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THE CANADIAN REAL ESTATE ASSOCIATION’S DUTY OF COOPERATION POLICY – TRANSPARENCY VIA THE MULTIPLE LISTING SERVICE

During their Annual General Meeting in April of 2023, the Canadian Real Estate Association (CREA) voted in favor of adding a policy of a “Duty of Cooperation” to be added to the Realtor Code. This duty of cooperation requires realtors to put residential listings on its Multiple Listing Service (MLS) within three days of publicly marketing a property. The policy will shortly come into force on January 3, 2024.

The CREA defines public marketing as any type of marketing of a listing to the public or to anyone not directly affiliated with the brokers and licensees. Therefore, if a realtor takes any steps to market the property to the public, he or she is automatically required to post the same property on MLS after three days of doing so. Some examples of public marketing then would be flyers, yard signs, and digital marketing or social media.

This policy aims to address marketing tactics that kept the listings off MLS which made it more difficult for other realtors to be notified of available properties. The policy also includes additional disclosure requirements. CREA hopes to increase the opportunities for sellers by ensuring that the information is made available on MLS.

CREA acknowledges that there are different situations for each buyer and seller, and that in some instances privacy must be considered. As such, exclusives are permitted with the caveat that the seller who declines to use the MLS needs to confirm their decision in writing and that they understand the disadvantages of not using MLS.

Source:

https://www.crea.ca/media-hub/news/a-new-duty-of-cooperation-added-to-the-realtor-code/

Amendments to the Prohibition on the Purchase of Residential Property by Non-Canadians Act and the Regulations

It didn’t take long for the government to recognize how this ban essentially discourages new comers to establish their roots in Canada and consider our country their new home.  Amendments have been introduced on March 27, 2023.  Noting the reason for the amendments, Hon. Ahmed Hussen, Minister of Housing and Diversity and Inclusion, said: “These amendments strike the balance in ensuring that housing is used to house those living in Canada, rather than a speculative investment by foreign investors.”

There are four notable amendments effective March 27, 2023, namely:

Enable work permit holders to purchase a home to live in while working in Canada

This is the most beneficial among all the amendments so far.  This amendment will allow who hold work permit or authorised to work in Canada under the Immigration and Refugee Protection Regulations to purchase a residential property.  If you hold a work permit that is valid for 183 days or more remaining on their work permit or work authorization, you are eligible to purchase one residential property.  The requirement on tax filing and previous work experience in Canada are repealed.

The prohibition no longer applies to vacant lands

This repeals section 3(2) of the Act which prohibits the purchase of vacant land zoned for residential use or mixed-used  by non-Canadians.  Vacant land zone for resident and mixed use can now be purchased by non-Canadians for any purpose the purchaser deems, including residential development.

Purchasing for the purpose of development

This exception now allows non-Canadians to purchase residential property for the purpose of development. Notably, this exception is extended to publicly traded corporations under the Act or to publicly traded entities formed under the laws of a province or Canada and controlled by a non-Canadian.

Foreign threshold increases from 3% to 10% for foreign controlled corporations

For privately held corporations or privately held entities, the foreign control threshold has now increased to 10% from 3%, in line with the definition of ‘specified Canadian Corporation’ under the Underused Housing Tax Act.

The amendments bring good news to our foreign workers who are integral in the Canada’s economy.

Last December 15, 2022, the Property Rights Statutes Amendment Act took effect.  Prior to this Act, a person who has been adversely occupying private owned lands has the potential to go to Court and claim ownership.  Only public land, municipal land and irrigation were protected.

The new Act abolishes the ability of adverse possessors to make a claim over private lands.  Adverse possession, otherwise known as ‘squatter’s rights’, allows a person who has occupied another person’s land for at least 10 years to go to Court and make a claim of ownership.

Squatter’s rights have brought enormous worry and stress to landowners in Alberta with the need to always monitor and keep people from taking possession of their property in order not to lose them.

For over a decade, advocates and past governments have called for the abolition of adverse possession.  In an April 2020 report, it was reported that there were only nine cases in the last eight years up to 2020 but there was a belief that there may be other adverse possession cases that were not listed nor made public.  An MLA Select Special Committee on Real Property did a rigorous consultation with the public that resulted to the proposition to abolish adverse possession.    In 2017, the Alberta Law Reform Institute reviewed the adverse possession law and in 2020 has made recommendations to stop the ‘squatter’s rights’.

With the new Act, Alberta’s registered owners can now heave a sigh of relief, use and enjoy their property without the worry of any ‘squatter’s rights’ overtaking their property.

This 2023, in the desire to generate more income, the federal government is also cracking down certain individuals engaged in flipping residential real estate and improperly reporting the sales as business income.

Principal Residence Exemption

When a home qualifies as a principal residence, the income from the sale of such home may be exempt from capital gains under the principal residence exemption (PRE).  To be eligible for PRE, there are many factors such as but not limited to actually owning the home, and inhabiting the home for at least part of the year by the individual (or spouse, common-law partner or child).

An example would be if A bought a property for $500,000 and sold it for $650,000 after 5 years of living in it, the income of $150,000 from the sale would be tax-free under the PRE.

Capital Gains for Sale of Rental Property

Notably, if the main reason from owning a housing unit is to gain or produce income, such as in the case of a rental property, then such home will not be eligible for the PRE. The income realized on the sale of a rental property would be taxed as capital gains.  The income taxable is only 50% of the gain.

So if A bought a property for $500,000 and had it rented out and afterwards sold for $650,000 after 5 years, the income to be considered as gain is only $75,000.

Business Income for Sale of Flipped Property

The income from the sale from flipping, assignment or buying to build and sell the property is generally taxed as business income at the seller’s tax rate.

So if A bought the property for $500,000 and made renovations to it amounting to $100,000 and sold the same to B for $750,000, the income of $150,000 would be taxed as full business income.  CRA would then look at A’s tax rate and apply the rate against the $150,000 income.

The New Anti-Flipping Rule

The CRA has found that house flippers have been incorrectly using the PRE to avoid or minimize taxes. Under the new Rule, the gain in the disposition of “flipped properties” are to be realized as taxable business income and not as capital gain.

The Rule provides that an individual who sells a residence within 12 months of acquiring it will be deemed to have flipped it unless they fall under any of the exceptions. The exceptions include a number of life events including the death of the individual or a related party, an addition to a household, breakdown of a relationship, a threat to personal safety, serious illness or disability, work relocation or termination, insolvency or destruction or expropriation of the home.

This new Rule would take effect for transactions occurring on and after January 1, 2023.  We highly advise that you approach your accountant or your tax lawyer if you are intending to sell any property within 12 months from your date of purchase to avoid being considered under this Rule.

SERVICE OF COMMENCEMENT DOCUMENTS – ORDER VALIDATING SERVICE NO LONGER REQUIRED WHEN THERE IS ELECTRONIC ACKNOWLEDGMENT FROM THE DEFENDANT

Recently, the Court of King’s Bench released a memorandum of the decision made by the Honourable Applications Judge B.W. Summers, Toronto Dominion Bank v Halliday, 2022 ABKB 764, (“Halliday”) which provides guidance as to when an order validating service is no longer required.

In Halliday, the plaintiff filed an affidavit with an email attachment to the defendant which stated: “attached to this email is the Statement of Claim in court action #2203 15669, The Toronto Dominion Bank v Robyn Halliday. Please confirm if you are willing to receive this document via email.”

The plaintiff’s affidavit also attached the defendant’s email response which stated: “I confirm that the document is received.”

The Clerk was directed to treat the affidavit evidence as sufficient proof of service of the Statement of Claim on the Defendant.

Applications Judge Summers considered sections of the Alberta Rules of Court in making his decision. As the defendant in the case at bar was self-represented, he considered Rule 11.18(1), which tells us that a self-represented litigant may accept in writing, service of a commencement document. Judge Summers also noted Rule 11.30(b), which tells us that service of a document in Alberta and service of documents other than commencement documents outside Alberta may be proved to have been effected by an acknowledgment or acceptance of service in writing by the person served.

Judge Summers stated that the concept of acknowledgment or acceptance of service in writing requires a document with the recipient’s handwritten signature on it is anachronistic, and that most of written communication today is by electronic means. As such electronic transmissions may constitute an acknowledgment or acceptance of service in writing.

Judge Summers also provided an outline to guide the Bar and the Clerks of Court showing when an order validating service is no longer required. The Plaintiff must submit to the Clerk of the Court an Affidavit of Service which states that the defendant was served, the method of service and the date of service. This Affidavit must refer to and attach as an exhibit a written document from the Defendant where the Defendant acknowledges or accepts service of the commencement document. A written document may be an email, a text message, a social media communication or a handwritten note. The plaintiff must also show prove that the Statement of Claim was served in the manner that the defendant agreed to.

Judge Summers did clarify that a confirmation from an electronic transmission service such as Microsoft Outlook is not sufficient in and of itself. Similarly, verbal acceptance is not sufficient as well.

When is an Order Validating Service still required? If the written acknowledgment comes from an agent on behalf of the defendant – an Order Validating Service under Rule 11.27 is still necessary. An Order Validating Service may also be required if the Clerk of the Court has doubt as to whether the evidence of service is satisfactory, in which case the Clerk may refer the matter to an Applications Judge for their discretion. Alternatively, the Clerk may exercise its own discretion to advise the submitting party that an order validating service will be required. It is also important to note that the Halliday decision does not change the compliance requirements for service as per the Convention on the Service Abroad of Judicial or Extrajudicial documents in Civil or Commercial matters.

The Halliday decision provides a welcome change which considers the prevalence of usage of electronic means of communication, and streamlines the court process by not requiring parties to obtain an order validating service when the defendant has already confirmed acceptance of service.

Beware:  Prohibition on the Purchase of Residential Property by Non-Canadian will take effect soon!

Due to the skyrocketing housing prices, the Government of Canada has passed the “Prohibition on the Purchase of Residential Property by Non-Canadians Act” (“the Act”).  This Act will come into force on January 1, 2023 and would be valid for a two-year period or until December 31, 2024.   Purchasers, developers and real estate agents must be aware of the restrictions in order to ensure compliance with the Act.  Some of the key points of the Act are as follows:

Exceptions

The Act does not apply to the following:

1. Canadian Citizens and Permanent Residents;
2. A Temporary resident within the meaning of the Immigration and Refugee Protection Act who satisfies prescribed conditions;
3. A protected person within the meaning of subsection 95(2) of that Act;
4. An individual who is a non-Canadian and who purchases residential property in Canada with their spouse or common-law partner if the spouse or common law-partner is a Canadian citizen, person registered as an Indian under the Indian Act, permanent resident or person referred to in paragraph (b) or (c); or
5. A person of a prescribed class of persons.

There are other exceptions in prescribed circumstances and foreign states for purchases of diplomatic or consular purposes.

The Act is not clear as to the prescribed class of persons or prescribed circumstances.  The full extent of the Act, scope, restrictions and exceptions will be clearer once the Regulation has been released.

Residential Property Types

The properties included are the following:

1. A detached house or similar building, containing not more than three dwelling units (residential unit with private kitchen facilities, bath and living area);
2. Part of a building that is intended to be a separate parcel or other division of real property or immovable including a semi-detached house, rowhouse unit, residential condominium unit or other similar premises;
3. Any prescribed real property or immovable.

Violations

Violation of the prohibition of the Act, counseling, inducing, aiding or abetting or attempting to do the same makes one guilty of an offence and liable on summary conviction, to a fine of not more than $10,000. A non-Canadian who is convicted of violating this prohibition, in addition, may be forced to sell the property for no more than the purchase price as it was obtained.

Beware:

If you are involved with a purchase of a residential property (be as a developer, realtor, lawyer, mortgage broker, etc.), it is incumbent upon you to familiarize yourself with the prohibitions under the Act, as well as the upcoming Regulations.  Reasonable inquiries with your clients is highly advised.

NEWHOUSE v GARLAND: DOCUMENTATION AND ERRING ON THE SIDE OF CAUTION

The B.C Court of Appeal, in a 2-1 decision Newhouse v Garland 2022 BCCA 276, confirms the Chamber’s Judge Decision that the Appellant Ms. Patricia Newhouse failed to prove, on a balance of probabilities, that she and the deceased Bob Garland intended to hold an investment property as joint tenants with a right of survivorship. This case tells us that if parties were to intend a right of survivorship over a property when either of them passes away, it is highly encouraged to have written documents endorsed by both parties evidencing this intention.

There is a legal presumption that partners hold partnership property as tenants in common, and as such there is no right of survivorship. However, the Partnership Act, RSBC 1996, c 348 Section 21 allows partners to vary their mutual rights and duties by either the express or inferred consent. In this case, the appellant argued that she held the property with Bob as joint tenants with a right of survivorship instead of holding the partnership property as tenants in common as this would allow her to obtain the full value of the property which is approximately at one million dollars. On the other hand, if the property was seen to be held by the parties as tenants in common, Bob’s estate would still be entitled to his half of the value of the property.

The Chamber’s Judge concluded that Ms. Newhouse has failed to prove on a balance of probabilities that the parties had an agreement intending that the right of survivorship applied to their investment property. The Chamber’s Judge inferred that Ms. Newhouse only came to fully appreciate the significance of the joint tenancy and the right of survivorship upon researching after Bob’s death, that Ms. Newhouse’s affidavits were vague and lacking in particulars, and that Ms. Newhouse was not credible. On the other hand, the Chamber’s Judge viewed Bob’s instructions in a Wills Checklist reflecting Bob’s anticipation of the property being sold upon his death, which was consistent with the ordinary rules that govern partnership property on the dissolution of a partnership. The Chambers Judge subsequently held that the property was indeed held by the parties as tenants in common only.

Ms. Newhouse appealed the Chamber’s Judge Decision. In the Court of Appeal, one of the considerations that the sole dissenting Justice, Justice Goepel, looked at when arguing that the Chamber’s Judge decision be overturned was that the deed, the mortgage and the BMO application signified a contrary intention to the legal presumption that the partners hold the investment property as tenants in common, and that Patricia and Bob were to hold the property as joint tenants with a right of survivorship.

The majority Justices Justice Dickson and Justice DeWitt-Van Oosten did not agree – the deed, the mortgage and the BMO application was not enough. The majority was not satisfied that these documents sufficiently resolved the live issue of whether the parties also intended to give each other the right of survivorship. The majority agreed with the Chambers Judge’s decision that Ms. Newhouse failed to prove on a balance of probabilities that there was an agreement between her and Bob that the value of the property would go solely to the surviving partner in case that either partner passes away.

This decision cost Ms. Newhouse roughly half a million. It remains to be seen as to whether Ms. Newhouse would continue to appeal to a higher level of court, but this case tells us that in order to avoid making the same mistake as Ms. Newhouse, it is highly encouraged to prepare written documents evidencing the parties’ intent to give each other the right of survivorship.

https://www.canadianlawyermag.com/practice-areas/corporate-commercial/no-survivorship-right-in-partnership-propertys-beneficial-interest-bc-court-of-appeal/369115?utm_source=GA&e=ZGhlbmRyaXhAaGVuZHJpeGxhdy5jYQ&utm_medium=20220819&utm_campaign=CLW-Newsletter-20220819&utm_content=0268D16E-98B1-4AD8-8694-0B7048E32DB4&tu=0268D16E-98B1-4AD8-8694-0B7048E32DB4