About Peter Borszcz

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

Powers of Attorney

This week’s article is a request from a managing broker in Prince George on Powers of Attorney.

 

Due to fraud concerns, the use of a Powers of Attorney in purchases of homes can be quite limited. For example, most institutional lenders now will NOT permit a mortgage to be obtained by way of a power of attorney.  Aside from their use for military persons on active duty, the use of a power of attorney for purchase transaction is relatively rare.

 

Powers of Attorney are still used for sales, often where an elderly parent has transitioned from their fee simple home (often to assisted living).

 

For licensees, the general guidance from the LPM should be remembered “Whenever any Power of Attorney is contemplated or utilized in a trade in real estate, licensees should advise parties to seek the advice of their respective lawyers as soon as possible to ensure the form of Power of Attorney being used is valid and is acceptable for Land Title Office purposes. (LPM 4(a)(vii))”

 

It is important that the power of attorney be reviewed by a lawyer prior to a licensee relying on its use, when dealing with Sellers this means getting the power of attorney reviewed prior to activating the listing or otherwise relying on the representations of the purported attorney.

 

A couple important things to remember about POA’s:

  1. A POA can only be initially granted by someone who is an adult and competent (capable of making decisions about their financial affairs and understanding the consequences (s.11 POA Act)
  2. A POA can only be used while the Donor is ALIVE (see Re: Goodwin), after death it is the will that governs and probate must be obtained.
  3. A POA can be limited to only certain actions (ie; may state “to transfer mutual funds but not real property”)
  4. A POA in another jurisdiction or province many not be registerable in the BC LTO
  5. A POA can be limited, enduring or springing
    1. Enduring – will survive incapacity
    2. Limited – only for a specific task
    3. Springing – only effective after a certain event

Read the terms of the POA very carefully!

  1. A POA can be revoked, however notice of the revocation must be given to the attorney (s.28 POA Act)

 

I often get asked, how does one know if the person they are dealing with is COMPETANT. The rule of thumb here for a Licensee, is if there is ANY doubt, get a lawyer involved. The lawyer will look to assess the following:

Is the person:

  1.  capable of understanding the nature and consequences of their actions
  2. do they know the property they have and its approximate value;
  3. do they know the obligations they owe to their dependants;
  4. do they understand what they are empowering an attorney to do anything the adult could do with their financial affairs;
  5. do they understand that if the attorney doesn’t manage the property prudently, the value could decline;
  6. do they understand that that the attorney might misuse their authority;
  7. do they understand hat the adult can revoke their power of attorney if capable.

 

Speculation Tax Update

As Speculation Tax notices are starting to sink in I am getting lots and lots of inquires as to how Realtors should be handling this tax and advising their clients.

First and foremost, Licensee should be:

  1. Directing their clients to the government website:
    1. General Info: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/speculation-and-vacancy-tax
    2. Exemptions: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/speculation-and-vacancy-tax/exemptions-speculation-and-vacancy-tax
    3. How to declare: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/speculation-and-vacancy-tax/declaration
  2. Directing their clients to seek professional advice from a professional if they have further questions.

 

This new Speculation and Vacancy Tax Act is not exactly a straight forward read, and in the last months I personally have had a number of conversations with lawyers across the province on the possible interpretations of many provisions and how different scenarios will play out.

 

I am also aware that some local real estate lawyers have suggested a mere acknowledgement in in the contract and referring your client to an accountant for tax advice. This suggestion personally strikes me as good risk management for the lawyer, but not necessarily good for the average residential real estate seller who is now going to struggle to find an accountant who is up to speed on the issue during subject removal (likely they don’t get the advice and they just worry).

 

Here are (in my opinion) are a couple of good practices, how you proceed will depend on your client and your professional judgement:

 

From a Seller’s Perspective:

  1. OUTSIDE THE CONTRACT! – The Licensee should remind their Seller clients (perhaps in your listing agreement schedule A)
    1. “SPECULATION TAX – All Owners as at Dec 31 in the prior calendar year are required to declare and if they are not exempt, to pay Speculation Tax for the prior calendar year even if they are not owners as at July 2 (the payment date). The Seller is advised to review the government exemptions and seek professional advice regarding this tax liability.”
    2. Remember that we want to avoid excess clauses in the contract that are NOT directly negotiated between Buyer and Seller (the Realtor/ Licensee is not a party to the contract)

 

From the Buyer’s Perspective (IN THE CONTRACT)

  1. Choice 1 (SAY NOTHING) – If your Buyer is not worried about this, you can simply choose to leave NO MENTION of it in the contract, the Buyer, upon paying PTT (and not being an defaulting owner on Dec 31, see section 103/105 of the Act) will be exempt from tax in the year of acquisition (this has been clarified since the initial commentary legislation was first released in November).
  2. Choice 2 (ADD A REP AND WARRANTY) – If your Buyer is worried and they don’t want reduce the risk of being involved in a Speculation Tax audit
    1. Draft this into the Contract (first):
  1. This property is located in an designated taxable region under the Speculation and Vacancy Tax. The Seller represents and warrants to the Buyer that the property is eligible for an exemption in the prior tax year. The parties are advised to seek independent legal advice on the application of the Speculation Tax.
    1. Then, if the Seller counters that they are NOT EXEMPT, I would suggest the following:
  1. This property is located in an designated taxable region under the Speculation and Vacancy Tax. The Seller represents and warrants to the Buyer that the property is NOT eligible for an exemption in the prior tax year and the Seller solicitor shall undertake to holdback the amount of the tax from the proceeds of sale at closing and pay such amount to Province when due. The parties are advised to seek independent legal advice on the application of the Speculation Tax.

 

 

  1. IN THE NEWS – REAL ESTATE AND MONEY LAUDERING

Global recently published a news story about the prevalence of real estate and money laundering in the Vancouver market (here). This is a great reminder for Realtors on the requirements of the PCMLTFA and the Regulations on brokerages to:  set up a compliance program, keep good records, appropriately identify clients; and report where there is suspicious activity or a large cash transaction (see pg 45 from LU 2017).

 

REFERRALS TO PETER

The best way to make a referral is a telephone call or a joint email attaching the offer between the realtor, the client and myself (peter.borszcz@pihl.ca), these emails get a return call or email as soon as possible in all cases.

 

We do some interesting stuff around here, in addition to residential real estate within OMREB, we work on complex commercial, land assembly, development, native land, and industrial deals all over the Province. If you are outside of board area and are working on something unique, chances are we have done it, please feel free to give us a call (250-762-5434).

 

Have a great week,

Peter.

Peter’s Weekly – A Realtor’s Ethics Matter

With Remembrance Day long weekend behind us, Black Friday and Christmas are firmly ahead. Like all married men, I struggle at this time of year sky rockets trying to find the perfect gift for my wife… any great ideas?

 

In the News

  • Don’t Lie to your Regulator – A realtor in Vancouver was suspended when he forged a fake medical excuse note for one of his unlicensed assistants after he had handed in a licensing assignment late (CBC story here).  His assistant had texted him “I need a note somehow saying I was in the hospital.”… and the Realtor offers “We will make it work,” he wrote. “My (family member) said he could do letter np.”… the BCREA administrator discovered and reported the forgery. The assistant will have to undergo a conduct hearing prior to continuing to be a licensee and the Realtor (who was complicit in the forgery) was fined, suspended and ordered to take an ethics course…. Remember your conduct as a regulated professional extends to all that you do.

 

Christmas Closings

  • Christmas break is NEVER a good time to close a real estate deal. Many banking, legal and accounting professionals are away (our office is closed during the Christmas week). Unless there is a good corporate year end reason WHY a deal needs to close on December 31, you should be recommending to your clients to schedule their closings for earlier (DEC 20th) or later (JAN 4th). Note in both cases I have picked these dates to allow some time for requesting of mortgage funds from banks or administrative delays in receipt of funds.  Remember CLOSING DATE and POSSESSION DATE are often different days (and should be at least a day apart)… at Christmas time it is VERY common to see CLOSING DATE of DEC 20th and a POSSESSION DATE of DEC 28th (for example)… as this is a much “safer” transaction than hoping all your deal closes between Christmas and New Years.

 

Encroachments

  • Use GIS Mapping as part of your due diligence to flag for potential encroachments (RDCO GIS). Everyone probably remembers the case of the swimming pool encroachment in the Upper Mission where the court ordered the swimming pool removed (see my blog post here)…  In a similar case, I had a meeting today with clients of a great Royal Lepage Realtor that had looked at the GIS mapping of a property and after looking at the City file discovered a large potential encroachment of the neighboring property.  The client, a first time home buyer, had a meeting with myself, their Realtor and Andrew Prior (the real estate litigator at the office) to discus the options for proceeding here, including both transactional, negotiated and court option. It was a great team approach to getting these clients to advice they needed.

 

Getting  Pihl Law Corp involved is good risk management.

If your client does not know a real estate lawyer…. I really appreciate talking with these  clients EARLY in their real estate journeys, have them call (250-762-5435) or email (peter.borszcz@pihl.ca) and I am happy to talk with them personally to get them on the right track…

Our valued referring Realtors always get the inside track here… our firm works to ensure that your clients get connected and get the advice they need to make their real estate decisions.

Before you List…

  1. Contact Your Bank– find out how much you will owe the bank to discharge your mortgage. Some important questions for your banker include:
    1. How much do I currently owe?
    2. Is there a payout penalty, if so, how much?
    3. Are there other fees (ie; a discharge fee) which is also payable?
    4. Do you owe more than your home is worth (more info on Distressed Sales here)?

It is a term of every real estate contract that all financial charges be discharged. In the event that the net proceeds of sale (after commission) are not sufficient to pay the mortgage, you will have to bring in money to complete the deal.

  1. Clean up your Land Title
    1. Has your name changed since you last bought your home?
    2. Has a contractor or CRA filed a lien against your property?
    3. Are there certificates of pending litigation or other charges on title that will be required to discharged prior to closing,

Contact your lawyer early and get these dealt with asap before listing. If these items are on title during the selling process they will weaken your bargaining position with potential Buyers.

  1. Do you have the Legal Capacity to Sell?
    1. Are you going to be present during the selling process or are you planning a vacation in the near future?
    2. Does the you as seller have the mental capacity to understand the sales process?
    3. If you are not the registered owner, do you have a power of attorney?
    4. If the owner has died, have you been granted probate?

If there are issues here that are expected, contact your lawyer who can assist you with strategies to deal with some of these issues.

Have questions, Call or Email Real Estate Lawyer Peter Borszcz at Pihl Law Corporation (250-762-5434).

Strata Documents and Minutes

Is strata right for me? This is a personal question and each strata is different. When you are buying into a strata you are buying into a community and you should carefully read through the Form B package, the rules, minutes, and bylaws to ensure that who your are matches the “personality” of the community. When in doubt don’t be afraid to call the strata council president.

The Strata Form B is a large stack of documents, should I get a lawyer to review? Most of these documents are strata rule and minute and are not written by lawyers, they are written by your strata council and should be easy to understand. Unfortunately legal review of these minute is not as effective as a your own personal review as it is most important that you (and not your lawyer) feel comfortable with the way the community if being run. This being said, I always encourage my clients to, after reading the minutes, give me a call when any specific items of concern they may wish to discuss.

What are some red flag in the strata Form B package and minutes? Things to watch out for include: discussion of future repairs, reoccurring problems and disputes, and dysfunctional or disinterested councils.

What is a property depreciation report and how can I tell if a strata contingency fund is “fully funded”? Each strata is required to commission a property depreciation report every three years. This report sets out models which detail how the building will require maintenance and upkeep over the next few decades and can assist in foreseeing the likelihood of special assessments. Each depreciation report sets out three funding models and by comparing the current state of the contingency reserve and the monthly CRF contribution to these models you can determine how closely the strata is following the reports recommendations.

Written by Kelowna Real Estate Lawyer Peter Borszcz.

Home Inspection Subject Conditions

 Why are Home Inspections so Important in BC?  Because the state of the law in BC is generally “buyer beware” absent fraud or negligent misrepresentation or a latent defect.

Does the Property Disclosure Statement Protect Me? Not much, it is only a statement of the Sellers Current Knowledge and is a “snapshot in time”.

All I need is a home inspection right? Not always, home inspectors are generalists and if they identify a problem a good rule of thumb is to get the specialist out there for further investigation.

 

Peter Borszcz is a Kelowna Real Estate Lawyer practicing law at Pihl Law Corporation in Kelowna, BC.