January, 2023

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How to Prevent a Real Estate Deal From Falling Through

Disclaimer: This article on your real estate deal is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

You’ve sold your house! You’re packing up and getting ready to move. But then, seemingly out of nowhere, it looks like the deal may not actually go through.

Or perhaps partway through the transaction, an issue arises that needs to be addressed before the deal can be finalized. Regardless of the circumstances, it’s important to know your rights. It’s important to know how to protect yourself when a real estate transaction goes off the rails.

In this article, we will discuss why a deal may suddenly be on shaky ground. Then we will outline what your options are if that is the case. We always welcome you to book a complimentary consultation with our team to discuss your situation in greater detail.

a man considering his real estate transaction in hamilton

Why might a real estate purchase or sale not close?

First of all, you cannot back out of a real estate deal because you have changed your mind. You signed a legally binding contract and the other party has the right to sue you for breach of contract.

There are a few reasons why a transaction may fall through or fail to close on the closing date. Here are just some that our office have come across.

The buyer has trouble obtaining financing

This was relatively common when the market had cooled. The offer price and the house’s value to the bank were no longer equal. The bank would no longer provide financing for the offer price. Therefore, the buyer had to come up with the difference or the deal was lost.

The buyer may have initially been able to qualify for a loan. However, since then, their credit rating changed or their income dropped. The bank could no longer support the loan and the purchase had to be cancelled.

The title search reveals problems

The title search on a property looks at the history of ownership. A title search may reveal that someone has made a claim to the property. It may reveal liens that haven’t been cleared up. If there are these or other issues with the title, it can be difficult to close on the closing date.

The house inspection reveals problems with the home

A home inspection can reveal previously unknown issues such as mold, structural problems or other defects.

a sign saying "sale pending" illustrating that this real estate deal may fall through.

How to save a deal that is on the rocks

First and foremost, you want to seek legal advice as soon as possible with any real estate transaction.  Your lawyer can provide legal advice and strategies to salvage a deal that is in danger of not closing. She can also make sure to document your file while things are going well. This way, you have all of the evidence on your side if matters do not go as planned.

You have a few options that you can pursue to resolve your issues.

Extend the closing date

If your matter can be resolved within a short amount of time,  you can ask the seller to extend the closing date. This gives you time to make sure all of your documents are in order and that any outstanding issues are resolved.

Consider a vendor take-back mortgage

If you are having trouble getting financing, you may consider a vendor take-back mortgage. This is where the seller agrees to provide secondary financing for part of the purchase price.

Negotiate an abatement

If the issue is with the condition of the property or something on title, you can negotiate an abatement. This is when the seller agrees to reduce the purchase price of the home in order to account for any outstanding issues or repairs that need to be done.

Pursue litigation

In the worst-case scenario, if negotiations and attempts to resolve the issue have failed, you may need to pursue litigation. This is the last resort, as it can be costly and time-consuming. It is also important to remember that any legal action taken must be within the confines of the contract entered into between buyer and seller.

Of course, you’ll be in a better position to pursue litigation if you have been working with a real estate lawyer who is well-versed in both the transactional and litigation aspects of real estate law (like Beeksma Law!).

It is important to remember that there are options available to you if a real estate purchase or sale does not close on the closing date.  However, it is always advisable to seek legal counsel so that you can make sure all of your bases are covered and any potential issues can be dealt with in an efficient manner.

What happens to the deposit if the deal falls through?

This is a question that we get fairly often when a deal looks like it may not proceed. The answer is…it depends.

There is no guarantee that it will be given to the seller. It will depend on the language that is used in your purchase agreement. It will also depend on the actual damages suffered by the seller.

For example, if the deal falls through and the seller is able to find a new buyer at the same price and terms, then the seller may not be entitled to keep your deposit. However, if the seller cannot find a new buyer or must accept less money for their property, they may be eligible to receive damages from the buyer in the form of your deposit.

Smoother Real Estate Transactions with Beeksma Law

The last thing that anyone wants is a stressful, drawn-out dispute over a real estate transaction. At Beeksma Law, we are here to help make sure that we close your deals and if it doesn’t, then you have the best chance of recovering any damages that may be owed.

a real estate deal going through, with one party handing keys to the other

Our team is highly experienced in both real estate transactions and litigation so we can assist you no matter what stage your deal is at.

If you have any questions or would like to speak with a real estate lawyer regarding a potential transaction, please don’t hesitate to contact us today! Let us help make your real estate transactions smoother and stress-free!

What is a vendor take-back mortgage?

Disclaimer: This article on Vendor Take-Back Mortgage is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

Last year was marked by some large changes in the real estate market. First, there was the boom in early 2022, where prices reached record highs. Homes in Hamilton rose to an average of over $1 million. Since then, the market has cooled as interest rates continue to rise and the economy struggles.

If you are looking for a new home, you may have heard of vendor take-back mortgages. These were popular in the late 1980s and early 1990s. However, our offices have been seeing more of them recently.

In this article, we will outline what a vendor take-back mortgage is, how it works and whether it is right for you. If you want to discuss your circumstances and the strategies we can use to help you with your legal needs, we encourage you to book a call here.

What is a vendor take-back mortgage?

A typical mortgage is when a borrower borrows money from a lender and uses the property as collateral. The interest rate is usually determined by market rates and the loan is paid off over time in installment payments.

In contrast, with a vendor take-back mortgage, the seller of the property agrees to lend some or all of the purchase price to the buyer. Instead of paying in full at closing, the buyer provides a promissory note to the seller that can be converted into a mortgage.

The seller is the lender, and they set the interest rate, loan term and repayment schedule. The buyer needs to make sure that they can make timely payments on the promissory note in order to keep their home.

What are the benefits of a vendor take-back mortgage?

A vendor take-back mortgage can be beneficial for both buyers and sellers. For the buyer, they can purchase a home even if they don’t have enough money saved up for a down payment or don’t qualify for traditional financing.

Recently, many have turned to vendor take-back mortgages when the market cooled, and their home’s value dropped. Traditional lenders would no longer provide the full funding needed to purchase the property. That’s when a vendor take-back mortgage provided them with an alternative.

For the seller, this type of mortgage allows them to get cash now instead of waiting for their home to appreciate in value. Additionally, the seller can set the interest rate so that they are receiving a higher return on investment than traditional investments.

If you are the seller and do not need the full purchase price immediately, there are advantages to you. Vendor take-back mortgages can be a flexible way to get the money you need now and receive interest income in the future.

If you are an investor or are selling commercial properties, there are tax benefits to offering a vendor take-back mortgage. Speak with your accountant about how you can best structure your transactions to ensure you are getting the most out of the deal.

What risks are associated with a vendor take-back mortgage?

Although there are many benefits to a vendor take-back mortgage, it is important to be aware of the associated risks.

The biggest risk is that the buyer may default on their payments, leaving the seller without any repayment. In this situation, the seller may have to foreclose on the property.

Understanding your priority

Let’s imagine that you are the seller of a property for $1 million dollars. The buyer has obtained a mortgage from a lender, such as a bank for $750,000, and you provide a vendor take-back mortgage to cover the remaining amount of $250,000.

The buyer is unable to make the payments and the property is foreclosed. However, the market has cooled and the house is sold for $800,000. The order of the registration determines how the mortgages are paid. Since the first lender would have been registered first, they would be paid back in full. You would receive the remaining funds, which is significantly less than what is owed.

Pros and Cons for Buyers and Sellers

Let’s summarize the pros and cons for both buyers and sellers when it comes to a vendor take-back mortgage.

Pros and Cons for Buyers

ProsCons
Easier to qualify for a mortgage and can cover the gaps where you cannot obtain traditional lendingYou need to make sure to read the fine print carefully and make sure that your seller provides receipts for mortgage payments. 
You can negotiate the terms and the interest ratesTypically has higher interest rates

Pros and Cons for Sellers

ProsCons
May be able to more quickly sell your homeIf the buyer fails to make mortgage payments, the bank holds the primary mortgage and you could lose your investment or have to pursue it through litigation. 
Can earn income from the interest being chargedDo not have access to full sale proceeds right away
May be able to defer capital gains taxes

Strategic Buying and Selling Real Estate in 2023

The world we live in has changed and become increasingly complex. This is true when buying or selling your home. At Beeksma Law, we provide strategic advice and make sure that our clients understand all of their options, along with the risks and benefits.

If you want to see the difference it makes having a strategic advocate on your side, reach out today. We love helping our clients buy and sell their homes.

Do I need an estate litigation lawyer

Disclaimer: This article on choosing an estate litigation lawyer is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

Estate law is more than preparing a will or settling an estate after the death of a loved one. There is also the litigation side of estate law. This article is designed to help you understand if you need to pursue estate litigation and if so, what that would look like.

At Beeksma Law, we practice in a variety of areas, including estate litigation. We understand that disputes involving estates can be unquestionably difficult and emotional. We provide guidance to help our clients navigate these complicated cases, so they are able to make the best decisions for their families.

Firstly, a note for those planning their estate.

Preventing Estate Litigation

To begin with, if you are planning your estate,  it is important to take steps to prevent future disputes. This includes ensuring that your will is clear and properly drawn with the help of an estate lawyer, that all assets are properly allocated, and that executors and trustees know what is expected of them. With proper planning, you can be more confident that your executor will follow your wishes and avoid disputes.

What is estate litigation?

Simply put, estate litigation is when someone seeks legal action because of a dispute involving the management, control and distribution of property within an estate.

Let’s consider some examples of when someone may want to pursue estate litigation.

  • Challenging or contesting a will
  • Disputes related to how the estate executor carries out their duties
  • Disputes related to how much a beneficiary receives from an estate or how much the estate is worth
  • Issues related to how a power of attorney is being used
  • Disputes between co-executors
  • Disputes between co-attorneys of a power of attorney
  • Disagreements between beneficiaries
  • Disputes related to compensation for the estate trustee
  • Guardianship and incompetency disputes
  • Disputes that arise when there is no valid will

If you think you may need to pursue estate litigation, discuss this with an estate litigation lawyer immediately. In Ontario, estate litigation is time-sensitive. You must file a claim within two years after you knew or ought to have known that there was an issue. Generally, the legal standard is that the time limit begins when a “reasonable person” would know there was a problem.

Litigating an estate claim

Let’s very broadly outline how the process works if you need to litigate an estate claim. At any point, either side can file motions requesting that the judge make an order on a certain issue.

First, one party files a claim, along with any affidavits and evidence to support those claims. Then, the respondent responds to the claim, which includes their own affidavits and evidence. The applicant may or may not reply to the respondent.

Thereafter, each party cross-examine the other under oath about the materials, as well as any affidavits that they have filed.

Mediation is mandatory in Ontario. Mediation is where a neutral third party helps the parties come to an agreement. However, if this is unsuccessful, the case goes to trial, and both sides present their evidence and arguments to a judge. The judge will make a  decision and issue an order that the parties must abide by.

Resolving an estate dispute without going to trial

It’s important to acknowledge that estate disputes are highly emotionally charged. Beyond the legal issues involved, grief sometimes makes people act irrationally or want to right wrongs that have nothing to do with the facts being disputed. We understand that and therefore work hard to help our clients move forward in a healthy manner while protecting their legal rights.

Litigation is simply never the best option. Litigation is time-consuming, difficult and expensive. It does not allow you to move forward in handling the estate or putting the dispute behind you. In many instances, mediation or negotiation resolves any estate disputes.

Understanding Estate Litigation With Beeksma Law

At Beeksma Law,  we understand estate litigation and how to handle it in a respectful way. With extensive experience litigating estates, we are strategic advocates when it comes to protecting your legal rights.

Book a call with our team today for your complimentary consultation.

Should You Update Your Estate Plan in 2023?

Disclaimer: This article on your estate plan is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

The beginning of a new year is always an exciting time. It’s a time to reflect on the past year and set new goals for the upcoming one. For many people, a new year means thinking about the future. While none of us like to think about our eventual end, it’s important to consider that reality when considering our future.

You may have a will prepared, but your estate plan is not a “one and done” exercise. In this article, we’ll consider whether you should add “update my estate plan” to your 2023 plans (and how we can help if that is the case).

Your Estate Plan is More Than Your Will

First, let’s address a common misconception. Your estate plan is not just your will. While that document is certainly an important part of the larger plan, it’s only one piece. An effective estate plan may also include trusts and durable powers of attorney for personal care and property.

We talked all about powers of attorney here, but to summarize, there are two types of powers of attorney that you would need in Ontario. One relates to your personal care – the person you name your “attorney for personal care” will make decisions about your medical and lifestyle choices in the event you cannot. The other power of attorney is for property – this is the person who will manage your financial matters if you are unable to do so.

You may have trusts, like a resulting trust, that are part of your estate plan. Or you may not have trusts in place but now realize that it would be prudent to do so.

When updating your estate plan, you’ll want to make sure to review all of those documents or create any documents that are not currently in place.

Life Changes to Consider

As we noted above, your estate plan is not something that you do once. Your estate plan should reflect your life. As we know, life changes.

Here are some questions to consider. Since you created or last updated your estate plan, have you:

  • Gotten married, divorced or remarried
  • Had children
  • Purchased or adopted a pet
  • Started a business
  • Changed the structure of your business (for example, incorporated your business)
  • Moved to another province
  • Purchased or inherited any property
  • Had a material change in your financial situation
  • Had second thoughts about who should be the guardians of your minor children?
  • Thought about introducing new timelines for when minor children would inherit your estate?
  • Had any other significant life change?

If you answered yes to any of those questions, then it’s time to update your estate plan. When updating an existing plan, you’ll want to consider how the changes in your life will impact your estate plan.

If you fail to update your estate plan to reflect your current situation, it could mean that certain assets may not be distributed in the way that you intended. Your executor may have to go to court to obtain direction on how to proceed. This could mean that assets are frozen until the court provides direction, which could delay the distribution of assets and create additional costs.

Therefore, updating your estate plan is important to ensure that it reflects your current situation.

Changes to your executors and attorneys

Speaking of your executor, we have spoken before about how to choose an executor and how important that role is in the estate planning process. We have also written about the role of an alternate executor in case your primary choice is unable or unwilling to serve as executor. If you have powers of attorney, you will have people appointed in those documents to serve as your attorney.

Therefore, it would be prudent for you to review who you have named as executors and alternates in your existing estate plan. You may want to update that list if you are uncertain that your original choices can still operate in that capacity.

For example, perhaps your current executor now suffers from ill health and is unlikely able to take on that responsibility. Perhaps your relationship with that person is not as solid as it once was. Or maybe your estate has become more complex and it may make more sense to appoint a professional executor.

In any event, reviewing those appointments can help you be sure that your executors and attorneys are still the right choices.

Title Changes and Your Property

Many clients are coming to us because they want to transfer their property (like a cottage) to their children while they are still alive.

We have an entire article dedicated to that here but, as it relates to estate planning, transferring a property into joint tenancy or to the children while you are alive will impact your existing Will and other estate planning documents.

You need to make sure your intent is clear, and you may need to put additional documents in place. It’s not as simple as transferring the title – you really need to speak to your lawyer and accountant to ensure the transaction is structured in a way that reflects your wishes and that no additional taxes or probate fees will be due.

What if I don’t have an estate plan?

What if you don’t have an estate plan at all? An estate plan is not just for the wealthy or those who have a lot of property to pass on – it’s actually very important for everyone. An estate plan helps your family understand how you want your affairs handled if something were to happen to you and can save them a lot of time, effort, confusion and money.

If you don’t have an estate plan in place, we encourage you to make it a priority in 2023. If we have learned anything from the past few years, life can change quickly and without warning.

Go into 2023 with peace of mind

While no one wants to think about passing away, it is one reality that we all have to face at some point. What we leave behind is fully within our control. What kind of legacy are you leaving for your family?

The best gift you can give to your family is the peace of mind of knowing what your wishes are and making it easier for them once you pass on. At Beeksma Law, we want to help you do that. Let us know if you need help updating your estate plan and entering the new year with peace of mind.