Author Archives: Peter Borszcz

About Peter Borszcz

Peter Borszcz is a Real Estate Lawyer and Business Lawyer practising law in Kelowna, British Columbia, Canada.

“Our Place” on the Lake – Inter-Generational Issues with Secondary Residences

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For many Kelowna visitors, our lakes, mountains and sunshine are a place to unwind with their friends and family at secondary vacation homes. As these properties are now starting to get passed on to the second (or third) generations,  many interesting legal issues are arising including:

  1. Income Taxes (capital gains) payable on the death of the Parents on Title;
  2. Income Taxes payable due to placement of kids as Joint Tenants with Parents (to avoid #1)!;
  3. “Sharing” issues between family members on things like upkeep costs and usage times;
  4. Liability issues in the event of a judgment against or divorce of one the owners (where property is shared);

Some Potential Solutions Include:

  1. Legal Ownership Structuring – Does there need to be a “Co-Ownership” agreement setting out the use and enjoyment of the property between multiple families? For larger or more complex family holdings, has a Family Holding Company or Trust been considered (Divorce/ Liability Protection)?
  2. Tax Planning – Capital gains will be payable upon transfer to children (whether as joint tenancy or upon death), has this tax been accounted for (life insurance may assist)? Is a principal residence exemption/ election available (or part thereof), especially if the primary home is not expected to appreciate?
  3. Securing Family Loans – Where a property (or portion thereof) is to be transferred to kids without immediate payment, parents should ensure that a promissory note/ mortgage evidence the loan (important in case of a future marital breakup).

Need help with a family vacation residence?

Call Kelowna Real Estate Lawyer Peter Borszcz.

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WFN – WEST HARBOUR LEASE FAQ

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West Harbour is a residential community and marina located immediately across Lake Okanagan from Kelowna, BC and developed by Troika Developments.

  1. What is the term?  Unless earlier terminated, the sublease expires June 5, 2107. Upon termination of the lease, your leasehold interest will expire and you must remove all belongings and leave the premises in good condition. A lease may be terminated prior to the end of the term in the event of an uncured default of either the sublease of the head-lease.
  2. Is the lease entirely prepaid?  YES – In addition, there are additional components which you are responsible for paying on a monthly ongoing basis being: Additional Rent and Home Owners Association dues, which will include common costs for property taxes, utilities, common area maintenance, common area insurance, and common area utilities.
  3. Other financial obligations under the lease? The rent is pre-paid however, as with other strata-type properties, there are additional components which you are responsible for paying on a monthly ongoing basis being such items as: Property Taxes and Utilities are payable to the WFN and Home Owners Association dues are payable (similar to strata fees) which will include common costs for property taxes, utilities, common area maintenance, common area insurance, and common area utilities
  4. Does the lease allow the owner to assign (sell) to a third party? YES – but, prior to assignment (sale) to any third party a certificate of good standing will have to be obtained. The Assignment must be registered with WFN. Additionally, there is a non-assignable, non-transferable sublease for a boat slip which terminates upon assignment to a third party, a $500 assignment fee is payable by the Buyer.
  5. Does the lease permit the owner to obtain a mortgage from a bank? Yes – the lease will permit the mortgaging of the Tenant’s interest without consent of the Landlord. The lease also contains those provisions which are required by the CMHC to provide insurance to lenders.
  6. Does the lease restrict the use of the property? Yes- Your use of your property is restricted to residential uses and home-based business uses which are subordinate to your residential use and carried on indoors.
  7. Are there unique insurance requirements? Yes – the Tenant must obtain a Personal Liability Insurance policy in the name of both the Tenant and the Sublandlord (West Harbour Holdings Ltd.)  in the amount of $2,000,000 and maintain “All Risks” Property Insurance upon improvements of Subleased Premises to their full insurable value.
  8. Are there provisions for a homeowners association? Similar to a Strata, The Home Owners Association or Sub-landlord may create bylaws and rules and fines may be imposed if you breach those bylaws or rules

By Kelowna Real Estate Lawyer Peter Borszcz.

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Why Kelowna Real Estate?

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I grew up here, so admittedly I have always has a little bit of a bias toward this valley. But, I recently had lunch with one of my clients who has an Alberta based business and a vacation home in Kelowna. Given the recent changes in our economic environment, a relatively weak US housing market, and a strong Canadian Dollar, he asked how come people continue to look to buy second homes in the Kelowna area?

In my opinion, the attraction of the area is:

  1. Ease of Access– Kelowna is a one day drive (or less) from Calgary, Edmonton, Vancouver and the oil and gas fields.  The direct flight is even faster.
  2. No Health Care Issues – As someone who has had to spend a night in a foreign hospital, I can say there is a lot of value in having a health care system you understand close by.
  3. No Taxation Issues – CRA treats property across provincial boundaries exactly the same, no special filings are required.
  4. No Residency or Visa Issues – Spending a large amount of time in a foreign jurisdiction requires permission of that foreign government (a visa).
  5. A Real Four Season Lifestyle – World Class Skiing, Golfing, Beaches, Wine all in one place. If you are bored in Kelowna, I guarantee next week will be different.
  6. Good Real Estate Value – the average home price in Kelowna is lower than the average home price in Edmonton, Calgary, and Vancouver.

Those are the good things, but I also think there are many areas where Kelowna can improve, especially in the area of business development. The city needs to constantly be looking to attract businesses to the valley. Our elected officials (provincial and municipal) need to look at initiatives to: a) reduce administrative barriers for business, b) facilitate infrastructure investments that help business grow, and c) connect quality of life with quality careers.

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Written by Kelowna Real Estate Lawyer Peter Borszcz.

WFN – ELKRIDGE LEASE FAQ

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Elkridge is a mixed townhome and single family home community located on Elk Road near the Two Eagles Golf Course in Westbank, British Columbia

  1. What is the term?  Unless earlier terminated, the sublease expires: January 2, 2109. At the end of the term, your leasehold interest will expire and you must leave the premises in good condition.
  2. What type of Lease is it? Upon the sale of the last unit in the development and at the discretion of the Developer, Elkridge uses a “Lessee Corp”  as Sublandlord model where the Owner may be issued a share Homeowners Association which is the tenant of the Headlease (note this has yet to occur).
  3. Is the lease entirely prepaid?  YES – In addition, there are additional components which you are responsible for paying on a monthly ongoing basis being: Additional Rent and Home Owners Association dues, which will include common costs for property taxes, utilities, common area maintenance, common area insurance, and common area utilities.
  4. Other financial obligations under the lease? The rent is pre-paid however, as with other strata-type properties, there are additional components which you are responsible for paying on a monthly ongoing basis being such items as: Property Taxes and Utilities are payable to the WFN and Home Owners Association dues are payable (similar to strata fees, and include a 15% administration fee) which will include common costs for property taxes, utilities, common area maintenance, common area insurance, and common area utilities
  5. Does the lease allow the owner to assign (sell) to a third party? YES – but, prior to assignment (sale) to any third party a certificate of good standing will have to be obtained and a transfer fee will be payable. The Assignment must be registered with WFN.
  6. Does the lease permit the owner to obtain a mortgage from a bank? Yes – the lease will permit the mortgaging of the Tenant’s interest without consent of the Landlord. The lease also contains those provisions which are required by the CMHC to provide insurance to lenders.
  7. Does the lease restrict the use of the property?  YES – Your use of your property is restricted to residential uses  and home based businesses only.
  8. Are there unique insurance requirements? YES – You are required to insure your premises according to the terms of the Sublease.
  9. Are there provisions for a homeowners association? Similar to a Strata, The Home Owners Association or Sub-landlord may create bylaws and rules and fines may be imposed if you breach those bylaws or rules

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Home Inspections – What Home Buyers Need to Know

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Recently, a local Realtor and Home Inspector have been in the news as a Buyer has claimed that they have bought an “unlivable” home (full CBC News Story here) and the aggrieved Buyer is claiming against the Realtor and Home Inspector in small claims court.  From my reading of the story and documents (as presented by CBC) there are obviously some salient points that have been downplayed or glossed over:

a)      The Buyer bought the home “sight unseen”

b)      The Home Inspection (as posted by CBC) noted:

  1. Damaged, rotten windows with moisture damage
  2. Old galvanized piping
  3. The house was 80+ years old
  4. The home inspector was unable to access the crawl space
  5. Major cracking in the ceiling
  6. Damaged sinks and freeze vulnerable piping
  7. Missing baseboard heaters
  8. Major electrical issues requiring further inspection

So the question that comes to my legal mind given these facts is “would a reasonable person think they were buying a home without major flaws?”. Obviously there are many more facts to this story which will be uncovered in the course of the court proceedings on this matter.

Whenever I discuss home inspections with Buyers I always stress that home inspections are like going to see a doctor at a walk-in clinic; Home Inspectors are generalists, they have a broad base of knowledge, but they are not specialists. The take home message for Realtors is that if there are “issues” that are discovered in a home inspection, Realtors should ensure that their clients are directed toward professionals (plumbers, engineers, roofers, ect…) who are in the best position to assess the magnitude of the problem and provide a realistic cost of repair.

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Can I put a swimming pool in the backyard?

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I can still remember the day when my dad told me that we were putting in a pool at our old Nathan Road home in the Okanagan Mission in Kelowna, BC. It was better than Christmas. My sisters and I lived in that pool every summer thereafter. Swimming has always been an integral part of my life, as Kelowna Aquajet, as a lifeguard at Swim Bay in Peachland, and now taking my daughter swimming every weekend to the H20 Centre.

I get excited when Buyers and Realtors ask, “Can I put a pool in my backyard?”, but the answer depends on a number of factors including:

  1. Land Title Restrictions
  2. Bare Land Strata Restrictions
  3. City of Kelowna Building Permit Requirements
  4. Water Input and Discharge Considerations
  5. Security and Safety Concerns

A. Land Title Issues

Many different land title charges on a property can affect the placement of a pool on the property. The terms of these charges need to be obtained from the Land Title Office and reviewed with your Real Estate Lawyer.  Among the potential “red flags” are Easements, Statutory Rights of Way, and Covenants which may prevent the placement of a pool in the preferred location.

B. Bare Land Strata Restrictions

Bare Land Strata subdivisions “look” like fee simple residential subdivision, but the Strata Property Act will apply and the strata will be able to place rules and restrictions on the use of the property (Ironhorse is one local example). When considering a pool in one of these neighborhoods, the strata bylaws and rules need to be reviewed to ensure a pool is permitted.

C.  City of Kelowna Requirements

i. Fences – the City of Kelowna requires that a fence maintained in good repair surround the pool having a height of not less than 1.07m (3.5 ft.) that has no more than a 10 cm gap and designed to prevent climbing. Any gates must be “self-closing”. This is a minimum, and from my experience as both a lawyer and lifeguard, I would recommend that clients go further and install at least a 5 foot fence that does not allow a child to “see through” and be tempted to climb over into the pool area.

ii. Water Input and Management – the City of Kelowna prohibits the filling of a pool until the fence is complete and the home owner should note that some local municipalities have, in the past, prohibited filling of pools in times of drought (City of Vernon). Chlorinated pool water cannot be discharged into the a municipal storm water system (this is both a municipal and federal requirement). A water discharge plan should also be part of the any pool design. If a home owner discharges water and it flows onto a neighboring property, the home owner may be liable under the tort of nuisance for damages that are caused to the neighbor.

Summary

A home owner wishing to install a pool will need to consult a number of professionals, including a Lawyer, BC Land Surveyor, municipal officials, and the pool contractor.

  1. Consult your Lawyer and obtain the terms of all registered non-financial charges from your lawyer, including easements, rights of way, registered no build/ no disturb zones, septic easements.
  2. Ensure you know the location of the non-financial charges, if unsure contact a BC Land Surveyor and obtain a consolidated site plan.
  3. Ensure you have a water discharge plan for the property.
  4. Review the current building permit requirements with a City of Kelowna official.

Written by Kelowna Real Estate Lawyer Peter Borszcz.

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Buying Foreclosure Properties in Kelowna, British Columbia

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By: Peter Borszcz, Real Estate Lawyer, Pihl Law Corporation

Irrespective of economic conditions, foreclosure properties are often viewed as a “deal” for the savvy real estate investor. However, courts in British Columbia have a duty to ensure that foreclosure properties are being sold as close to their fair market value as possible. Usually this means ensuring that a property is marketed with a REALTOR on the MLS system.  Here are some key points for Home Buyers to remember when they are buying foreclosure properties in Kelowna and other parts of British Columbia:

1.      Offer is Subject to Court Approval.

Buying a foreclosure starts much like any other real estate deal, except that often you are negotiating with the Bank, the Bank’s Realtors, and the Bank’s Lawyers. This means that offers must be open for acceptance for longer periods of time to allow the institution’s foreclosure committee time to consider your offer.  Unlike a regular real estate deal, just because your offer has been accepted does not mean that “You Have a Deal”.

All deals are subject to court approval. This means that a judge (or master) must approve the terms and conditions which have been agreed to by the bank. The judge will be ensuring that the current home owner has been given proper notice of the proceeding and that they have not “paid out” or redeemed their mortgage prior to the Court Date.

A Buyer should keep in mind that a judge has absolute discretion in her courtroom and success in court can never be guaranteed. The outcome will vary depending on whether the application by the lender for sale of the property is uncontested, contested by the home owner, or if there is multiple offers presented in court.

2.      No Other Subject Conditions

The offer which is presented to the Court (and the Lender) must not contain any subject conditions for the benefit of the Buyer. In most real estate transactions, subject conditions allow time for a Buyer to perform due diligence on the property they are purchasing while binding the Seller to the deal (for example: obtain a home inspection). In a traditional real estate deal, if an issue is discovered (ie; a leaking roof) after the deal signed but prior to subject removal, the Buyer will have an opportunity to re-negotiate with the Seller and will not be legally obligated to complete in the face of the new information.

In foreclosure transactions, the Buyer must do all due diligence prior to knowing if their offer will be acceptable to the bank or the court. This means that a Buyer is faced with a dilemma: a) potentially spend thousands of dollars on home inspection costs, appraisal fees, and other consultants only to have the property purchased by another party on court day; or b) buy an “as-is” property without proper due diligence which may have many costly unforeseen complications.

Financing is one area in foreclosure transactions that cannot be overlooked. Once the court approves the offer, the Buyer is legally obligated to complete the transaction and pay the Purchase Price. Buyers must ensure that their mortgage brokers have received an unconditional approval from their lender prior to proceeding to Court.

3.      Property Purchased “As-Is”

In a standard residential real estate transaction, the Seller provides a Property Disclosure Statement which provides the Buyer with a modest amount of disclosure on the condition of the premises.

One of the key differences between a foreclosure purchase and most residential real estate transactions is that the Buyer is purchasing the property “As-Is”. In a foreclosure, the seller (Lender) explicitly is making no representations or warranties about the Property and there is no Property Disclosure Statement which is provided (or it is simply blank).

When a Buyer is purchasing a property in “As-Is” condition, the onus is on the Buyer (caveat emptor) to ensure that the property meets the Buyer’s needs. Commonly foreclosure properties have issues including: non-compliance with bylaws, illegal activity, squatters, no occupancy certificates, unhealthy conditions (mold), and very poor maintenance.

The Buyer needs to understand that the condition of the premises may change dramatically between the date of viewing to the date of possession. The Buyer is inheriting all these potential issues, “warts and all”.

4.      Be prepared for Court

Once a Buyer’s initial offer is accepted, the Lender’s lawyers will set down a date in Court for approval of the offer. This initial offer becomes part of the public court filing and other parties may show up in court to present better offers. The Lender’s sole responsibility is to set the date for the chambers hearing, if the initial Buyer wishes to have the option of revising their offer in Court (usually in the face of competing offers) they (together with their agent) should attend in chambers on the date. Buyers are well advised to have their “BEST OFFER” ready on the court date (with an appropriate deposit in the form of a Bank Draft) if there are competing offers.

It is important that any offer presented to the court should contain the correct information as the court will rely on the offer to draft the Order Approving Sale which will be filed in the Land Title Office by the lawyers for the successful Buyer. Care should be taken to ensure: Correct Legal Names of Purchasers; Correct Legal Description of All Property; and Correct Description of Property Interest Acquired (i.e.; Leasehold v. Freehold)

5.      Closing and Possession Issues

Once you are successful in Court and the Court has granted you, as Buyer, an Order Approving Sale, there are still a number of potential complications. At this stage it is important that you are using the services of a Real Estate Lawyer familiar with closing of distressed and foreclosure properties. Obtaining title to your new home is much different in the case of foreclosure property as there is no transfer filed in the Land Title Office and instead the actual Order Approving Sale is reviewed and approved by a Land Title Examiner. If there have been any mistakes in drafting of the order by the Lender’s counsel, the order may be defected by the Land Title Office and the Lender’s counsel only obligation will be to correct the order.

Possession of a foreclosed property is not guaranteed on the Closing Date. A tenant, squatters, or the former owner may be present on the property. In this case the bank is only required to use reasonable efforts to obtain another court order (writ of possession) ordering the property be vacated. This process can take additional time. A Buyer should not rely on timely possession of foreclosure property.

6.      Liability Issues

In summary, Buyers assume a number of additional liabilities when foreclosure property is purchased, including:

a)                Property Damage

b)                Property Non-compliance with law and by-laws

c)                Illegal Activity

d)                Adverse Possession of Premises

e)                Potential Tax Liability (GST and Non-Resident Withholdings)

f)                 Potential Strata Assessment Liabilities

Foreclosure property purchases can represent a good deal for many savy and experienced property investors however, Buyers should carefully enter into these arrangements fully educated on the risks of purchasing foreclosure property.

This paper is based on the lecture provided to at the Okanagan Mainline Real Estate Board annual general meeting on March 6, 2013.

Foreclosure Slides Here!

Written by Kelowna Real Estate Lawyer Peter Borszcz.