Toronto at Home - A Real Estate Blog

Judge chides bank in mortgage fraud

Ontario is experiencing a "serious mortgage-fraud plague," says a judge who released a blistering decision yesterday that chastised the Toronto-Dominion Bank for failing to detect a scam that left a North York couple without their home.

In a decision seen as precedent-setting, Superior Court Justice Randall Echlin ruled that Seyed Aboulgasm Rabi and his wife, Shohreh Shafiei, were the innocent victims of fraudsters who stole their identity, transferred the family condo behind their backs to an accomplice, then placed a $250,000 mortgage on the property, took the money and disappeared.

In bold, unequivocal language, Echlin nullified the mortgage, saying the couple "did nothing in any way to bring this nightmare upon themselves" and that the bank was not, as it had portrayed itself, an "innocent victim" of the crime.

Although the bank admitted that the Rabi-Shafieis were innocent victims of a "sophisticated fraud" — the couple did not learn about the fraudulent transactions until long after they had occurred — it argued that under a 2005 Ontario Court of Appeal decision, the fraudulent mortgage became legally valid and enforceable once it was registered on the province's land-title system.

But Echlin noted: "Ontario is currently experiencing a serious mortgage-fraud plague. This action involves one such fraud."

Toronto lawyer Morris Cooper, who represents the Rabi-Shafieis and several other victims of mortgage fraud in Ontario, described Echlin's ruling as "a remarkable precedent-setting decision."

"This is the first time we've had a court address in such depth what the judge describes as the `plague' of mortgage fraud in Ontario," he said. Cooper said the decision will "undoubtedly" be considered by the Ontario Court of Appeal when it reviews its controversial earlier ruling at a special hearing on Nov. 28.

Echlin ruled that the bank should not be able to rely on the strict letter of the law since it had not done enough to check out the mortgage — such as sending an appraiser to the couple's front door to ask a few questions before handing over the large amount of money."A person's home is their largest lifetime investment," he said. "A homeowner's rights ought to be at least equal to the rights of commercial lenders in the face of the increasing prevalence of identity thefts."

See full article in the Toronto Star:

Real estate fees and commissions

The Toronto area real estate market has shown steady growth for nearly 10 years, resulting in positive outcomes for consumers, the real estate business and the economy as a whole. However, this period of growth has also led to a number of misconceptions about the business.

Perhaps the most common misconception is that in a hot market, properties "sell themselves" and the REALTOR® has less work to do in order to earn commissions. Many consumers are not aware of how the commission structure works, and given the significant amount of money changing hands in a real estate transaction it is natural for them to want to know where their money is going. Let’s take a brief look at how commissions work.

When a consumer decides to sell their home, they often agree to pay their chosen salesperson (actually the brokerage) a certain percentage of the selling price of their home upon completion of the sale. This rate is generally specified in the Listing Agreement that is signed by the homeowner and the listing salesperson. As in any business transaction, prior to signing an agreement the consumer should firmly establish the level of service they will be receiving and the fees they will be required to pay.

When a home sells, commission is initially paid to the real estate brokerage that employs the listing salesperson. In most cases a portion of this money - often half - is immediately forwarded to the company working on behalf of the buyer for services provided in bringing the transaction to fruition. The remaining funds, meanwhile, may be distributed in a number of ways depending on the business model of the listing brokerage.

Some brokerages retain a portion of the listing salesperson’s commission for operational costs like company management, rent, office staff, employee training, franchise fees and so on. Other companies may forward all of the commission to the salesperson but charge a significant monthly fee.

A good portion of the commission earned goes toward maintaining the business operation and, of course, marketing and selling the home. Keep in mind that most real estate professionals are paid solely on commission, with no base salary. Their livelihood relies on the level of service they provide their customers and clients.

It is also important to understand that as the real estate market grows, so too does competition for commissions. An active real estate market typically brings in a large influx of new registrants that reduce market share for each individual. For example, the total number of sales in 2005 was 24 per cent higher than in 2001, the beginning of the most recent “hot market.” By comparison, the number of Toronto Real Estate Board Members during that time increased by 33 per cent, to over 23,000 active Members. The 7,000 transactions, on average, that take place each month are divided among these Members.

Learn about our commitment to reduce the cost of selling homes by providing full MLS® service at 3%.

Ajax: 50th Anniversary

Remembering the past ...
Preparing for the future

The Town of Ajax, named after the courageous and determined British warship HMS Ajax, has a history deeply routed in industry and community spirit.

The Town began as the site of a munitions plant built by the Federal Government and operated by Defence Industries Limited (DIL) to provide war munitions to support the Second World War Allied effort.

In 1950, in response to a petition from citizens of Ajax, the Ontario Municipal Board (OMB) ordered that Ajax become the Improvement District of Ajax but that it would be owned by the Canada Mortgage and Housing Corporation and administered by a provincially appointed Board of Trustees.

In 1954, a petition for Town status was submitted to the OMB and the Board once again ruled in favour of the petition and the Town of Ajax was born. The first Council, comprising of Mayor, Reeve, Deputy Reeve and six Councillors, was elected on December 11, 1954 and were sworn into office at the first Council Meeting on January 10, 1955.

What began as a munitions plant during the Second World War has grown over the last fifty years into a vibrant community with a robust economy that will continue to grow well into the future.

See homes for sale in Ajax.

The dream house nightmare

Top court rules anyone building a home can be liable

by Bob Arron

Imagine living in a house, which shifts slightly under a heavy snow load or in a high wind, because of an unstable centre-bearing wall. Whenever it rains, water enters the building through a breach in the building envelope. The flooding in the basement creates a proliferation of toxic mould.

Sharon Ann Mariani got more than she bargained for when she moved into her 3,459-square-foot house in the Township of Puslinch, south of Guelph, in 1991. The house had been built as a dream home by John and Anne Lemstra back in 1987. Although not professional builders, they did much of the work themselves, and enlisted the help of a contractor and some sub-trades. They had a building permit, but moved in without a final inspection or an occupancy permit.

Last week, the Supreme Court of Canada wrote the final chapter in a case, which began back in 1993 when Mariani sued the Lemstras and the township for damages. After a nine-day trial in 2001, Justice Thomas Dunn ruled that the house was a write-off and had to be demolished. He awarded Mariani $300,000, plus interest and costs. The Township was responsible for 25 per cent, but had already settled with Mariani for $150,000.

Justice Dunn based his ruling on fraudulent representation and negligent misstatement. The listing agreement for the house described it as well-built, but the agreement of purchase and sale contained no warranties.

Last year, the case got to the Ontario Court of Appeal. Justice Robert Sharpe found that there were no grounds for finding that the Lemstras were responsible for fraudulent or negligent misstatement. The three-judge panel held the Lemstras liable for negligent construction. Their liability was based on a 1995 decision of the Supreme Court of Canada in the case of Winnipeg Condominium Corporation 36 v. Bird Construction. That case ruled that a builder owes a duty of care to subsequent purchasers, not just the first buyers, with respect to dangerous defects.

The Court of Appeal decided that Mariani was only entitled to "to the reasonable cost of putting the building into a non-dangerous state" and not any resulting damages such as repairing Building Code defects. It reduced Mariani's damages from the cost of demolishing and replacing the house to the cost of repairing the defects -slightly more than $75,000, less $30,000 in costs awarded to the Lemstras because they were successful in having the damages reduced. The Lemstras, however, had to pay court costs of the original trial.

After the Ontario Court of Appeal decision, both parties were unhappy and applied for permission to appeal to the Supreme Court of Canada. Earlier this month, the Supreme Court dismissed both applications for leave to appeal without giving any reasons. This effectively means that the Court of Appeal judgment is final, and the Supreme Court in Ottawa will not interfere with it.

In the aftermath of Mariani v. Lemstra, anyone building a home, whether a professional or amateur builder, can be held responsible not only to the first purchasers, but to an endless chain of subsequent owners, if the house contains hidden dangers or unsafe conditions.

The case emphasizes once more the importance of buyers of new homes checking out the reputation and track record of their builders. Using a professional home inspector when buying a new or resale home is money well spent.

Toronto Realtors oppose greenbelt

More Ontario residents won’t be able to afford homes if the provincial government’s Golden Horseshoe Greenbelt proposal becomes law. That’s the position of the Toronto Real Estate Board (TREB) and Greater Toronto Home Builders’ Association (GTHBA), who are calling on the government to reconsider its legislation to slow growth in the GTA.

“We’re asking the government to also focus on the big picture,” said Ron Abraham, president of the Toronto Real Estate Board. Abraham said that REALTORS believe that growth management is critical to maintaining a high quality of life, but “enhancing the GTA’s quality of life will be irrelevant if people can’t afford to live (there).”

The government introduced the greenbelt protection legislation on October 28th in an attempt to address urban sprawl around the Golden Horseshoe. Under the proposal, development will be banned or dramatically curtailed on about 1.8 million acres of land surrounding Toronto and its neighbours. It will run from Rice Lake – which is southeast of Peterborough – to the Niagara Peninsula.

“Within the greenbelt area, our plan will set strict limits on where urban boundaries can and cannot expand,” said Ontario Premier Dalton McGuinty. “Areas not currently zoned for urban development will be protected. This means no new subdivision paving over our valuable farmland. It means no new shopping malls carved out of our forests.”

The government also has plans to use the locations of sewer and water lines, highways and transit routes along with electricity transmission lines to direct growth into specific centres rather than following growth where developers choose to build homes, businesses and shopping centres.

The GTA is one of the most expensive places in the country to live, according to TREB. While there are still affordable pockets, TREB and the GTHBA are concerned that the provincial restrictions on land will eventually mean that only high density housing will be affordable to most people.

House prices will rise
A GTHBA survey of about 500 Toronto and suburban GTA residents reveals that the public does not want to live in the “higher density housing in compact neighbourhoods” that the provincial government is proposing in its growth management plan.

The plans are out of step with the general public: 65 per cent of Toronto and suburban GTA residents polled in September said they would “definitely” or “very likely” move into a single-family home.

Fifty-five per cent of respondents also said: most new high-density, high-rise buildings should be located in downtown Toronto and not in the suburbs; 61 per cent said that higher-density housing is not appropriate for their neighbourhood or community.

According to GTHBA President Mark Parsons, the poll, conducted by Navigator Limited, also revealed that the top growth-related concern on the minds of the public is transportation gridlock. Seventy-four per cent of respondents said that expanding public transit and roads and highways were the best solutions to the gridlock challenge, while just 22 per cent said that limiting urban sprawl or encouraging more people to live in the city were the best solutions.

The overwhelming majority of respondents (81 per cent) believe that if the province restricts traditional suburban development, housing prices will rise. If that occurs, half of respondents said they would just stay put and not buy the kind of home the government prefers. More than one-quarter said they would move out of the GTA to get what they want.

“That means that new home sales would falter, growth would not be accommodated, and we’d see leapfrog development that would actually lead to more commuting and more traffic congestion,” Parsons said. “Denying consumer choice has serious ramifications for everybody.”

Parsons added that home builders understand and appreciate the provincial desire to curb urban sprawl, protect environmental and agricultural lands and maximize existing investment in infrastructure. “The home building industry shares the same concerns, but we are equally concerned with housing affordability and choice as well as continued economic growth and prosperity, and we’re looking for the province to strike that very careful balance.”

Toronto's Second Suite information

by Bob Aaron
Toronto Real Estate Lawyer

The recent death of a single mother in a Toronto basement apartment fire is a reminder tragic fires can and do occur in every type of dwelling.

For landlords everywhere, it should underline the importance of ensuring that their below-grade residential units comply with all relevant fire code, building code and zoning bylaw requirements.

Based on my own experience, I believe many of the thousands of basement apartments in the Toronto area fail to comply with one or more of the governing regulations.

Real estate agents have become very creative in using euphemisms for the term "illegal basement apartment." Some of the more common expressions are granny flat, nanny suite, income potential, second suite and, my favourite, "no warranty as to retrofit status."

Sadly, there appears to be no single source of intelligible, reliable information on how to create a new basement unit, or to legalize an old one.

I started a search recently with the City of Toronto's Second Suite information kit (available at the Access Toronto counter in the main lobby of City Hall, and at the old civic centres in York, East York, Etobicoke, Scarborough and North York).

It contains a number of pamphlets and booklets about renovating, building permits, smoke alarms, building costs and responsibilities of landlords. But there is virtually nothing about the actual physical requirements for basement units: size, fire protection, zoning, parking, window area, ceiling height, exit requirements and similar basics.

An online search revealed some very helpful information at http://www.landlordselfhelp.com, and http://www.carsondunlop.com

Jim Laughlin, the city's deputy chief building official, advised that if you have a house less than five years old, forget about a basement apartment. So-called conversions can only be done in "existing" homes.

Under old legislation introduced by the former NDP government, basement apartments created or legalized between July 14, 1994 and Nov. 16, 1995 are grandfathered if — and it's a big if — they complied with health, fire and building code standards.

Apartments created during this time don't have to meet current zoning bylaws, but they do have to meet all the other requirements.

Fast forward to July, 2000, when the Ontario Municipal Board approved a Toronto bylaw to permit second suites (basement units) across the entire city. The bylaws of the six former Toronto municipalities have now been amended to contain harmonized zoning standards.

Laughlin explained that new basement apartments can now be created and old ones legalized if certain minimum requirements are met:

• The detached or semi-detached house must be at least five years old.
• The front of the house cannot be significantly altered to change its appearance from that of a one-unit building.
• Stairway exit walls and a continuous ceiling in the unit must have appropriate fire-rated drywall separations from the other unit. Exit doors must have a specified minimum size and thickness.
• The unit's exits must satisfy the Fire Code (if existing) and the Building Code (if new). While it is best to have a separate exit for the unit, a shared exit is acceptable in some circumstances.
• The basement unit must be smaller than other units in the building.
• Certain property standards must be met concerning minimum ceiling heights (6 feet, 5 inches) and minimum window sizes.
• All units must have operating smoke alarms. A carbon monoxide detector may also be required.
• Bathrooms have to have either a window or exhaust fan.
• Inspections by the Electrical Safety Authority and the local fire department are required for existing units.

The fire inspection is often called a fire code retrofit certificate, but compliance certificates from the fire department and electrical authority alone do not mean that the apartment is completely legal.

• An additional parking space is required for the new unit in most areas of the city.
• Newly created units require building permits before construction begins.

Anyone interested in creating or legalizing an existing basement apartment will have to become familiar with parts 9 or 11 of Ontario's building code, the fire code, electrical code, the zoning bylaw, property standards bylaw and the credit limit on a bank loan necessary to fund all of the work.

It may appear to be a regulatory nightmare, but Laughlin says the city will help guide people through the process.

Anyone building a second suite or buying a house that contains one should seek the professional help of an experienced architect or contractor experienced with below-grade living accommodations.

The consequences of doing it wrong can be deadly.

Toronto Rental Market Report

2004 rental transactions up 14 per cent over 2003

The Toronto Real Estate Board's annual Rental Market Report for 2004 reveals a much more active market, with total transactions reaching 6,643 condominium apartments and townhouses leased, a 14 per cent increase over 2003. Rental prices, however, fell from last year, with the two bedroom apartments averaging $1,730 per month, a marginal decline over 2003's $1740, and two bedroom townhouses falling 10 per cent to $1,551 per month. See report details [PDF file].

Toronto resales up in early January

Early 2005 sales up 18 per cent over last year.
Beaches, Bloor West Village push price hikes.

by THERESA BOYLE

The new year is off to a good start for home sales, according to the Toronto Real Estate Board.

In the first two weeks of January, there was an 18 per cent increase in sales of existing, single-family homes to 1,310, compared to the same period last year.

The price of homes during that time jumped to $301,372 from $295,989.

"We're off to a great start. I expected it would be good, but not this good," said Ron Abraham, president of the board.

Areas pushing the price hikes include the Beaches, Bloor West Village, King Township and Oakville.

Abraham said the early numbers are a good indicator of what to expect for the rest of the year.

"Strong early numbers in January bode well for a good start to 2005 as the market begins to gear up following the holiday season," he said.

Supporting the strong sales is a healthy economy, the board said.

The latest numbers from Statistics Canada show that the national unemployment level fell 0.3 percentage points in December to 7 per cent.

That was the lowest level since 2001.

In Toronto, 1,000 jobs were added over that time.

"A positive economic climate continues to exist, keeping home ownership a realistic goal," Abraham said.

Most analysts expect the Bank of Canada to moderately raise interest rates.

They will likely rise by about 50 basis points over the course of 2005, due at least in part to the rising dollar.

"The prospect of a slight rise ... will not be likely to scare off consumers," Abraham said.

Meanwhile, the Canadian Real Estate Association is celebrating a record number of home sales for 2004.

There were more than 25,000 sales for the eleventh month in a row, including December last year.

This is the longest monthly run above that level ever.

Sales by real estate agents on the multiple listing service came in at a record 316,386, up 2.7 per cent from the 307,971 sold in 2003.

The Select-Plan Real Estate Story

Fraser Beach began his real estate career in 1977, working as a salesman in Pickering Village. After two years of successful selling, he obtained a broker's licence and moved on to become a branch manager. He subsequently established successful new branch offices for two major brokerage firms and later became the senior marketing executive of one of those firms. At the same time he continued his formal real estate education, completing the qualifications for the F.R.I. and C.R.B. professional designations. After all of this, Fraser had established himself well, in a position most people would be happy to occupy until they could collect their pension.

But Fraser believed that changes were needed in the real estate brokerage business. The established firms were not meeting emerging demands of vendors for higher standards of quality and value. The real estate business was over populated with sales- people, all providing virtually the same service, for the same fee, to a declining number of home buyers and sellers.

It was a vicious circle. The inefficiency of too many salespeople chasing too little business sustained high commission fees. At the same time, the prospect of earning the high fees attracted more and more salespeople into the business. Vendors felt they were paying too much, while brokers and agents were earning less and less. The process had to become more efficient because no one was prospering.

Fraser believed the answer lay in eliminating the duplication of effort resulting from too many salespeople competing for the same inventory. Efficiency could also be improved by reducing overheads like the head office expenses of big brokerage organizations and the substantial franchise fees paid on the business done by franchised operations.

So, after years of working with the big names in the business Fraser decided to establish an alternative brokerage service. He would provide a full range of professional services but reduce much of the overhead expenses which burden the established firms. He could then offer the same services at a very attractive price.

Fraser reasoned that if he didn't have to spend time chasing after listings and could focus on the productive activity of marketing listed properties, he could afford to offer effective service at a much lower fee. And there would be equal incentive for all of the other Realtors to sell the company's listings because they would get the customary "co-operating" selling fee for their effort.

So in the summer of 1991, Fraser and his wife Joanne established Select/Plan Real Estate Inc in Pickering Village.

In returning to his roots, Fraser gave homeowners in Ajax, Pickering and Whitby the very best in professional service. The firm acquired all the computer tools, including direct links to the listing databases of MLS® services and the Internet. Thus, all of the Realtor MLS listings immediately go "on-line" to Realtors throughout Greater Toronto Area.

Cost savings and efficiency are not the only solutions for better value that Select/Plan gives its clients. As an Internet guru, Fraser uses that powerful medium to best effect. For example, Select-Plan promotes each property on high volume Internet portals. The internet exposure provides pictures and descriptions of property to the people who are most likely to buy them.

In November of 1999 Select-Plan moved to a state-of-the-art electronic office at 2 Ritchie Avenue - at the corner of Highway #2.

Our purpose is to combine the latest Internet technology with professional real estate services to effectively meet our clients every need ... and all at lower cost.

That's our story ... and we're sticking to it.

Simple steps to home improvement

Affordable ways to up a home's style and value Change lighting, hardware, and use crown moulding

by KIMBERLEY SELDON

Who isn't looking for a bigger return on his or her investment these days? When a decorating or home improvement project is required, all of us appreciate smart solutions that won't break the bank.

Here are a dozen affordable ways to improve your home's style quotient and value while offering more bang for your decorating bucks.

Combine stock elements with custom elements. For a kitchen renovation, you can choose stock cabinetry for lower cabinets as well as the majority of upper cabinets, but opt for custom-designed wall units flanking a feature window. The impression will be anything but routine.

Modify items that are noticeably dated. The '70s wall tile in the bathroom, the balloon shades in the living room or eggplant-coloured toilet can be improved upon. (Unless, of course, you are designing a room that is retro in style.)

Use standard elements with custom flair. For example, 12-inch by 12-inch slate flooring tile can be customized by cutting the tile into numerous sizes, say 6 inch by 12 inch and 2 inch by 2 inch and using the various pieces to create a unique pattern.

Update items at eye level where the immediate impact can be appreciated. The dull stair runner, tired backsplash, bland wall colour or chipped cabinetry offer instant gratification when replaced or enhanced.

Don't be afraid to mix pedigrees. The Ikea sofa and the Hermès throw are perfectly companionable, provided they have a similar design.

Paint offers the most notable changes at minimum cost. Good quality paint doesn't chip, goes on easily, and covers well. The role of paint is to enhance other items in the home.

Spend the most you can comfortably afford on investment pieces like area carpets and sofas, as they are frequently used and enjoyed over many years.

Update lighting for immediate improvement. Replace dated fixtures and improve atmosphere by adding table and floor lamps.

These incandescent light sources provide the most comfortable, flattering lighting.

Improve cabinetry in any room by changing uninteresting hardware.

Today's choices are limitless with finishes ranging from pewter to porcelain, glass to nickel.

Invest in original artworks. Seek out local artisan sources and purchase a painting or photograph that inspires or pleases you.

Phone a local art college such as the Ontario College of Art to gain access to student showings.

Traditional homes benefit from the addition of crown moulding and substantial baseboards.

Although it requires some skill to do the installation, it's a relatively easy project.

In addition to adding depth and history to rooms, architectural enhancements like these will contribute to the home's resale value.

Adopt a five-year plan. For many of us , this is the only practical way to create the home of your dreams.

Make a list of all the required changes and work systematically through the list beginning with "hidden" work such as lighting, plumbing, heating, air conditioning, and roofing.

Although these initial tasks are not glamorous, postponing them can actually be dangerous and cost you more money in the long run.