Monday, September 27, 2010

Tax rebate for home owners, not investors

I have purchased a new condo that is scheduled to close in a few days and my lawyer has called requesting I indicate if I will be moving into the unit or if I am buying as an investment. I don’t see this being any of his business, or that of the builder, as I am buying it with my savings so there is no mortgage on the property. How should I respond to this inquiry?

The answer to the question is extremely important from a documentation perspective and in the end result, the amount you pay for the condo.
Built into almost all new condominium Agreements of Purchase and Sale is the provision that GST/HST is included in the purchase price. This is standard, and effectively lowers the actual value of your property at the time of registration. 
The federal government, in a move to spur new home and condo development, has instituted a tax break for purchasers of new builds whereby if the buyer is purchasing for themselves or for a close family member to live in the home, they offer a GST/HST rebate. This amounts to approximately 36 per cent of the applicable built-in tax. This rebate is not available to people who are purchasing new property as an investment, for whatever reason.
When you attend at your lawyer’s office to sign the documents for your new home, you have to swear a declaration in front of the staff member that you will occupy the premises. If you fail to occupy the residence after swearing to do so and you are caught by the Canada Revenue Agency, not only will you have to refund the tax rebate — which the builder claims on your behalf — but you could have criminal charges brought against you under the Canada Evidence Act.
It is a criminal offence to swear a declaration with a Commission of Oaths that is not true.
Therefore, you need to be quite clear and up front with your lawyer as to how you will take possession of your new home or condo.
Clearly, you are treading on thin ice if you think you can claim the rebate if you do not move into the property.





Source:
http://www.metronews.ca/toronto/comment/article/621236--tax-rebate-for-home-owners-not-investors

Thursday, September 23, 2010

Buying new from the builder is not always a great idea.

I think that you should read this article if you are not sure whether to buy new new vs resale 

Undisclosed costs can really add up

It’s hard to think of any consumer purchase contract where the price on the front page is not the full purchase price, where additional charges are unlimited, and where the seller has no legal obligation to make full disclosure of extra charges to the buyer at the time of sale.
And yet this is a common practice among some Toronto-area condominium builders. It is an issue that cries out for the government to intervene in the public interest.
I was reminded of this problem once again last week while I was reviewing a client’s pre-construction purchase contract for a unit in a large mixed-use condominium development in downtown Toronto.
When I added up all the extra charges buried in the disclosure statement but not even hinted at in my client’s purchase agreement, the total came to just shy of a staggering $70,000.
The 33-page purchase and sale agreement for this project is typical for pre-construction condominium contracts. For a mere $935,3000, the buyer gets a floor plan without measurements or any guaranteed size, along with an obligation to pay a number of disclosed but unlimited charges such as government taxes and levies, and the costs of utility meters and connections. In order to discourage buyers — and their lawyers — from actually reading the contract, it is written in the tiniest type face possible. (No wonder I have to use trifocals after years of reading these contracts!)
But the $935,300 cost of the condo (plus the disclosed but unlimited extras) is far from the total tab the buyer has to pay.
Under the 1998 Condominium Act, at the time a purchase contract is signed, the builder is required to deliver to the purchaser a thick volume of materials which includes the proposed condominium organization documents and a disclosure statement setting out 27 specific details of the project.
Buried in the disclosure document is a statement setting out whether the unit buyers jointly will be required to purchase assets or services from the developer.
In my experience, the vast majority of buyers find these disclosure documents intimidating and incomprehensible and do not bother to read them.
In reviewing the disclosure statement for the new downtown project with my client last week, I pointed out that after the condominium project is registered, all of the unit owners as a group will be required to purchase from the developer:
 • Up to 6 guest suites at $200,000 plus HST each, or $1,356,000, plus 8 per cent interest over 10 years,
 • A superintendent unit for $565,000 including HST, plus 8 per cent interest over 10 years.
 • A recreation centre for an astonishing $11.3 million, repayable without interest over 10 years.
Including $860,000 in interest on the guest suites and superintendent’s unit, the unit owners as a group are on the hook to the developer for a total of slightly more than $14 million during the first 10 years of ownership.
My client’s share of the total cost works out to $69,560, or a hit of more than 7.4 per cent in addition to his purchase price.
None of these charges were disclosed in the sales office, so when I calculated it out for my client, he was in shock at the total amount of the costs.
In my experience, this project marks a new high — or low, depending on your viewpoint — in undisclosed extra charges for condominium buyers. It’s a situation which demands greater government protection for unsuspecting consumers.
And it’s also an issue which the members of the Building Industry and Land Development Association might want to tackle before the government does it for them.
Until the disclosure laws are changed, condominium buyers can protect themselves by taking several steps:
 • Ask about undisclosed charges in the sales office before signing anything.
 • Read the disclosure statement and especially Section 17 (about extra costs).
 • Above all, always have an experienced condominium lawyer review the purchase agreement and disclosure statement within the 10 day cancellation period after signing it.


Bob Aaron is a Toronto real estate lawyer.  He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.  Visit the column archives at http://aaron.ca/columns/toronto-star-index.htm for articles on this and other topics.

Saturday, September 18, 2010

Mississauga condos: Absolutely brilliant



 Source: yourhome.ca Written by STEPHEN WEIR
Long after the memories of Marilyn Monroe have faded, two well endowed condos will still be twisting the years away in downtown Mississauga.
Curvaceous. Shockingly new.
Absolute Buildings 4 and 5 are being built to last for the next century and beyond.
While their growing shapes are unconventional — the 56-storeyAbsolute 4 has been dubbed the Marilyn Monroe building because of its curves while Absolute 5, at 50 storeys, will sport a masculine big butt profile — it is the traditional application of concrete, and lots of it, that will make these buildings an eye-catching monument in time.
The condominiums have been under construction for over three years. Now, as the structures begin to tower over the nearby City Hall and Square One shopping centre, motorists, pedestrians and probably even the pilots of low flying planes are taking note of the now undulating skyline.
Designed by MAD architects, a very cutting edge and oh-so-chic Beijing-based architectural firm, their Mississauga condos with curves are being hailed as examples of “structural expressionism.”
Both condos break the mold on status quo. And of the two, Marilyn Monroe is the most different and therefore most interesting in terms of how it is being built.
Anthony Pignetti of the Dominus Construction Group is the director of highrise construction of the Marilyn Monroe building. Dominus is overseeing the building for Fernbrook Homes and the Cityzen Development Group.
Pignetti is quite used to being asked how a building can be rotated in space. Taking up a stack of his business cards, he shows how it is being done on the worksite. He holds the cards tightly in the centre and fans them out. While each card is the same size, the overall shape of the deck has morphed.
The cards, like the 56 egg shaped floors in the new Marilyn Monroe condo, remain rooted to the center (where fingers hold them in place) but are angled away from each other at a measurable angle.
“Each floor in Absolute 4 (Marilyn Monroe) is egg shaped and, like the cards, is fanned out from the centre of the building,” explains Pignetti. “The angle of difference between one floor and another ranges from one to eight degrees. Absolute 5 is different because the floors are shifted (from the core) at a constant angle shift of four degrees.”
HOW MARILYN MONROE
IS BEING BUILT
The business of building a condo with off-centered ovoid floors began not with a deep hole, but rather in a wind tunnel — it was essential for the architects to find out how a non-rectangular building would be affected by the elements.
“The wind tunnel tests at the University of Waterloo showed we had to build heavy underground and the first 25-floors above ground,” says Pignetti.
He estimates that the building’s base is about 20 per cent stronger than a traditional condo of the same size. Not surprising, the actual construction cost of the building will be about 20 per cent more than a typical 400 unit glass skyscraper.
And under Marilyn Monroe’s glass exterior is special concrete and steel, and lots of it.
The basement, all six floors of it, was dug like any other big project. The differences come into play with the Marilyn Monroe when her foundation — the basement walls and the floors — were made. Her bottom was constructed using a thick network of reinforced steel poles (rebar) that increases the tensile strength of the concrete that now covers it.
All buildings rely on rebar, but, in the case of Marilyn Monroe, a bigger rebar has been used. “Not only is it a thicker grade of rebar, we have used more of it” explains Pignetti “It is so tightly packed together you could easily walk across the rebar in the beams.”
So dense is this forest of rebar that traditional concrete could not be poured over and around it. Instead a special flowing concrete has been used on the lower floors.
Dump run-of-the-mill concrete inside a form made of plywood and you won’t get a solid wall after it has set. Concrete, when left on its own, leaves large air gaps inside the mix. In fact construction experts say that with traditional concrete as much of 20 per cent of its volume is made of trapped air. Bubbles reduce the density of concrete and that lowers its strength while increasing the chances that water will do damage.
On “typical” construction sites it is very much a case of shake while you bake. The concrete is vibrated to shake all the big air bubbles out. The oversized rebar used in the Marilyn Monroe is too thick and too close together to allow for equipment to vibrate poured concrete. Instead, a relatively new and more expensive concrete has been used for the foundation and the first 25-floors above ground.
“We have been pouring SCC — self-consolidating concrete,” explains Sergio Vacilotto, Dominus’ director of site operations. “It is highly flowable. In fact it fills the forms so completely we have to seal off their ends so that it doesn’t drain right out of the seams and onto the floor.”
This new expensive concrete uses super plasticizers and it is the weight of its mass, not vibration, that allows it to set without air pockets or seams. The concrete now exposed in Marilyn Monroe’s unfinished first floor lobby has a noticeable superior, almost polished, surface finish.
This summer Marilyn Monroe’s SCC passed the earthquake test. Workers already working on the 50th floor barely felt the 5.5 earthquake that rumbled through Ontario in July. “We didn’t even lay down our tools” said Vacilotto.
Because the windows have not yet been installed the innards of the building are easy to see. There are five ramrod straight concrete pillars that run from her bottom to her top. These pillars, the building’s core, form a tower that each floor, no matter its angle, is attached to.
Inside these pillars six high-speed elevators will soon be installed. “Sure the building has curves but you can’t run elevators at an angle so there has to a perpendicular core.”
At right angles to the centre tower there are four “C” shaped smaller concrete pillars. Like the central core, the squared Cs run straight and true from the basement to the roof. These are the passageways that carry the electricity and water upwards and residential garbage and recycled goods downwards.
Sounds normal. Where it gets a little wacky is in the building of each individual floor around these core shafts and tower.
The floors are egg shaped concrete platters. Since each individual plate is skewed at a different angle than the floor directly below or above it, each suite in the building is different.
While in a traditional condo tower each unit’s kitchen and bathroom is directly in line with the kitchen and bathroom above and below it, the same isn’t true in the Marilyn Monroe.
Wearing a hard hat and work boots and standing on the 49th floor, Vacilotto uses his hands to show where a unit’s bathrooms and kitchen will be. “If we drilled down to a lower floor chances are there wouldn’t be a kitchen or bathroom there. They could be here (pointing to a spot close to the open edge of the building) or over there (gesturing back to the core tower).”
This gives unit owners uniqueness not found in any other large format condo build. But by not having water and sewage services running down the building in a straight line, the actual placement of pipes becomes an integral part of the initial stages of the construction.
“On some floors we have more piping running horizontally across the ceiling than we do going vertically through the floor to the next unit below,” Vacilotto says.
Building a tall condo is akin to creating a vertical assembly line. Each floor has to be created by a team of skilled tradesmen before the next level can be added.
Pouring concrete inside standing plywood forms creates the load bearing walls. Since the ceiling (and the next level’s floor) comes after the walls, the concrete is poured in between the wooden forms from above.
When the walls have firmly set, the plywood forms come down. The ceiling is poured and the basic services — electricity, water, sewage and gas — are roughed in.
There are no outside walls, so the forms are bundled up and put on a platform on the outside of Ms Monroe and lifted up to the next level so the floor building process can continue.
We can’t “fly” form (a crane swings the forms out the side of a building and lifts it up to the next level) the way other buildings do,” said Vacilotto. “The shape doesn’t allow for it.”
It takes about four days to build a floor at the Marilyn Monroe site. Periodically the roof crane and a concrete pumping rig are raised to keep pace with the growing condo.
Driving by you can’t see how busy the construction site is. The top two floors of Marilyn Monroe have a downward slanting brightly coloured collar around it.
The covering is there to make sure the workers, their tools and building material don’t fall down onto a busy Burnhamthorpe Rd. below. The barrier also protects the workers from the constant wind. And it takes the edge off anyone suffering from a fear of heights.
Watching the concrete being pumped from a crane you don’t see that you are at the top of the tallest building in Mississauga. But once the structure is complete, the view from inside will be just as interesting as the view from outside.
Cookie cutter and tiny boxes on boxes are two condo clichés that don’t get used much when talking about the Marilyn Monroe. Each suite is aligned differently than the units above and below it. And each suite varies in shapes and sizes depending on where it is on the ovoid shaped floor.
A unit’s view of the outside world will be through a curved bank of windows and glass doors. Where there isn’t window glass there will be spandrel opaque glass panels giving Marilyn Monroe a wall-of-glass look.
These windows don’t open, instead there are sliding doors leading out to balconies. The balconies range in size; from 10 to 50 feet — it all depends if you are on a hip or a waist. If you stand on the bulge side of the ovoid and look down, you can’t see any other balconies. Go to another unit and look over the edge and you see a stepped progression of balconies below you. Look up and you will see ledge upon ledge of concrete.
Dominus Construction Group readily admits that the building is over built. All that extra concrete, rebar and snaking pipe work does have its advantages. This is a building that could well be standing in the year 2110.
The project has caught the interest of buyers and builders alike. Only a handful of suites are left for sale and the top floor was snapped up long ago by a single customer. A steady stream of companies from across the country have sent their own builders in to look up Marilyn Monroe’s skirt to see for themselves how it is being done.
Facts & Figures
• Absolute consists of five buildings in the block on the northeast corner of Burnhamthorpe Rd. and Hurontario St. in Mississauga.
• Absolute 4 (Marilyn Monroe) has a rotation of 207 degrees from the base to the top.
• Absolute 5 has a rotation of 200 degrees from the base to the top.
• Absolute 4 will reach 56 storeys. Each level has nine-foot ceilings except the penthouse level, which will have 10-foot ceilings
• Marilyn Monroe has 428 suites; her shorter companion will have 453.
• Marilyn Monroe’s largest suite will be 3,500 square feet, her smallest will be 545 square feet.
• Marilyn Monroe will have six penthouse units, 100 2 ½ -bedroom suites, 217 2-bedroom suites and only 28 1-bedroom units.
• Amount of concrete that has been poured at Absolute 4: 4,400 cubic meters
• Amount of concrete still to be poured at Absolute 4: 1,500 cubic meters
• Absolute 4 and 5 share a common garage with 954 parking spaces.
• There will be a retail space between the two buildings.
• A 30,000-square-foot, three-storey recreation centre has already been built. It has indoor and outdoor pools, a basketball court, two squash courts, weight room, cardio room, games room, three party rooms, five furnished guest suites, a 48-seat theatre, spa, indoor and outdoor whirlpool, men’s and women’s change rooms with showers, lockers and sauna/steam room, library room and outdoor barbeque facilities.

Monday, September 13, 2010

August Sales and New Listings Down, Prices Up

September 3, 2010 -- Greater Toronto REALTORS® reported 6,232 sales through the Multiple Listing Service® (MLS®) in August 2010. This represented a 22 per cent decrease compared to the 8,035 sales recorded during the same period in 2009. New listings decreased by one per cent year-over-year to 10,488.

"The prospect of interest rate hikes and new mortgage lending rules prompted some households to purchase a home sooner than they otherwise would have this year. The result has been a larger than normal dip in sales over the summer months. With this said, it is important to recognize that sales on the year were eight per cent higher than in 2009," said Toronto Real Estate Board President Bill Johnston.

The average price for August transactions was $411,012 – up six per cent compared to the average of $387,921 reported in August 2009.

"Market conditions have remained tight enough to support higher home prices in comparison to last year. Under current mortgage lending standards, a household earning the average income in the GTA can comfortably afford the mortgage payments on an average priced home. Market conditions and the affordability picture would have to change dramatically before a sustained drop in the average selling price would take place," said Jason Mercer, TREB's Senior Manager of Market Analysis.

Friday, September 10, 2010

Why rising rates haven't hurt housing

Why rising rates haven't hurt housing

Thursday, September 9, 2010
Recent mortgage-pricing trends are helping to offset the Bank of Canada's moves
ROB CARRICK
So much for the housing market being crushed by rising interest rates.
The Bank of Canada cranked up its trendsetting overnight rate for the third time in four months on Wednesday and the impact will be felt by a wide range of borrowers. But home buyers? Not so much.
True, the central bank's increase of one-quarter of a percentage point has already been applied by the major banks to their prime lending rate. That in turn means variable-rate mortgages, plus lines of credit, are now a quarter-point more expensive.
But there are two trends that offset higher carrying costs for variable-rate mortgages. One is that fixed-rate mortgages, notably in the popular five-year term, have been coming down in recent weeks and are now as low as 3.59 per cent. That's a fabulous rate, by the way.
The other trend is a return to previous levels of discounting in variable-rate mortgages. With their usual dexterity, the banks used the financial panic of 2008 and early 2009 to ram through higher lending costs on a variety of products, including variable-rate mortgages. Now, some of these rate hikes are being unwound.
MorCan Direct, a Toronto mortgage broker, notes that pricing on variable-rate mortgages has over the past 20 months fallen from prime plus a full percentage point to prime minus as much as 0.65 to 0.8 of a point. The level of competition in the mortgage market suggests to MorCan's Travis Allinott that by next year we'll see banks offering their best precrisis deal on variable-rate mortgages - prime minus one percentage point.
"We definitely believe it's going to get back to prime minus 1," Mr. Allinott said "It's a rate war out there."
Wherever variable-rate mortgages end up, it's clear that pricing trends in the marketplace are offsetting the Bank of Canada's rate moves to some extent.
On the fixed-rate side, there have been at least four rounds of rate cuts by the big banks since the end of May. Last week, Bank of Montreal lowered its special five-year rate to 3.59 per cent from 3.79 per cent (note: this rate applies only to 25-year mortgages and offers limited prepayment privileges). Back in May, discounted five-year mortgages went for something like 4.7 per cent.
Lenders price fixed-rate mortgages off the yield on Government of Canada bonds, not the Bank of Canada's overnight rate. Bond prices have been rising lately, which means yields have fallen because the two move in opposite directions.
Things get a bit weird here because good times for bonds have lately coincided with bad times for the economy. And yet, the Bank of Canada is confident enough about the economy to have raised rates repeatedly.
Craig Alexander, chief economist at Toronto-Dominion Bank, explains that trading in Canadian bonds is heavily influenced by what's happening in the U.S. market. Down there, of course, there's a lot of worry about a return to recession - the dreaded double dip.
The Canadian economy has slowed, too, and nowhere more markedly than the housing market. This was widely predicted many months ago, but ironically it was rising interest rates that were supposed to drive the decline.
Mr. Alexander said rising rates have had only a very small negative impact on house prices. More important factors have been a rise in the inventory of homes for sale, a rush to buy in 2009 and early 2010 when rates were at rock bottom, and the expectation that rates would rise.
Today, he sees rates as being supportive of housing. "Rates are remarkably low by historical standards. People get so hung up on the direction of interest rates. The level matters."
Rates will increase from here, but Mr. Alexander doesn't seem them as a major problem for housing.
"The fact that rates are low and likely to rise at only a gradual pace in the next 18 months suggests you really aren't going to get a major correction in the housing market," he said. "What you're going to get is a period of softening, some declines in sales and a modest correction in housing prices. But after such a strong run, you could expect that."
Interested in variable-rate mortgages even though they're captive to the Bank of Canada's rate moves? Mr. Allinott suggested starting with a one-year closed mortgage, which you may be able to get for as little as 2.44 per cent. In a year, he suggests jumping into a variable-rate mortgage.
Variable-rate mortgages could be more costly then, but pricing pressure might just get you a prime-minus-1 deal.

Thursday, September 9, 2010

Bank of Canada Rises Interest Rates

OTTAWA -- The Bank of Canada raised its benchmark interest rate Wednesday by 25 basis points to 1%, arguing financial conditions remain “exceptionally stimulative” even in the face of a slowing -- but still growing -- economy.
In its accompanying statement, the central bank acknowledged the economic recovery in Canada would be “slightly more gradual” than envisaged it its most-recent economic outlook, due to sluggish private-sector demand in the United States. However, it said domestic demand was expected to be “solid” and business investment to advance “strongly” -- powered by “accommodative” credit conditions that have eased further in recent weeks due to sharp declines in bond yields.
Banks price loans, such as mortgages, based on yields for relatively safe government debt.
The statement provided no suggestion the central bank was set to keep rates on hold for an indefinite period, as some analysts now expect.
“As a result of monetary policy measures taken since April, financial conditions in Canada have tightened modestly but remain exceptionally stimulative,” the central bank said.
For instance, consumers continue to take out loans at a steady pace, with central bank data suggesting household credit expanded at an annualized 7.1% pace for the three-month period ended July 31.
The Bank of Canada said future hikes in its key lending rate, up 75 basis points in the past three months, “would need to be carefully considered in light of the unusual uncertainty surrounding the outlook.”
This decision may come as a bit of a surprise for traders, who have been largely divided as to which way Mark Carney, the central bank governor, and his colleagues would lean toward in the face of slower than anticipated economic growth. Markets had priced in a roughly 60% chance of a rate hike, and those odds increased over the past week from a less than 50-50 chance based on better-than-expected manufacturing and labour data in the United States.
Canadian GDP expanded 2% annualized in the second quarter, well below the central bank’s forecast of 3%. However, analysts have said the economy was stronger than the headline print indicated, as final domestic demand advanced at a robust pace (3.5%). Plus, much of the drag in the second-quarter was from so-called “import leakage,” in which gains in imports -- as firms acquired productivity-enhancing equipment at the fastest pace since 2005 -- outstripped exports.
Of the GDP results, the Bank of Canada said economic activity “was slightly softer” than expected, “although consumption and investment have evolved largely as anticipated.”
The central bank is likely pleased at the turnaround in business investment, which it has argued is required for the recovery to maintain momentum once consumer spending tapers off. Plus, investment from firms in productivity-enhancing technology is required to ensure future growth.
The bank said the Canadian recovery would be “slightly more gradual than it had projected in July … largely reflecting a weak profile for U.S. activity.” The U.S. Federal Reserve has said it was prepared to take further action if required to stoke the recovery, although officials at the powerful central bank are unsure such measures are required.
The Bank of Canada said inflation -- which the central bank aims through rate decisions to hit and maintain a 2% level -- has been “broadly in line” with expectations and “its dynamics are essentially unchanged.”
In terms of the global picture, it said the recovery is proceeding “but remains uneven, balancing strong activity in emerging market economies with weak growth in some advanced countries.” As for the United States, the world’s biggest economy and Canada’s biggest trading partner, the central bank said the recovery in private demand is “being held back by high unemployment and recent indicators suggest a more muted recovery in the near term.”
Economists have scaled back growth expectations for both Canada and the United States, although at the same time boosting the forecast for Europe as its major economies are advancing better than expected following the sovereign debt crisis in the spring.
The central bank is scheduled to provide an updated economic outlook next month, two days following its next rate decision on Oct. 19. Previously, the central bank had forecast 3.5% economic growth this year, followed by 2.9% expansion in 2011. The output gap -- a rough measure of the amount of excess capacity in the economy -- is expected to close by the end of 2011