It’s that time of year! We continue to strive to raise awareness about Autism Spectrum Condition. What better way to start a discussion than by coloring with your family! Submissions can be dropped off at our office or submitted online to www.autismcolouringcontest.ca or on Facebook at https://www.facebook.com/Autismcontestyyc/
Posts by Denise Hendrix:
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 The requirement on tax filing and previous work experience in Canada are repealed.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.
In the pursuit to make the creation and management of trusts more efficient and to reduce the need for Court interference, the new Trustee Act (Bill 12) was given Royal Assent and has come into effect on February 1, 2023.
What is a Trust?
A trust is a legal document created by a person (settlor) to allow another person (trustee) to hold assets and administer them for the benefit of others (beneficiaries). There are two kinds of trust: A Testamentary Trust is are created when a person dies and such creation is set out in a person’s Last Will and Testament. If a trust is settled while a person is still alive, an Inter Vivos Trust is created.
What is a Trust Instrument?
According to the new Trustee Act, a trust instrument creates or vary a trust. It may come in the form of a deed, will, or other legal documents; an enactment other than the Trustee Act; or an oral declaration but does not include a judgment or any order of the court.
Why A New One?
The old Trustee Act predominantly focused on testamentary trusts in order to be consistent with the Estate Administration Act. The new Trustee Act offers a modernized framework of trusts and provides more clarity in terms of duties, responsibilities and powers of the trustees including the duty to provide annual financial information to qualified beneficiaries . Also, other relevant additions are the provisions on temporary appointment of trustees, resignation of the trustees, removal of the trustees by majority with notice, and the delegation of the trustee’s powers to an Attorney– all have been bases of actions in Court.
Note that the new Act applies in respect of a trust created before, on or after the date such section in the Act comes into force.
Beneficiary? Trustee? Or Contemplating of Creating a Trust?
As the new Trustee Act has articulated many responsibilities of the trustees more than that of the old Act, trustees must ensure that they are ready to comply with their responsibilities under the Trust and under the legislation when they accept their role as trustees. There is also a sense of transparency being advocated by the new Act, hence, Trustees must be open to disclosing information to qualified beneficiaries. Beneficiaries have increased rights to disclosure and provisions to remove trustees, among others. We therefor cannot stress the importance for trustees and beneficiaries to familiarize themselves with the new Act and obtain legal advice in order to guide each of them with their rights and responsibilities. Hendrix Law would be happy to assist you in this endeavor.
We will be launching towards the end of March to raise awareness regarding Austism and its impact on the communities and families.
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:
The Act does not apply to the following:
- Canadian Citizens and Permanent Residents;
- A Temporary resident within the meaning of the Immigration and Refugee Protection Act who satisfies prescribed conditions;
- A protected person within the meaning of subsection 95(2) of that Act;
- 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
- 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:
- A detached house or similar building, containing not more than three dwelling units (residential unit with private kitchen facilities, bath and living area);
- 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;
- Any prescribed real property or immovable.
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.
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.
If the will-maker’s Will had overcome the proof of formal validity of the will, there is a presumption of the will-maker’s testamentary capacity, knowledge and approval of the Will, unless, suspicious circumstances are present with respect to the testamentary capacity, knowledge and approval of the will-maker.
The Supreme Court of British Columbia recently invalidated the Will of a BC woman finding her to have lacked capacity upon her execution of the will due to suspicious circumstances.
In the case of Jung Estate vs. Jung Estate, 2022 BCSC 1298, the testatrix died leaving two sons. It was alleged by one son, the plaintiff and executor of the estate, that their mother was unduly influenced by his brother, the defendant, when she made her 2017 Will. The Will leaves a specific bequest of a real estate property to the defendant and the residue of the estate to the plaintiff. The parties later agreed that the residue of the estate would be fully spent and there will be no funds to be distributed to the plaintiff, effectively disinheriting the plaintiff in the Will. The plaintiff filed a complaint with the BC Supreme Court against the defendant.
The Court ruled in favour of the plaintiff and the Will was declared invalid. In invalidating the Will, the Court extensively analyzed whether there were suspicious circumstances surrounding the creation and execution of the Will.
As laid down by the Court:
“When a Will has been executed in accordance with the statutory formalities (such as the will is in writing, was signed at the end of the document in the presence of two witnesses at the same time at the presence of the will-maker), the propounder is aided by a rebuttable presumption that the will-maker possessed the requisite knowledge and approval, and testamentary capacity: Vout at para. 24; Lantzius Estate at para. 64; Laszlo at para. 205; Leung v. Chang, 2013 BCSC 976 at para. 31, aff’d 2014 BCCA 28, leave to appeal ref’d  S.C.C.A. No. 261 [Leung]; Allart Estate v. Allart, 2014 BCSC 2211 at para. 33 [Allart Estate].’
If the will-maker’s will had overcome the proof of formal validity of the will, there is a presumption of the will-maker’s testamentary capacity, knowledge and approval of the Will, unless, suspicious circumstances are present with respect to the testamentary capacity, knowledge and approval and of the will-maker.
In this case, the plaintiff alleged suspicious circumstances surrounding the execution of the will; thus, reverting the burden to the defendant, who alleges the validity of the Will, of proving the testatrix’s testamentary capacity and knowledge and approval, on a balance of probabilities.
What are suspicious circumstances? The Court explained the same to be:
“Suspicious circumstances must raise what has been described as a “specific and focused suspicion”; a “general miasma of suspicion that something unsavoury may have occurred” is not sufficient: Leung at para. 32; citing Clark v. Nash (1989), 1989 CanLII 2923 (BC CA), 61 D.L.R. (4th) 409 at 425 (B.C.C.A.). Such suspicions must be “well grounded” and will generally relate to circumstances (1) surrounding the preparation and execution of the will, (2) calling into question the capacity of the will-maker, or (3) tending to show that the free will of the will-maker was overborne by acts of coercion or fraud: Vout at para. 25; Allart Estate at para. 32. There is no checklist of suspicious circumstances, but one commonly occurring theme is where a beneficiary is instrumental in the preparation of the will (especially where they stand in a fiduciary position to the testator): Laszlo at para. 207.”
After analyzing the evidence presented by both parties, the Court found the testatrix to have no testamentary capacity at the time she made the Will.
According to the Court, the testatrix did not have a sufficient understanding of the value of her assets and she did not appreciate the actual consequences of her decision to give the Property to only one son. Further, there was no evidence that the testatrix understood the legal difference between a specific gift and a gift of the residue nor an understanding that all estate expense would be paid from the residue.
Worthy to note that the Court said: “ While Ms. Jung did not need the “metronomic precision of an accountant” she did need to be able to appreciate the effective result of a specific gift of the Property to Jerry on the distribution of her estate, and most importantly, upon the amount remaining in the residue of her estate. I find she did not have the necessary capacity to understand the nature and the effect of the distribution she set out in the Will, and as a result accordingly did not have the testamentary capacity necessary to create a valid will.”
The Court invalidated the Will of the testatrix and has reinstated her 2001 Will and 2002 Codicil.
Please see the summary from the Canadian Lawyer Magazine: