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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.

Why You Might Need a Litigation Lawyer in 2023

Disclaimer: This article on hiring a litigation lawyer in 2023 is intended for the purposes of providing information only and is to be used only for the purposes of guidance. Please note this article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

At Beeksma Law, we have been practicing law for quite some time and through different economic climates. We have seen how the practice of law changes as world conditions change. For example, we remember how our practices changed during the recession of 2008 and the boom of 2017.

By all accounts, we can expect the economy to continue to shift in 2023. Recently, Royal Bank predicted back-to-back negative quarters as early as January 2023. However, we don’t want to be all doom and gloom. We cannot control the changes that will take place in the economy, but we can control how we handle those changes.

Our experience has shown us that when there is a downturn in the economy, there is a greater need for litigation lawyers. At Beeksma Law, we can provide you with knowledgeable legal counsel and representation when it comes to litigation matters.

In this article, we will outline specific areas where you may need our litigation expertise as we move into 2023. We will also outline some steps you can take today to protect yourself, your families and your business.

Two people having a business disagreement - one of the reasons you may need a litigation lawyer in 2023

Business Disputes

This is the largest area where we see an uptick in litigation files. You may find it harder to get paid by clients as people face harder economic times. You may find yourself in other disputes.

A knowledgeable lawyer is crucial when navigating these situations and ensuring that you are lawfully protected. (Of course, enforcing your contract means being able to show that you upheld your contractual obligations.)

However, it is also important to have a lawyer on your side to prepare strong contracts. Those strong contracts will protect your interests. Your budgets may be stretched a little thin, but this is one area that you should prioritize. Without a contract in place, you are more likely to have to pursue litigation to resolve your issue. This is much more expensive than having contracts prepared.

Arming yourself with strong, well-written contracts is the single best thing that you can do to protect yourself and your business before 2023.

Real Estate Litigation

We still see some sales held up by a sudden inability to close because the purchaser can no longer get financing.

When that happens, you need an experienced advocate to negotiate how to close the deal. However, if the parties cannot agree (a topic for a future blog post), a seller’s only option may be to sue.

Of course, you can protect yourself well before you get to that point. A prudent lawyer will be able to help you structure a sale that protects your interests. She will also help you document everything in the event you need to pursue litigation.

Estate Litigation

If you are an executor or administrator of an estate, you may face more inquiries from beneficiaries during tough economic times. When people are struggling financially, they may be more likely to challenge the terms of a will or trust.

In other situations, you may suspect your loved one’s power of attorney is mismanaging the estate, leading to disputes. It’s important to note there is a 2-year limitation period where you have known, or ought to have known that a power of attorney was mismanaging the estate. Therefore, you need to be aware of your rights and act quickly in these instances.

If you find yourself in the middle of an estate dispute, it’s best to consult with a lawyer early to protect your interests and the wishes of your loved one.

Preventing Litigation in 2023

Litigation is stressful, time-consuming, and expensive. It can also have long-term impacts on a business or individual’s reputation. That is why it is so important to protect yourself now before we move into 2023.

It’s said that the best defense is a good offense, and we could not agree more.

At Beeksma Law, we specialize in working with clients to prepare them for any legal issues that may arise. We can help you review contracts, provide advice on how to structure transactions, and more. We will also be there to represent your interests if a dispute arises.

If you think you may need a litigation lawyer in 2023, book a call today. We can help you navigate potentially difficult situations with confidence.

Do You Need a Shareholder Agreement?

signing a shareholder agreement

Disclaimer: This article on what to include in your shareholder agreement 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.

After incorporating your business, You may think that the hard part is done. You may not want to spend money on unnecessary legal fees. However, one important document you should not overlook is a shareholder agreement.

This article will explain what a shareholder agreement is and why it is important to protect your shareholders’ interests. We will also discuss the different provisions you should consider in your agreement.

You have worked too hard in your business to not protect your interests. At Beeksma Law, we are active within the entrepreneur community (we are entrepreneurs, too!) and understand your needs. Book a call with us today to discuss your corporation’s needs. We would be happy to help you!

What is a shareholder agreement?

A shareholder agreement is a contract between a company’s shareholders. It sets forth their rights and obligations with respect to their ownership interests in the company. The agreement may also include also provisions, which we will outline below, governing the management and operation of the company.

A shareholder agreement must be in writing and signed by all shareholders in order to be valid. You must keep the signed copy and any amendments in your corporate minute book. (To learn more about what should be in your minute book, please see this article.)

Do I need a shareholder agreement?

While not legally required, we recommend a shareholder agreement if your company has more than one shareholder. A shareholder agreement can help avoid disputes between shareholders by setting clear rules and procedures for the management and operation of the company.

It is also important to have a shareholder agreement in place so that all shareholders know their rights and obligations concerning their ownership interests in the company.

You do not need a shareholder agreement if you are the sole shareholder or if you have a not-for-profit corporation.

a person signing a shareholder agreement

Why do I need a shareholder agreement?

Many people do not think that they need a shareholder agreement. We can compare it to a marriage. At the beginning of a relationship, everything is perfect, and you are in a honeymoon period. However, arguments can arise over time, and your relationship can change.

Similarly, while everything may be running smoothly in your business at the moment, it is important to have a shareholder agreement in place to prepare you for any potential disputes that may arise down the road.

Think of a shareholder agreement as a form of insurance for your business. It will protect your interests and help keep the peace between shareholders if disagreements occur.

Shareholder agreements protect both majority and minority shareholders. Let’s outline how shareholders protect each group.

How Shareholder Agreements Protect Minority Shareholders

If you are a minority shareholder (meaning you own less than 50% of the shares), you may worry that majority shareholders may take advantage of you or push you out. A shareholder agreement can help protect your interests by including provisions that give you certain rights and protections, such as preventing some decisions unless there is a unanimous agreement.

For example, you may include a clause that all shareholders must approve any decision to issue more shares. This will prevent the majority shareholders from issuing more shares and diluting your ownership stake in the company.

Another example is a drag-along clause, which gives minority shareholders the right to sell their shares if the majority shareholder decides to sell their stake in the company. This ensures that you will not be left holding shares in a company that you do not want to be a part of.

How Shareholder Agreements Protect Majority Shareholders

The majority shareholder owns more than 50% of the company’s shares and is protected by a shareholder agreement. For example, when a majority shareholder wants to sell their shares and leave the company, they may include a clause in the shareholder agreement that requires the other shareholders to sell their shares as well (known as a tag-along clause).

How Shareholder Agreements Protect All Shareholders

Regardless of whether you are a minority or majority shareholder, there are some provisions that will protect all shareholders.

One common provision is the right of first refusal. This means that if a shareholder wants to sell their shares, they must first offer them to the other shareholders before selling them to a third party. This gives the other shareholders an opportunity to maintain their ownership stake in the company and avoid doing business with a stranger.

Your lawyer will also recommend a provision that determines how to resolve disputes. As we noted in this article, litigation can be expensive and time-consuming. Including a provision in your shareholder agreement that requires shareholders to mediate or arbitrate their disputes can help prevent the situation from escalating and costing the company time and money.

Finally, consider what will happen if a shareholder passes away. Those shares will become part of the deceased shareholder’s estate, unless otherwise stipulated in the shareholder agreement.

There are many different types of shareholder agreements, and the provisions you include will depend on your company’s needs. It is important that you seek legal advice to ensure that your agreement is tailored to your specific business and protects all shareholders involved.

Beeksma law meeting with a client to prepare a shareholder agreement

Beeksma Law and Your Corporation

At Beeksma Law, we love supporting small businesses and corporations as they grow. We are active within many business communities and know how much you have put into making your business a success.

That is why we want to help you protect your business. We want to ensure you have the right shareholder agreement in place. Contact us today to schedule a consultation. We can determine what provisions to include and draft an agreement that meets your company’s needs.

We look forward to hearing from you!