Tag Archives: Calgary real estate

Why You Need an Enduring Power of Attorney?

Date: November 24th, 2020
By: Bill Leclair

Things To Consider While Estate Planning

What Is An Enduring Power Of Attorney (EPA)

One of the documents we include as part of our Estate Planning package is an Enduring Power of Attorney. The EPA (as it is known) is a relatively inexpensive legal document yet very effective. The donor is the person who gives the EPA to the person appointed (referred to as the “Attorney”) which lasts until the Donor dies.

The Disadvantages Of Not Having EPA

Why is an EPA considered an extremely useful part of an Estate Planning package? The Attorney has the authority to deal with real property the donor owns, deal with necessary expenditures required on behalf of donor, deal with the CRA and appoint lawyers, accountants or other persons for such compensation and length of time as the Attorney considers advisable. The most common examples of the use of an EPA is the sale of the donor’s house or dealing with monetary assets of the donor.

The Importance Of An EPA

Why is an EPA considered an extremely useful part of an Estate Planning package? The Attorney has authority to deal with the property the donor owns. This means they deal directly with the necessary expenditures required on behalf of the donor. They work with the CRA and appoint lawyers, accountants or other persons the Attorney considers advisable for the necessary compensation and length of time. The most common examples that EPA’s are used for are;

  • The sale of the donor’s house;
  • Dealing with the monetary assets of the donor.

When Drafting An EPA, There Are 2 Options:

First, it can take immediate effect without a trigger or make it conditional on incapacity.

In the second case, the EPA only becomes effective if the donor is mentally incapable or mentally infirm of making reasonable judgements in respect of matters relating to all or part of the estate. We need a written declaration of the Attorney and medical physician practicing in Alberta that the donor lacks mental capacity. It is conclusive proof to ensure the EPA becomes effective.

The other way is if the donor having mental capacity declares in writing that the EPA is effective.

The Difference In Cost & Time

The reason for getting an EPA is the difference in cost compared to having to get a Court Order plus the length of time required to get said Order which can take six weeks or longer depending on the circumstances. That time frame may present problems when there is a desire to sell a house or have monetary assets attended to on a more urgent basis.

In the end, the Enduring Power of Attorney (EPA) is a vital document that should certainly be considered as part of any Estate Planning you undertake. If you would like more information or are interested in an estate plan don’t hesitate to contact us, call us at 403 245-3500.

Avoiding Mortgage Payout Penalties

Date: November 24th, 2020
By: Ron Thibeault

How Mortgage Payment Penalties Work

What we find most surprising when dealing with Sellers is that they rarely know how a mortgage prepayment penalty works. Either it was never explained to them. By either the mortgage broker, their bank, or their lawyer. Or, they never took the time to understand this important factor of mortgage payout penalties, when they first mortgaged their property.

In today’s interest rate environment, our clients are seeing some very severe penalties. This is due to a little-known clause on prepayments. The mortgage penalty is  applied on the basis of the greater, of the payment of 3 months of mortgage interest. Or applied as the interest rate differential – the IRD.

Closed Mortgage

When you elect to have a closed mortgage there are limited prepayment privileges. Which range anywhere from 5% to 25% of the principal of the mortgage on an annual basis. Typically there is also the option to increase your mortgage payment by a maximum amount each year. If you go above these limits you will likely incur a mortgage penalty. We typically see mortgage penalties being incurred either from a sale or a refinancing of the property.

Interest Differential

Understanding 3 month interest is simple enough to do. However, the interest differential is a little more difficult and of greater concern. Essentially, this is the difference in the amount of interest you would be paying for between the balance of the term of your mortgage and the amount of interest you would be paying if the interest rate were equal to the bank’s current posted rate for the balance of that term.

Seems innocent enough, except for the fact that we have seen interest differential penalties in the tens of thousands of dollars. This can and will potentially affect your return on your property. In some cases has resulted in Sellers having to pay money in order to sell their properties.

What Can Be Done About Mortgage Penalties?

What can you do about mortgage penalties? First, understand what the mortgage penalties are for the mortgage product you are contemplating. Second, understand what your purpose of buying a property is. Are you intending to sell the property relatively soon or hold on to it for longer? Match your term and mortgage product to your intentions. Third, engage your banker or mortgage broker in a full and frank discussion of what your needs are and how prepayment costs can be minimized.

Maybe the best advice of all is to understand what your penalty might be BEFORE you decide to sell or refinance your home.

We can help you understand your mortgage payout penalties and whether or not you will have to pay a penalty. Don’t hesitate to get in touch before you sell or refinance your home. For any questions or concerns contact us today by emailing us at [email protected].

Structuring Holdbacks During Negotiations

Date: November 6th, 2019
By: Ron Thibeault

Handling Closing Day Issues In Your Offer

Buyers are often surprised during our meetings to learn that a pre-possession walk-through is not a right. In fact, technically Buyers don’t have access to the property until the funds have already been released on the day of closing.

In almost all cases, Buyers expect their newly purchased home to be perfect. It is an emotional time and the excitement is palpable. They walk into a dirty home and all of that excitement disappears.

Can You Holdback Money?

The first inclination of Buyers is to demand that money be held back from the Seller to cover the costs of the cleanup. Unfortunately, the reality of a real estate transaction is that Buyers are not entitled to holdback money from the closing funds for minor breaches of contract.

The standard form contract in use in Alberta does not give Buyers an automatic right to withhold funds unless that right has been agreed to in the purchase contract.

What constitutes a minor breach? That is not easy to quantify but examples of this would be where the home has not been cleaned as required, an appliance is not working or there is some drywall damage.

Can You Minimize Risk?

This is simply a question of negotiation at the time of your Offer. Will the Seller accept a clause in the contract giving the Buyer a right to holdback funds if the property is not up to standard at closing? It is unlikely, but certainly something worth attempting to negotiate.

If, for example, a term of your Offer obligates the Seller to get carpets professionally cleaned, a clause should also give you the right to holdback a preset amount at closing pending the production of receipts showing the work having been done.

You should also ensure that a term is added to your original offer giving you the right to a walk-through either the night before or morning of closing.

Simply put, if there is work to be completed by the Seller before closing, you and your Agent must ensure that the Offer has terms added that protect you in the event those matters aren’t resolved as required. The wording of these holdbacks is vital. Your Realtor is not a lawyer so if there are any questions either contact us or have your agent contact us to review what should be included in the holdback clause.

Buying Foreclosed Properties Comes With Risks

Date: November 5th, 2019
By: Ron Thibeault

So, you want to get a deal? Looking at a foreclosed home? Well, the risks in doing that might be more than you expected. Often what looks to be a fantastic deal really might not be exactly that in the end.

Normally, the Seller gives certain warranties to the Buyer that the property will be, amongst other things, in the same condition as when it was originally viewed, that there are no compliance issues, that there are no defects the Seller is aware of. This is not the case in a foreclosed property.

Risk? What Risk?

The major issue in dealing with a foreclosed property is that the lender who has foreclosed will be selling the property with no warranties whatsoever. A typical term of an Offer relating to a foreclosed property specifically states that the property is being sold on an “as is” basis.

What does this really mean? In layman’s terms it means that you assume all of the risks with foreclosed properties and may ultimately be left holding a property that has serious deficiencies.

In a standard transaction, the Seller warrants to the buyer that there are no compliance issues and is obligated to provide evidence of that. In a foreclosure situation, you will likely not know of any compliance issue until you go to sell the property in the future and, most importantly, will be left with the problem because the lender sold the property “as is.”

What Is The Worst That Can Happen?

How serious can the problem be? If you purchase a property with a serious compliance issue, say a portion of the garage was encroaching into the neighbouring property, you might not be able to resell that property until that issue is resolved, which could include moving the garage; you have absolutely no recourse as against the owner/lender who sold it to you.

Ultimately, buying a foreclosed property is not for the faint of heart. If you decide to make an offer on one you should ensure that your agent is fully aware of how to protect you and discuss the issue with us prior to making your offer. Sometimes deals really are too good to be true but we can help you get through the process.