Who are CLIENTS in Real Estate Transactions?

Clients ~ An Easy to Understand Concept

Ontario Real Estate Source

By Brian Madigan LL.B.

While it may be difficult to understand the “customer” status relationship, no one seems to have difficulty with “clients”.

The concept of a client is simple and straightforward. It is the usual name of the principal in an agency relationship.

Many professionals deal with agency and represent clients, including lawyers, doctors, engineers, architects, barristers, solicitors, notaries public, conveyancers, paralegals, attorneys, accountants, consultants etc.

In just about all cases, the principal is referred to as the “client”. There is one notable exception, and that is doctors, whose principals are known as “patients”.

It is also easy to figure out that the highest duties are owed to the client or patient. You don’t have to know specifically what they are, but just about everyone knows inherently that clients stand in first place. That’s as good as you get. It is very basic and very fundamental.

And, of course, it’s the common law.

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 Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

The Difficult Task of Explaining Customers

Customers ~ Who are they?

Ontario Real Estate Source

By Brian Madigan LL.B.

No one outside the real estate industry seems to know the difference between clients and customers.

In fact, once explained, most seem to think it is absurd, and to say the least a little unfair, and perhaps a “ruse” by the real estate industry.

Recently, I have found myself pointing out the fine distinction between clients and customers, agency and non-agency relationships.

Sophisticated consumers including lawyers, doctors, architects and teachers have found the matter puzzling.

I suppose it won’t be too long before someone takes issue with the entire concept.

For that matter, lawyers, doctors and architects all act as agents, so the matter of agency law is not alien to them. But, many express surprise that real estate professionals, generically known as agents in many jurisdictions may not be “agents” at all.

I have to admit, this is indeed one of the most difficult concepts to explain. Once, I have that one down, I’ll move on to the “trinity”.

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 Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

Toronto Condo Market in 2012

What’s Happening ~ Toronto Condo Market 2012

Ontario Real Estate Source

By Brian Madigan LL.B

Although the world is filled with pessimists and a lot of them see the Toronto condo market going bust, the facts and the figures don’t seem to support that conclusion.

There are two major driving forces behind the most active condo market in the world:

1)     net new immigration, and
2)     low interest rates.

Condo developers are just reacting to the demand. A lot of people are moving into the GTA each year, actually upwards of 100,000. They have to live somewhere!

Affordability is relatively attractive, so they are buying.

The condo lifestyle is becoming more popular. It works for several different groups:

·        New and first-time homebuyers
·        Trade up Buyers
·        Empty nesters
·        Investors
·        Out of town buyers

Each of these different and rather diversified groups will find a developer catering to their needs.

Prices of condos have kept pace with single family homes. Both have increased over the last few years at about 7% per annum. Compare that to the stock market or the return on bonds or bank accounts.

Newspapers often sponsor articles that spell the doom for the condo market but the fact of the matter is that other than a “hunch”, they don’t have any other supporting facts. The real facts seem to suggest otherwise. The Toronto condo market will be hot well into 2012.

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 Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

Financial Resolutions for Individuals

Financial Resolutions for Individuals

Ontario Real Estate Source

By Brian Madigan LL.B.


This is the time of the year for Resolutions.

I received a some resolutions from a friend and colleague, Mr. David Predovich an Investment Advisor with TD Waterhouse at the Mississauga offices. Naturally, these are Financial Resolutions. David can be contacted through TD Waterhouse at:

905-501-8661
david.predovich@td.com

So, here’s the start, and it’s all good basic advice:

“The New Year is a time when we often reflect on the changes we need to make and create resolutions to help guide us. If you are looking for a financial-related goal, perhaps one of your commitments could be to update your estate plan. Here are some components to consider when conducting this review:

Update Your Will — A review of your Will will ensure that it is reflective of your current situation, especially if you have had significant changes in your circumstances. Make sure that you are still comfortable with your choice of estate trustee(s) and that the instructions for the distribution of your assets to the beneficiaries of your Will are reflective of your current wishes.

Don’t forget to let your trustee(s) know where the signed copy of your Will is kept for safekeeping and where they can find the contact information of your lawyer.”

Comment

This article raises five important points.

1) Up-to-date Will

Many people simply sign a Will, and because “contemplating death” is a rather unpleasant task, just leave it. Once it’s done, it’s done. But, that approach can certainly be worse than having no Will at all.

Consider Bob’s case. He was married to Harriet, divorced and has joint custody of his three year old daughter. He has now taken up residence with Marge, who has two children from a prior marriage.

His Will was signed at the time of his divorce, but his situation has changed abruptly and his intentions may not be carried out. If he marries Marge, his Will is revoked and he has no Will at all.

So, as unpleasant as it may be, this IS the time for Bob to head off to the lawyer’s office and up date his Will. Then, when he marries Marge, it will be time for him to go back and sign a new one.

2) Estate Trustee

Bob appointed Harriet as his Estate Trustee. He though that he would be dead, so Harriet would be fine, since he was leaving everything to Harriet in trust for his three year old daughter, Ruby.

Let’s rethink this situation. There is now a clear conflict if Marge is to receive anything. Perhaps Bob has someone who would be more suitable?

3) Distribution Instructions

This is the part that everyone thinks about when they contemplate signing a Will. Does it still make sense?

Now that Bob lives with Marge, should Marge receive something? And, what about her two children, now that they have become partly dependent upon Bob for support?

4) Will Location

There is really not much point to having a Will, if absolutely no one knows where it is. Or, by the time it’s actually found, your estate has been long since administered.

So, tell someone! Tell a few people. Don’t keep this a secret. Mention it to those who have a vested interest in finding it.

5) Lawyer Contact Information      

You should indicate the name of the lawyer who acted for you concerning the preparation of the Will. That lawyer may have retained the original.

Or, perhaps that lawyer knew where you intended to place it.

Do you have a safety deposit box? Is it in your name alone? Should someone else have access?

Assuming that you have no place whatsoever to place this document, it can be filed in safekeeping with the Surrogate Court. This is not a common practice but it can work for some people.

And, don’t forget, there should be copies. The disposition should not really come as a surprise to anyone. The time to offer an explanation if there would be any “hard-feelings” would be now, while you’re still alive. Explain it, and have the participants accept it, rather than be concerned about your decisions for the remainder of their lives. That’s most unfair.

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 Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

The Real Value of Title Insurance

The Real Value of Title Insurance

Ontario Real Estate Source

By Brian Madigan LL.B.

I thought that it might be wise to comment on the value of a title insurance policy.

In this case, Poplawski v. McGrimmon (2009), Anna Poplawski purchased a title insurance policy from Stewart Title. There were serious defects in the property.

The basement flooded and there were septic and well issues, and issues with framing, the roof and the foundation.

Possibly, if full searches had been done, these issue might have been discovered. But, they weren’t. And, that was in part the purpose of the title insurance policy. Save money on the searches and buy title insurance instead.

In this case, Stewart Title paid out the full amount of the title policy, namely $340,000 and initiated the lawsuit for recovery of its losses. It has the right to subrogate, that is, the right to sue in the name of the insured if it pays under the policy.

Here is a brief summary about title insurance made the Master MacLeod in Motions Court:

“Title Insurance

[8]          Title insurance has become increasingly common in Ontario over the past decade or so.

It is now increasingly a standard feature in residential purchases. 

It is marketed as covering both title defects and “off title” searches traditionally completed by lawyers on a real estate purchase.

By purchasing title insurance it may be possible to avoid the cost of a survey or various searches and to in effect “paper over” certain defects. 

I am simplifying of course and the particular coverage in any given case will depend on the wording of the policy in question, the options or endorsements purchased and other factors. 

In any event, this was a Stewart Title “Gold” policy in which both the plaintiff and the lender, First Line Trust, were insured parties. 

Structural problems with the buildings or other improvements on the property are not of course problems with title to the land and the provisions of the policy that are engaged are those that deal with the “off title” searches.

[9]          Title insurance does not cover physical defects in the building as such.

Largely the insurance coverage protects the marketability of the property from defects that would have been revealed by proper searches.

The policy in question does cover “adverse circumstances” that would have been revealed by “a local authority search of the land at the policy date”.

The policy also provides protection from regulatory action such as municipal work orders or demolition orders as a result of defects in the improvements on the property that existed prior to closing. 

It is not necessary to be more precise for present purposes.

The important point is that title insurance is available only indirectly to fund repairs or reconstruction and only under circumstances in which the policy is engaged. 

[10]      Apparently on discovery it was revealed that Stewart Title has advanced the entire face amount of the policy of $340,000.00 to First Line Trust.

Since this is equivalent to the purchase price paid for the property, it would appear this has fully retired the mortgage. 

Even if the house is worthless, the plaintiffs now have the land free and clear of the mortgage debt. 

The claim is for almost double the purchase price and includes consequential damages so the plaintiffs are arguably not made whole by the insurance proceeds. 

More importantly the plaintiffs do not concede that any part of this payment should be a credit against either damages for breach of contract or in tort. 

The important point is that the title insurer has paid out the policy, receipt of those funds has been disclosed, and the insurer is exercising its rights of subrogation.”

Comment

If you ever thought of not having title insurance, this case should convince you otherwise. How would the purchaser be able to sustain such a major loss, let alone finance the lawsuit for recovery of compensation?

In addition, the plaintiff in the lawsuit may be able to recover for other losses that were over and above what was covered under the insurance policy.

And, remember, this policy only cost a few hundred dollars!

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 Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

Professional Management of the Twitter Account

Twitter Account – Professional or Personal?

Ontario Real Estate Source

By Brian Madigan LL.B.

Issues concerning ownership, use, and operation of a Twitter account have arisen in the case of PhoneDog v. Noah Kravitz.

The novel issue is the crossover between personal and professional interests.Kravitz was employed by PhoneDog to blog about competitive mobile phone products. Kravitz tweeted about his blog and about football, food, the arts and other sports. His professional  phone blog became more popular.

When he left PhoneDog, naturally he had to leave his blog behind. But, what about the Twitter account?  There were 17,000 followers!

So, really it should be easy to separate. However, that needs to be determined at the outset.

If the individual is responsible for a company blog then any supporting social media should belong to the company as well. If, none, then agree on that too!

Professional Social Media

• Make this specific. Ensure that the company is the owner.
• Agree that supporting social media belongs to the company too.
• Have the account in the company’s name.
• Have supporting media in the company’s name too.
• Ensure that the access codes, passwords and the like are all made available to the company.

The company’s IT Officer should have all this information.

Ownership of the blogs, Linkedin, Facebook and Twitter accounts should be made quite clear: they are owned by the company.

If the employee or other delegate opens such accounts then they are doing so by and on behalf of the company. In effect, they are performing these tasks "in trust" for the company. The use and operation of the sites are distinguished from their ownership.

There should be a company social media protocol policy.

All employees, delegates, and independent contractors associated with the company should agree to adhere and abide by the terms of this protocol as issued and updated.

Personal Social Media

Personal is, of course, just that “personal”. Family and friends, sometimes extended family, longer term friends and acquaintances, and neighbours etc.

Personal use can be extended to “friendship” on a personal basis with companies for the provision of personal benefits.

However, this is clearly not “business marketing”. So, Facebook is really a “personal friend” site. Linkedin is intended to be more “professional”. Business marketing on Facebook requires the use of a “Fan Page”, but it’s already integral to Linkedin. When it comes to Twitter, and the 140 character limit, the issues and differentiation between personal and professional are most unclear. But, this would not be the case if matters were clearly set out in a contract.

Professional Social Media

Many independent contractors in various businesses, like real estate agents, have websites, blogs, and social media accounts. If they are licenced and supervised by a brokerage, then their brokerage has a vested interest in their marketing venues. They are considered to be advertising and must comply with any advertising guidelines set out by the regulating authority.

In Ontario, that would be the Real Estate Council of Ontario (RECO). However, there should also be advertising guidelines issued by the brokerage and the brand name franchisor concerning the use of trademarks etc.

Compliance is a requirement, but who is going to monitor this issue on a daily basis?

These issues suggest in effect that the individual should indicate which social media sites he may be engaged in, and disclose whether such sites are personal or professional.

Also, there needs to be a fundamental presumption about the engagement, either:

·        They are all professional, unless agreed otherwise, or
·        They are all personal, unless agreed otherwise

It would seem to me that a brokerage would prefer the latter since that would place the onus of disclosure clearly upon the real estate professional.

Once, the brokerage is aware of a “professional” engagement, then the brokerage has the responsibility, duty and obligation to monitor compliance. You will appreciate that there is a cost to the brokerage associated with that fact.

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 Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

Twitter Account Controversy ~ Ownership and Control

 

Who owns the Twitter Account – Employer or Employee?

Ontario Real Estate Source

By Brian Madigan LL.B.

In a recent case, PhoneDog v. Noah Kravitz, the issue of Twitter account ownership will soon arise.

The case is interesting because it presents a novel issue and that is the crossover between personal and professional interests.

This is what happened according to CNN sources:

Kravitz joined PhoneDog and was employed, in part, to blog about competitive products. The site became increasingly more popular as Kravitz began to tweet about his articles and reviews. On his Twitter account he threw in other topics that were not just mobile phone specs and comparisons. He talked about football, food, the arts and other sports. That made his phone blog more popular. Soon he had 17,000 followers on his twitter account. He left the company and initially was allowed to take the Twitter account with him. When he set it up in the first place he used his own personal information for registration.

With 17,000 followers, PhoneDog now wants the Kravitz’s Twitter account, or alternatively to be paid $2.50 for each follower per month for the 8 month period after he left the company.

This case will have some implications for the real estate industry, since most sales staff are employees from the perspective of the Real Estate and Business Brokers Act, 2002, (Ontario), but independent contractors for the purposes of other legislation.

Do they have websites, blogs, Facebook, Linkedin, Twitter, Google Plus and other social media sites? If so, what is the arrangement and the protocol for participation? Is the brokerage responsible for what they say? Can the brokerage be sued for comments made? Obviously, they are personally responsible, but if the brokerage is responsible for supervision, then should the brokerage see and screen the material in advance?

At this stage, it’s probably too early to tell, but the fact of the matter is that each brokerage should set up its own protocol concerning the use of social media in addition to its policies on websites and blogs.

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 Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com