Ontario Real Estate Source
By Brian Madigan LL.B.
 

A common question that arises in respect to real estate transactions, is the use of the seal.

Here is a little bit of history about the use of the seal in the first place. It did not arise out of contract law, so that is one reason why some people have difficulty understanding its use.

"Why are some contracts “sealed” and others are not?

In order to have a contract, you need to have an “agreement” that the Courts will enforce. Not all statements that are made, result in enforceable promises. Remember, all the promises made at election time!

Sometimes, it is necessary to determine which promises should be enforced. Really, there are basically three types of contracts:

• Those that have consideration (something offered, something given up)
• Those under seal (without consideration)
• Those that have consideration and are under seal (the most common type)

The legal seal is evidence that a promise is intended to be a legally enforceable promise. A promise might otherwise simply be a gift. A promise together with consideration is a legally enforceable contract. That premise arose out of the modern law of contracts. When I say “modern” I mean the last 700 to 800 years.

The concept of documents being executed under “seal” preceded modern contract law. Documents executed under seal were considered to be legally binding and enforceable promises.

Seals were used in Babylonia in 3200 BC to identify and authenticate the author and the agreement. Seals were commonly used by nations to settle disputes following war. The red wax seal (symbolizing blood) was used by Caesar. The first usage of seals in modern times was the period immediately following the Norman Conquest in 1066. From that time until 1215, seals were all the rage. They were the equivalent of cellphones. Everyone had a seal. This was your identification and served to indicate that you had the legal capacity to enter into a promise that was legally enforceable. It didn’t have to be a contract. You would be taken as a “man of your word” because you had a seal.

The poorer class, of course, didn’t have seals. They would “prick their right thumbs” with a sharp object to draw blood and impress a document with their thumbprints. Later, Courts would recognize this activity as being the equivalent of executing a document under seal.

By 1215, the modern day usage of seals was introduced to England by the signing of the Magna Charta, often viewed by historians as the first bill of rights, the first constitution and the birth of the common law.

There continues to be a special class of documents executed under seal. A promissory note is enforceable for 6 years, but a promissory note executed under seal is enforceable for 20 years. In essence, the practice grew out of an ancient system of authenticating documents rather than contract law. So, naturally there are some differences with the rules.

The limitation is usually longer. Basically, why get a promissory note that will only last 6 years, when one under seal will last 20? And, don’t forget that a mortgage is a promissory note.

It became commonplace for everyone to want just about everything executed under seal. All important documents were under seal. That was the way Kings and Queens did business. All deeds were executed under seal. That, of course, is no longer the case, but it was until 1985 in Ontario.

More recently, Courts have begun to erode the special status of documents under seal, by holding many other contracts to this higher standard.

Most standard form legal contracts include the words "signed, sealed and delivered" just above signatory line. You will find that in the standard form agreement of purchase and sale. The black dot is the location for the seal to be affixed. Seals today are small red circular dots with glue on the back. They should be affixed. However, any indication of an intention to execute the document under seal is sufficient. So, if you circle the black dot in ink, that will work and be just as good.

The custom at the present time is that just about all formal agreements documenting business transactions are executed under seal."

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

So “Budget Week” is over and for the most part the mortgage industry has not been directly affected.

It was, of course, a somewhat unique week in that we, in Ontario (some other provinces, too), had both a Provincial and a Federal budget to contend with. By-and-large the feeling was that both budgets would be tough – one due to absolute necessity to shore-up an already damaged credit rating and the other due to a first majority parliamentary budget in a number of years.

Many mortgage professionals were relieved that no further tightening of regulations were forthcoming and further relief came later on in the week when Mr. Flaherty implied that the banks ought to know how to run their own businesses and not rely on him to tell them how to do it. For the mortgage professional this likely negates the need to run to the nearest of 25 new LCBO outlets that are projected to open annually in the provincial budget!

While it will take some time yet to shake-out exactly what the long term repercussions and/or benefits will be, the primary areas that have an impact on the mortgage industry will be the lay-offs of civil servants. Hopefully, many of those lay-offs will be managed in such a way as to limit the overall fall-out, particularly in Ottawa where it is likely that some 60,000 federal employees will hold-off on big-ticket purchases until their individual fates are known.

Whether or not increased uncertainty over pension reform will have a knock-on effect on the mortgage market remains to be seen.

Finally, one little snippet from the Ontario budget that comes into effect in 2015: a one-two percent increase in the cost of land registrations and writ fees. Not likely enough to cause any major damage.

So an interesting week of budgets is behind us. Here’s to a booming spring market!

As always, please consult with a Lending Logic mortgage agent for all of your mortgage financing needs.

Stewart Eadie, AMP
Vice President, Marketing & Communications
FSCO 11782
(416) 587-0192
 

Once again the federal regulator, The Office of the Superintendent of Financial Institutions (OSFI), is looking to tighten-up on mortgage lending guidelines.

Ottawa moved to do just that a year ago citing its concerns regarding overall household debt. Readers will recall that the government reduced the maximum mortgage amortization from thirty-five to thirty years (for many years and up until the last decade a twenty-five year amortization was the maximum), lowered the maximum loan-to-value ratio (the most that you can borrow against your property value) on refinancing from 90% to 85% and removed government backed insurance on lines of credit secured by a house.

Most mortgage industry insiders felt at the time that these measures would be somewhat punitive for certain segments of the population. While we are all for the prudent granting and managing of debt (and very grateful for the strong regulations in our industry that helped to prevent a mortgage market “meltdown” such as has been seen in other nations), conventional wisdom was that these changes would limit the amount of mortgage financing that can be realized by well-qualified home-buyers and would negatively impact on the ability for people to leverage their home equity in the event of a financial emergency and the restructuring of higher-interest debt.

To a certain extent this has proven to be the case, but it is felt that to further “tinker” with an already well-regulated mortgage granting system may just be the proverbial straw.

• Some of the changes that OSFI is recommending (nothing is set in stone just yet) include:
• The removal of “cash-back” as a portion of a downpayment;
• Using the five-year (rather than three-year) rate to qualify applicants on conventional mortgages;
• The inclusion of home insurance in the total debt service calculation;
• Fewer exceptions to underwriting guidelines in general.

One significant change being put forward would be the re-qualifying of a property at the time of renewal by establishing a new loan-to-value prior to issuing the renewal. In a down-market the consequences could be devastating for some homeowners.

OSFI is also suggesting that Lines of Credit secured by a home (HELOC) ought not to exceed 65% and should have a provision for some form of amortization (not just interest only).

Many mortgage professionals feel that the real culprits in overall household debt are all-too-easy to obtain credit cards and other unsecured loans at significantly higher interest rates. Often, credit card limits are increased again and again encouraging the use of less prudent debt. If the government is truly concerned about our overall financial well-being, perhaps it’s time it was to take a look at those types of lending practices.

The general consensus within the mortgage industry is to leave well enough alone and focus on tightening-up the rules on “bad” debt.

As always, we recommend that you discuss your overall financial position with an experienced Lending Logic mortgage agent.

Stewart Eadie
Vice President, Marketing & Communications
Lending Logic Financial Inc.
stewart@lendinglogic.ca

The children were laughing and screaming and playing as children do. Their parents thought they were being a little too noisy, but their grandfather thought it sounded like music. When their mother called them to the dinner table, they bounced into the dining room and plopped into their chairs. The food looked so good they couldn’t wait to tuck into it. Finally mom said to go ahead and start, and the family spooned food onto their plates.

God had blessed them.

The young couple were still on their honeymoon. It felt so unreal. It all still seemed like a dream when they were seated at the outdoor patio balcony at La Grande Ristorante, overlooking the blue lagoon. They ordered the wine and soon the waiter returned to take their order. She wasn’t sure about the cost of everything. He reminded her that this was their one and only honeymoon and they wouldn’t feel the cost in the years to come, but they would always have the memories. She smiled at him and ordered her meal.

God had blessed them.

Retirement had once worried him. Not so for her. She knew it would be a wonderful time of their lives, a well-deserved finale to a satisfying and productive life together. And he had learned to relax after a time. The golden years were not as fraught with rusty joints, although there were more creaks than there had been a year ago and he was getting used to counting more age spots on his hands than he had counted a week ago. She had brought the sandwiches and fruit for their lunch. They sat down in the golf course outdoor patio to eat before starting the back nine.

God had blessed them.

He was used to it by now… saving half of his piece of bread from what he had been given the day before. It wasn’t having to beg for food or the hunger that bothered him. It was the longing for human contact, here in the middle of a big vibrant city. It was the uncaring of the passersby and the harsh looks, even scowls, of those who thought him less of a human because of his circumstances. But, in time, he guessed, even this would affect him less and less. He was lonely but he never felt that he was alone. From a soiled pocket he removed the piece of dried bread
and looked at for a brief moment.

And then he blessed God.

Sam Green B.A.
Career Coach, Manager
Re/Max West Realty Inc.
Thornhill Office

Effectively, there are two choices:                        

1) as soon as the offer is formally accepted, as in “signed, sealed and delivered”, and

2) when all the conditions are satisfied, waived or fulfilled.

Naturally, it makes a difference in terms of interpretation. Some people say 1) and other
people say 2).

There are several essential elements of a contract:

1) Parties, (legal capacity)

2) Lawful object (not illegal)

3) Intention to create contract (consideration or seal)

4) Mutual agreement (offer and acceptance)

5) Agreement in respect to terms (genuine intention)

6) Agreement must be certain (definite and clear).

Once those essential elements are all present, then we have a legally binding agreement.
There may very well be conditions that need to be fulfilled, satisfied or waived as the contract
proceeds, but at the outset, we still have a “binding agreement”.

In dealing with the conditions, the contract itself may specify the consequences, but
nevertheless, we started out with a legally binding agreement.

So, why all the problems? Apparently, many waivers, amendments, fulfillments etc. will
include a phrase to the effect that “… this agreement is now firm and binding”. That is just
confusing. It was already “firm and binding”. There just happened to be an outstanding
condition that required resolution.

The result is that some practitioners have come to the conclusion that the contract was
not “firm and binding” at the outset, but rather later, upon resolution of the condition. That
view would be in error.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you
are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300
www.OntarioRealEstateSource.com

Ingredients of an Enforceable Real Estate Agreement

Ontario Real Estate Source

By Brian Madigan LL.B.

Many REALTORS® get into the business after completing their required courses with little or no thought about the importance of the Brand to their Business.

By choosing a good Brand name Brokerage, you set yourself up for the opportunity to do many deals and earn a good income.

The First reason is Brand Name Recognition and familiarity. We are all creatures of Habit and are attracted to things we recognize. Have you ever been on Vacation in a different country and mentioned to a family member or friend “hey we have that back in Canada!”

That’s Brand name recognition at work. Well as a Realtor you want this Brand name recognition on your side. By aligning yourself with a well established, well known brand brings a good amount of familiarity and trust to your clients. Even though the clients may not know who you are, they certainly know your Brand.

This goes a long way in getting more calls for yourself as more and more people choose to sell their homes.

The Second is instant credibility. By choosing a good Brand you automatically inherit their business track record and statistics. There is nothing more powerful then walking into a listing appointment with some good statistics to back you up. Your presentation will look much better with Statistics of the market done by your brand.

It makes you look much more competent. The sellers realize you represent a terrific brokerage that can get the job done! We are there to sell their home as quickly as possible. If you can show through the Brands statistics that your company is already doing this, you have a greater chance of getting the listing.

Thirdly a larger Brand is going to have many many signs out there. Signs means more calls to the office and more hits to websites. With a larger Brand you are going to have more listings than an inferior Brand. When you have the product to sell you are in the drivers seat rather then waiting for listings to come on the market.

Lead generation is greatly improved for you by working with a larger Brand. More signs, more open houses, means more eyeballs on your products. A great setup for doing more business!

This is why I chose the RE/MAX Brand when I started in Real Estate years ago, and why I would still choose it today!

Marty Green