Are you common law? Then your spouse doesn’t need your consent

In Ontario, the law is very clear: common law and legally married are two separate things. In the context of real estate, that means that, if the house is only in your spouse’s name and you aren’t legally married, your spouse can mortgage or sell the property without you even knowing, let alone consenting. Get married, get on title, or be very aware of the limits of your rights.

Are you a first-time buyer?

It seems like it should be a simple question: if you’ve never personally bought a house, you should qualify, right? Unfortunately, it’s not so simple.

If you live in a home that your legally married spouse owns, you no longer qualify. Same if you are common law (in Ontario, that’s after three years of living together or any time of living together if you have a biological child together). If your spouse owns property, even if you don’t live there and never did, you no longer qualify. Even if you or your spouse got put on title to a property for some other purpose but didn’t truly buy the property, you don’t qualify – this happened once to a client of mine who got put on title to his parents’ Florida condo, and therefore no longer qualified as a first-time buyer.

This can have a significant for a first-time buyer. There’s the land transfer tax rebate – up to $4,000, plus more if you’re buying in Toronto. There’s the RRSP Home Buyers Plan, which allows you to withdraw from your savings, tax-free, as long as you repay yourself within 15 years. And there’s the tax refund available on expenses related to buying your first home that you can claim through CRA when you file your taxes for the following year.

If you’re planning to buy, and you’re counting on using a program available to first-time buyers, be absolutely sure that you qualify before you get started.

Always budget for your property taxes

Final tax bills are starting to come out in Simcoe County. Here’s a little known fact: if you don’t pay your property taxes, your city can sell your house in order to collect them. When I was a law student, I prepared tax deeds for people buying these properties. There were people who lost their properties over a few thousand dollars in back taxes.

In Barrie, as in many municipalities, taxes are due four times a year. You can choose to pay in those quarterly instalments, or you can (usually) set up a payment plan and pay each month as a direct withdrawal. Some banks will also let you pay your taxes alongside your mortgage, and they will take care of sending the money over to the municipality, and some banks require that you pay your taxes through your mortgage.

However you pay your taxes, just be sure that you pay them.

Don’t forget about other costs when shopping for a house

Short and sweet today: When thinking about the cost of a home, remember to be aware of more than just mortgage payments. You will need to pay taxes, house insurance, and utilities, and you should always budget for repairs and emergencies. When calculating whether you can afford to buy, don’t forget all of the little costs that add up.

Co-signed

With the mortgage rules changing almost daily these days, it is becoming increasingly difficult to qualify for financing. As a result, many young and first-time buyers are turning to parents or other relatives to co-sign the mortgage in order to get that approval.

As a co-signer, you do have to be very careful. You are now on the mortgage, so if the true owner stops paying, you’re on the hook – and your credit will take a beating. Also, you are likely going to be on the house too, so that could affect your ability to qualify for additional loans for yourself, whether a new credit card or credit line or refinancing your own mortgage.

Ultimately, you’re the only one who can decide whether it makes sense to co-sign a mortgage, but you should definitely be getting legal advice before you sign everything to be sure that you really want to do it.

Severing ties

What happens when you own a property jointly with someone, and don’t want to share any more?

Your kindergarten teacher probably wouldn’t be happy, but technically, you can sever a joint tenancy without any notice to the other parties. Basically, you do a transfer from yourself to yourself, with a statement that it is being done to sever the joint tenancy. The other person won’t find out unless they decide to look. Possibly not the best surprise to leave someone, but sometimes it is important to make sure that your share goes where you want it to go.

Can you cancel the closing?

As a follow up to my post last week, what happens if you’re the one who doesn’t want to close?

Generally, if you refuse to close, you must have a legitimate reason. As a buyer, if something is uncovered that would severely affect your enjoyment or use of the house, or your title to it, and you had no way of discovering it any earlier, you may be justified in not closing. As a seller, you are somewhat limited in why you can legitimately refuse to close, beyond not receiving funds. If you believe you have a legitimate reason, and refuse to close, you still run the risk of ultimately being found in the wrong, and then you will have to pay all of the other side’s costs that result from not closing. This could be additional mortgage costs, moving costs, or even the extra cost of buying a different house.

Before putting in or accepting an offer, be certain that you want it.

Specific performance

You put in an offer and it was accepted, but some time before the closing date, the seller decided not to complete the deal. Can you sue to make them sell you the property?

In Ontario, there is a concept called “specific performance” which, essentially, means that you are looking to have the contract fulfilled rather than get compensated for your loss. Specific performance, however, is not an easy thing to get. Generally, courts prefer to award damages (that must be proven) rather than force specific performance. Specific performance will usually only be ordered when the property is so unique that it would be impossible to find something similar. As always, consult a litigation lawyer before assuming that you can get the house in the end.

Do you have to pay HST?

Barrie always has a lot of new construction going on. New homes in Ontario are subject to HST on the purchase price. Usually, this is built into the offer price, so that you don’t end up having to pay extra, but that always factors in that you’ll qualify for the provincial and federal HST rebates on a new home. If you are buying a brand-new home, you may entitled to a rebate, but only in specific circumstances:

  1. You must intend to live in it as your primary home. It can’t be a cottage or other seasonal residence.
  2. If you are not going to live there, an immediate family member of yours (or of your spouse’s) must intend to live there. You can allow your brother to live there and get the rebate, but you can’t rent it to a friend.

If you don’t meet these requirements, you may end up paying a lot in HST that you weren’t budgeting for. If you aren’t sure whether you qualify, as a professional accountant before you go firm on your offer.

Left behind

I have had many occasions where purchaser clients arrived at their new home to find it full of items that the vendor left behind; most recently, a buyer client of mine agreed to allow the seller to leave behind a boat that couldn’t be moved because of the weather, which was only removed the very last day the seller was permitted to leave it there. (And the seller left behind some junk along with the boat, that he conveniently forgot to remove when he picked his boat up.) As a seller, you can only leave items if you have specifically agreed to do so in your agreement of purchase and sale. This includes construction materials; though it is easy to assume that the buyer would want leftover paint or trim, if the buyer doesn’t want it, you could be on the hook for the cost of removal after closing. If you aren’t sure, ask – before closing.