MODY LAW FIRM

07/14/2023

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07/14/2023

Back-to-Back BOC Policy Interest Rate Hikes

After a four month freeze the Bank of Canada (“BOC”) raised its overnight policy interest rate in June 2023 to 4.75% (from 4.5%) and again on July 12th, 2023 to 5.0%. The corresponding Prime Rate of the banks increased to 7.2%.

What does this mean for Buyers and Seller? That financing conditions previously fulfilled may fall through if banks have not appraised the purchased property. The appraisal allows the lending bank to determine if the Buyer is paying a justified amount for the property.

As interest rates increase the prices for properties sold will fluctuate, usually downward on average, and the appraisal done after the interest rate increase will reflect the new value of the property. See example below.

On May 23, 2023, the buyer’s offer to buy the subject property for $1,000,000 is accepted. In the APS, the buyer has a financing condition, whereby the buyer must obtain or waive the financing within 5 days of acceptance of offer. Note the number of days is agreed to by buyer and seller in APS. The buyer is approved for a mortgage by Lender Bank subject to appraisal condition, which is not done before financing condition fulfillment deadline. The buyer believes appraisal will reflect purchase price and gives seller a notice of fulfillment for financing condition.

The Lender Bank conducts appraisal after the interest rate has increased. Now the value of the home is less than before interest rate increase. The Lender Bank does not like the lower appraisal value and declines to provide current mortgage amount, usually offering only 80% of appraised value not purchase price. Well now the buyer can either:

1) negotiate for a new (usually reduced) mortgage and making up the difference, if funds are available;
2) find new financing quickly, maybe a new lender or a second lender if first Lender Bank agrees; or
3) the buyer attempts to back out the APS, in which case the buyer may lose the deposit and may become liable to the seller for difference in price once the property is sold to another buyer at a lower price.

This is the situation that many buyers and sellers are facing. It occurred in 2022 when BOC interest rates increased from 0.5 in January to 4.5 by December 2022. As BOC rates increased, appraisal values dropped and buyers’ financing conditions fell through.

Prepare for the worst situation. Have a plan B. DO NOT get into bidding wars. Factor in what happens if interest rates go up after Buyer’s submits an offer.

Sellers beware! This is not just a buyer problem. When interest rates go up, home values fall, and buyers and sellers can lose out if both parties are not amicable to completing the deal. Legal fees will eat up any profits of sale and your valuable time.

Knowledge is power.

Sincerely,
Gaurang Mody
Mody Law Firm
modylawfirm.com



General knowledge not legal advice.

04/12/2023

Federal Bank of Canada keeps overnight lending rate at 4.50%. This means that at least for a short while the banks will keep the prime rate at 6.7%.

Knowledge is power
Gaurang Mody
Mody Law Firm
modylawfirm.com

General information not legal advice.

03/31/2023

SO YOU WANT TO CHALLENGE A WILL!

You were notified that a loved one or relative has passed away and left you something in their will. After reading the will you are not satisfied with what was left to you. Do you have a cause to sue?

First, it is vital to understand that in Ontario a testator has the testamentary freedom to make their will and leave their estate to whomever they wish, as long as it does not contravene the law. So, just because you find the will unfair does not mean you have the grounds to sue.

A person requires standing to challenge a will. Section 75.01 of the Rules of Civil Procedure (“Rules”) sets out who has standing to challenge a will, namely “an estate trustee or any person appearing to have a financial interest in an estate”. O. Reg. 484/94, s. 12; O. Reg. 24/00, s. 15.

In our scenario you were left something making you a person having financial interest in the estate, so you have standing but is it a good idea to challenge the will?

The common grounds to challenge a will are: (1) the will lacks formal validity; (2) testator lacked testamentary capacity to make the will; (3) the testator was (i) under undue influence or (ii) subject to fraud; (4) there were mistakes in drafting the will; (5) there were suspicious circumstances surrounding the drafting of the will; etc.…

Second, you need at least one to ground challenge the will. But the ground alone is not enough, you must have some evidence to back up the ground you plead to meet the minimum evidentiary threshold to challenge the will.

The courts do not want every unsatisfied person with an interest in the estate to sue because litigation can be time consuming and costly, which will deplete the estate unnecessarily. This means that you need to present some evidence which calls into question the validity of the challenged will. The courts will not accept just allegations and your suspicions there must be something to support those allegations to meet the minimum evidentiary threshold to challenge the will. If you succeed at this stage then the court will allow your challenge to be heard, with time to properly find evidence needed to prove your case.

Third you need to consider the consequences of challenging the will. If the court decides something in the will needs to be rectified, then the judge will make the rectification based on what s/he believes the testator would have wanted. So, you still may not get what you want, you and the estate will have costly legal bills, and you will have to wait till the end of the legal battle (including appeals) before the estate is distributed.

So the decision to challenge a will is not simply a yes or no. Consider if you have standing and a ground to challenge, and the value vs cost of challenging the will.

Knowledge is power.

Sincerely,
Gaurang Mody
Mody Law Firm
modylawfirm.com



General knowledge not legal advice.

03/28/2023

Power of Attorney (“POA”) and Lawyers:

With a myriad of cheaper POA do-it-yourself kits and other widely available alternatives, many do not want to spend money on a lawyer to draft their POAs.

Lawyers are not required to draft POAs, but that means putting in the time and effort to learn how to draft a proper POA, which means spending time to learn and understand the rules and statutes about POAs.

While basic requirements to create a POA are easily found online, there are lesser-known rules to drafting valid POA clauses which may not apply to every POA. Drafting these clauses incorrectly may invalidate the POA or the negate the POA when it is needed to take effect. For example, a Continuing POA for Property requires the word “Continuing” to keep the POA from terminating when grantor becomes mentally incapable to manage his property.

To a layperson these deficiencies seem minor but can cost valuable time and money with legal procedures to get an attorney properly appointed once the grantor becomes incapable.

Equally important to consider is how the POAs are treated by third parties. For example, banks may reject POAs not created by professionals due to concerns that the grantor may have been unduly influenced or defrauded. When POAs are drafted by lawyers, it is an additional level of protection from liability claims by manipulated grantors.

Another reason for hiring lawyers is that certain POA rules are found in other statutes or case law. Grantors that do not obtain proper legal advice may draft clauses that invalidate the POA. For example, attorneys cannot be given testamentary powers of the grantor.

Loved ones that draft POAs for ill grantors may complicate matters due to the appearance of undue influence, costing valuable time and money to get court approval of the POAs.

Lawyers are objective gatekeepers who assess the grantor’s mental state before drafting and executing POAs. Lawyers can identify whether the grantor is being forced to draft the POA against their will. For third parties, lawyers become a barrier to liability claims and are a form of higher-level security compared to DIY POAs.

So, when deciding how to draft a POA, retaining a lawyer or buying a DIY POA kit is not the most important consideration. Assess whether you have the time to invest in properly drafting your own POA, how will it be received by third parties, your circumstances at the time of drafting your POA. Once the you assess these considerations evaluate your budget and your decision will be clear.

It is your decision what method will work best for you in your situation. But everyone should have their POAs setup in case of unforeseen circumstances.

Knowledge is power.

Gaurang Mody
Mody Law Firm
www.modylawfirm.com

General information not legal advice.

Mody Law Firm provides real estate, estate planning and notary services. We offer in-person and virtual appointments, and free consultation.

03/17/2023

Power of Attorney for Personal Care (“POAPC”)

If a Continuing Power of Attorney for Property (“CPOA”) is to manage the property and financial affairs of the grantor, then the POAPC is a legal document to manage the grantor’s medical affairs, daily lifestyle, and personal care. With a POAPC in place, grantors will have peace of mind that their personal needs will be maintained in the event they become incapable of maintaining it themselves.

POAPC allows grantors to choose:
• Who will be their Attorney;
• What they want for their personal care to be, including what to eat and where to sleep;
• What to do for a spouse or dependent;
• Where they are to reside during their incapacity;
• If/when they can be moved to a hospital;
• Where they prefer to pass away;
• Who will take care of them, such as an experienced nurse or preferred caretaker;
• What types of medical treatments they receive;
• Whether they want to be kept alive by artificial means;
• Who can decide to make end of life decisions for them;
• Their end-of-life instructions and how strictly they must be followed.

This list is not exhaustive and each POAPC can be tailored to provide an optimal level of living for the grantor in the event of the grantor’s mental incapacity and to the extent that their estate and finances allow.

In my opinion, the most important decision is who will be the grantor’s Attorney. This person should be someone who can be trusted with the grantor’s wellbeing and has the grantor’s best interests at heart. The Attorney should be someone who can put their personal beliefs aside to follow the lawful instructions of the grantor, should the instructions contradict with the Attorney’s personal beliefs. For example; when to terminate life support can be controversial but if there are clear lawful instructions in the POAPC then the Attorney should follow them regardless of personal beliefs and values.

To formalize the POAPC the grantor must be mentally capable of understanding the authority being granted to the Attorney and must trust the Attorney to follow any provided instructions and act responsibly with the authority granted. The grantor must give the POAPC of his/her own free will and they are at least 16 years of age or older. The POAPC must be executed in the presence of two witnesses, who must execute the POAPC in each other and grantor’s presence.

It is vital to have a POAPC and a CPOA to ensure that your property, financial affairs and personal care will be maintained status quo if you ever become mentally incapable. It is prudent to have them drafted where there are no signs of mental incapacity to prevent legal challenges related to your mental capacity.

Knowledge is power.

Gaurang Mody
Mody Law Firm
www.modylawfirm.com

General information not legal advice.

Mody Law Firm provides real estate, estate planning and notary services. We offer in-person and virtual appointments, and free consultation.

03/16/2023

Continuing Power of Attorney for Property (“CPOA”)

What is a CPOA and why you need it?

A CPOA is a legal document used by the grantor to appoint another person or persons to act on the grantor’s behalf with respect to the grantor’s property and financial affairs. The appointed person is called Attorney. Moreover, the Attorney can be any person the grantor trusts to manage his/her property and financial affairs, and does not have to be a lawyer. The CPOA grants permission for the appointed Attorney to act on behalf of the grantor according to the terms outlined in the CPOA.

The word “Continuing” is vital to the intent behind a CPOA, without it the POA becomes ineffective once the grantor becomes mentally incapable. The word “Continuing” signifies that the POA is meant to continue to be in effect after the grantor’s incapacity.

A CPOA is not created to just manage what the grantor owns, rather it helps the Attorney manage the grantor’s relationships with third parties, such as financial institutions, utilities companies, employers, record holders, phone and internet providers, etc. None of these third parties will discuss the grantor’s details with another party without the explicit permission of the grantor. The CPOA is the legal document that grant’s that permission.

Choosing the Attorney for any power of attorney is an important and vital consideration. The factors that go into choosing a good Attorney are whether the person is:
• trustworthy;
• reliable;
• available: meaning is the person able to act as your Attorney? Is s/he in residing in the same city or province as you? How hard will it be for them to manage your affairs from there location? Are they easily accessible by third parties; and
• Willing: meaning would they want the job of being your Attorney? Do not be mistaken being an Attorney can be a full-time job.

Other factors such as whether your Attorney has experience in dealing with property and financial matters, or whether being your Attorney will be financially draining on your Attorney are important considerations before choosing your Attorney.

A CPOA become effective once it is executed per formal validity requirements, however, the legal authority does not vest in the Attorney until the conditions in the CPOA are met. For example, a grantor may instruct and direct that the Attorney only gets legal authority of the over the grantor’s property and financial affairs if the grantor becomes mentally incapable and a doctor assesses as such.

Importantly, the CPOA can only be properly executed if the grantor is mentally capable. Likewise, it can only be revoked by the grantor while s/he is mentally capable.

The importance of a CPOA is to ensure that the grantor’s life continues without issue even s/he becomes incapable of maintaining it him/herself.

Knowledge is power.

Gaurang Mody
Mody Law Firm
www.modylawfirm.com

General information not legal advice.

Mody Law Firm provides real estate, estate planning and notary services. We offer in-person and virtual appointments, and free consultation.

03/06/2023

Property and Obligation Lists: why they are important to your estate planning?

Both the Substitute Decisions Act and the Succession Law Reform Act require the grantor and testator to understand their assets and obligations to validly formalize their will and powers of attorney.

When making a Will and continuing power of attorney for property, understanding what you own and what you owe it critical, informing your attorney and executor/estate trustee about the contents of your estate will make it easier and financially less burdensome for them to complete your instructions.

Many people do not estate plan until they are older. After living for many years people will own many items and store them in various places. A detailed accounting of their assets is rarely done, and obligations lists tend to be a list of their bills.

Creating a property list for estate planning means reviewing your life and gaining an understanding of what you want to do with your assets. It can help you understand how you obtained an item, for what purpose, did it mean something to someone else besides you, who would like to own it after you, was it used as secured collateral in a debt, etc. These are things that may escape our thoughts and considerations when we attempt to draft estate documents without proper planning.

Property lists should include (1) personal items, including vehicles, boats, antiques, collectibles, artworks, furniture and chattel; (2) registered plans, insurance plans, pensions, and other plans, including designated beneficiaries, if any; (3) online account information for financial and social media accounts; (4) financial institution accounts information; (5) any owned real estate; and (6) any obligations owed to you (has anyone borrowed money or items from you).

You should also create an obligation/debts list that includes (1) secured loans and property to which the loans are secured; (2) unsecured loans; (3) property in which someone else owns legal title; (4) loans on which you are a guarantor or co-signor; and (5) list of any other debts. For all debts and obligations be sure to record specific and detailed information of the debts including any co-signors or guarantors on the debt/obligation.

These lists serve an additional purpose besides being informative, they serve as evidence, especially if incorporated into your estate documents, that you had clear understanding of your assets and obligations at the time you formalized your estate documents. For these reasons, it is vital that you create property and obligation lists. Get expert opinion before drafting your estate documents, we at Mody Law Firm can help provide expert legal advice relating to estate planning.

Knowledge is power.

Sincerely,
Gaurang Mody
Mody Law Firm
modylawfirm.com



General knowledge not legal advice.

02/25/2023

What is the capacity to make a Last Will and Testament (“Will”)?

Drafting a Will can be as simple as writing down your wishes and formally executing in the right location. However, how will such a Will hold up during probate? When drafting a Will, the T should give consideration to how his or her wishes will be interpreted when probated.

While legal system wants to allow for interpretation of the Will as it stands, if there are challenges to the Will, the court will look at the factors around the drafting of the Will.

One of these important factors reviewed is whether the T had the capacity to make a will. What does that mean? This is the court’s attempt to ensure that the T was in the right state of mind to make the Will.

The capacity to make a Will involves reviewing:
1. Whether T was at least 18 years old when executing the Will. There are exceptions to this requirement outlined in section 8 of the Succession Law Reform Act (“SLRA”).

2. What was the general mental state of the T at the time of drafting and executing the Will? Looking at the general mental state of the T will involve figuring out:

a. Whether the T was able to form the necessary mental capacity to make a Will, also called “Testamentary Capacity”.
b. Did the T have actual knowledge of his or her estate as included in the Will and approve the Will?
c. Did the T sign the Will voluntarily?
d. Was there any undue influence or other fraud involved in the making of the Will?
e. Was there any mistake involved in the making of the Will?

If the Will appears to meet formal validity requirements than the challengers to Will need to prove that the T was not of valid age or lacked Testamentary Capacity when executing the Will.

For Testament Capacity, the court will review whether T had a general understanding and memory of the events surrounding the Will drafting including:
• If T had a clear understanding of the property s/he owns and debts s/he owes;
• Who T wanted to be the beneficiaries of his or her estate;
• Whether T understands the clauses included in his or her Will and the reason for their inclusion;
• Does T understand the effect of the included clauses on the distribution of the estate;
• Understanding all of the above, did T want to proceed with the disposition in the form and structure as outlined in the Will?

If the challengers suspect fraud or mistakes in the Will than it is their burden to show evidence of the such fraud or mistake, which the defenders than have to refute.

This is a simple review of the capacity to make a Will but hopefully if gives readers a picture of why it is critical to have a hands-on approach to drafting of your Will. Filling out a kit or drafting a disorganized Will can have severe financial and legal consequences on the distribution of your estate.

Knowledge is power.

Gaurang Mody
Mody Law Firm
modylawfirm.com

General information not legal advice.

02/22/2023

Durham Region Home Values fall 25% in one year!

With the BoC landing rate at 4.50% after its January 25, 2023 increase, the bank prime rate rose to 6.70%. This means less people qualifying for mortgages at the current debt to income ratios. This leads to less buyers of real estate.

Many regions outside of Toronto were hit hard as demand for homes falls short of the supply coming into the market. For those selling their homes to get out of high interest mortgages, this means taking major hits to the sale price of their homes.

For example, in the Durham region average house prices have decreased by almost 25% since Jamuary of 2022. Per the Durham Region Association of Realtors (DRAR) housing statistics, the average house price in January 2022 were $1,175,010 but the January 2023 average price fell to $886,849, a 24.5% drop in prices.

Per Durham region realtor Lindsay Smith, prices drops have been so extreme that within 10 months, the prices of some comparable homes have dipped $500,000 in the some areas like Oshawa. Smith recounts selling a 2,200 square foot home in Oshawa for $1.6 million in February 2022 but a same model, same square footage home on the same street sold for $1.085 million in December 2022.

The quick, successive increases in the BOC lending rate resulting in the parallel increase of the bank prime rate has created fence sitting and sidelined buyers, desperate sellers and free falling home values across Ontario. While these trends will correct itself once the lending rate and prime rates decrease, such moves are not projected to occur until the end of 2023 at the earliest, with more conservative projections predicting the end of 2024 before markets pickup.

Until then sellers will have to hope that if they sell, they can at least get their mortgage paid out of the proceeds. While buyers are stuck looking to alternative financing methods just to afford a home on a yearly salary that was sufficient one year earlier.

Knowledge is power
Gaurang Mody
Mody Law Firm
modylawfirm.com

General information not legal advice.


https://durhamrealestate.org/reports.cfm
https://www.durhamregion.com/news-story/10853445--people-freaked-out-as-house-values-plummet-in-oshawa-whitby-ajax-pickering-and-clarington-how-low-can-they-go-/

Home prices have dropped over 25 per cent in Durham Region in just over a year, and the big question on homeowners’ and sellers’ minds is: will prices continue to fall?

02/17/2023

CHARITABLE TRUST (“CT”) – Part 2 – Registering a CT with the CRA

Guidance CG-009 (“CG-009”) released by the Canada Revenue Agency (CRA) in 2011 listed the requirements to register a CT with the CRA. CG-009 provides valuable information for individuals and organizations who are considering setting up a CT in Canada.

Per CG-009, the minimum application requirements to register a CT with the CRA are:

• the name of the trust
• the name of the settlor(s) or the name of the person(s) making the declaration of trust
• the names of the original trustees
• the charitable purposes of the trust
• the rules governing how the trustees will administer all property (including money) received
• an acknowledgement that the initial trust property (including money) has been transferred to and received by the trustee
• a provision in which the trustees give assurance that all property (including money) received will be applied only for the purposes outlined in the trust document
• a provision detailing how the trustees will be replaced
• the effective date of the document
• the signatures of the trustees

This list is not exhaustive and the CRA may ask for more documentation. Most of these requirements are self-explanatory and should be in the documents that create the trust. These registration requirements are in addition to the requirements to setup a CT listed in Part 1, such as a CT:

• must have a charitable purpose
• must be irrevocable
• must benefit the public
• must be registered with the CRA
• must be administered in Canada
• must be controlled and operated by Canadians
• must be properly constituted and governed

CG-009 provides valuable information for individuals and organizations who are considering setting up a CT in Canada. By following these requirements, CTs can ensure that they are properly constituted and governed, and that they are eligible for tax benefits, which can provide significant financial benefits to donors who contribute to registered CTs.

In addition, CG-009 can help to ensure that CTs are properly administered and that they operate in accordance with Canadian law. This can help to maintain the integrity of the charitable sector and ensure that charitable donations are used in a way that benefits the public.

In addition to CG-009, also refer to Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, ss. 149.1 for more information and rules relating to CTs.

If you are considering setting up a CT in Canada, it is important to work with a knowledgeable professional who can help you navigate the requirements outlined in CG-009.

Knowledge is power.

Gaurang Mody
Mody Law Firm
modylawfirm.com

General information not legal advice.

02/16/2023

CHARITABLE TRUST (“CT”) – Part 1

In this article, we will explore the criteria and requirements for setting up CTs in Canada.

A CT is a legal arrangement whereby a person or organization donates assets to a trust to be used for charitable purposes. The trust is managed by trustees who are responsible for ensuring that the assets are used in accordance with the donor's wishes. CTs can be established during the donor's lifetime or in their will.

CTs are established to support a wide range of charitable causes, including education, healthcare, religion, poverty relief, and the arts. CTs are governed by the laws of the province in which they are established.

To establish a CT in Canada, the following criteria must be met:

Charitable purpose - The trust must be established for a charitable purpose that benefits the community or a segment of the community. The purpose of the trust must be recognized as charitable under Canadian law.

Irrevocable - Once the assets have been transferred to the trust, the donor cannot take them back; a permanent transfer of assets to the trust.

Benefit the public - The CT must benefit the public or a segment of the public. It cannot benefit a specific individual or group of individuals.

The trust must be registered - In order to receive tax benefits, the CT must be registered with the Canada Revenue Agency (CRA). See Part 2.

CT setup requirements:

Choose a trustee - The trustee is responsible for managing the assets of the trust and ensuring that they are used in accordance with the donor's wishes.

Draft a trust document - The trust document is a legal document that outlines the purpose of the trust, the powers and duties of the trustee, and the rules for the distribution of the assets.

Transfer assets to the trust - The donor must transfer assets to the trust. This can include cash, securities, real estate, or other property.

Register the trust with the CRA - To receive tax benefits, the CT must be registered with the CRA. The registration process involves completing an application and providing information about the trust's purpose, activities, and finances.

File annual information returns - Registered CTs must file annual information returns with the CRA. These returns provide information about the trust's activities and finances.

CTs can provide significant tax benefits to donors. Donors who contribute to registered CTs are eligible for a tax credit or deduction. In addition, the assets held in a CT are exempt from income tax and capital gains tax. By working with a knowledgeable professional, donors can set up a CT that meets their charitable goals and provides lasting support for the causes they care about.

Part 2 – How to register a charitable trust with the CRA.

Knowledge is power.

Gaurang Mody
Mody Law Firm
modylawfirm.com

General information not legal advice.