Judge R. Mesbur in the Cameron Estate ats. Bank of Nova Scotia (31 October 2011, Ontario Superior Court).

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.

Friday, August 3, 2012

Which way is the Toronto Real Estate Market Moving?

Toronto Market Trends

Flat Trend
Ontario Real Estate Source

By Brian Madigan LL.B.

Actually, that’s an interesting question. Let’s first have a look at the report just published by the Toronto Real Estate Board (TREB):

GTA Home Prices Up in July

TORONTO, August 3, 2012Greater Toronto REALTORS® reported 7,570 sales in July 2012, representing a decline of 1.5 per cent compared to 7,683 sales reported in July 2011. The decline was most pronounced in the condominium apartment segment in the City of Toronto. Total sales in the rest of the Greater Toronto Area (GTA) were up compared to the same period last year.

“Very strong annual sales growth in the first half of 2012 and an earlier peak in sales this spring compared to 2011 help explain more moderate sales this summer. New mortgage lending guidelines and the additional upfront cost of the City of Toronto land transfer tax also prompted some households to put their buying decision on hold,” said Toronto Real Estate Board (TREB) President Ann Hannah.

The average selling price in July 2012 was $476,947 – up by four per cent compared to July 2011. The MLS® Home Price Index (MLS® HPI)* composite index, which allows for an apples-to-apples comparison of benchmark home prices from one year to the next, was up by 7.1 per cent year-over-year.

“The GTA housing market became better-supplied in recent months. Buyers benefitted from more choice in the market place, resulting in less upward pressure on the average home price in July,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

“The mix of homes sold in July 2012 versus July 2011 also appears to have changed, further influencing the average selling price. This is evidenced by the different annual rates of growth between the overall average price and the MLS HPI®,” continued Mercer.


Well, it certainly seems pretty clear from the headline that the market was up. And, TREB goes on to point out that it compared July 2012 to July 2011. When you do the calculations, that works out to a 7.1% increase, year over year.

But, have a look at the monthly numbers. The average price for a single family home in the GTA was $516,359 in April 2012. In fact, the decline since April has been 7.63%. May, June and July all reflect a steady decline.

We could have used another headline that said: “GTA Home Prices Drop 7.63%”. But, nobody wants to read that.

So, is that something to worry about?

Let’s add a little more perspective to this. Last year the market peaked in May at $485,362 and dropped to $450,694 in August. That was a 7.14% decline over that time period.

This year the market peaked one month earlier. Is this just a cyclical trend or does it reflect something in the underlying economy? Actually, that type of decline is commonplace over the last decade.

Could we have a headline that just read: “GTA Prices Fairly Stable”. We probably could, but that doesn’t seem very exciting, and we would soon be fired from the editor’s desk.

However, let’s have a look at some numbers over the last two years:

April 2011 ~ $476,802                                                                                 
November 2011 ~ $477,573
July 2012 ~ $476,947

That looks fairly stable to me. We roughly have the same price now as we had last Spring.

It’s always interesting to look at the numbers behind the headlines. Which headline did you like?

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.