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Municipal, Land Use and Development – Michael Letourneau

The Ontario Planning Act provides municipal governments with a great deal of control over how their communities develop. It provides numerous mechanisms for municipalities to designate what can be done with the land within their borders. The general purpose of these mechanisms is to foster stable, healthy communities. They include the powers to establish zoning by-laws, collect development charges, and create official plans to guide community growth. One of the Act’s most powerful tools, however, is the power to decide how landowners can subdivide their land.

At common law, a landowner can subdivide a single piece of land by selling off portions of it to different owners. The Act, however, prohibits doing so without municipal approval (or provincial approval in remote communities without municipal governments). The most visible example of this is the process for creating new residential subdivisions, where prospective developers must submit detailed plans not only for the housing they intend to build and sell, but also for the services that they must build or pay for to serve those properties such as roads, drainage, utilities, parks, etc. The municipality must ensure that the plans meet their standards and conform to their official plan before they will be approved under the Act.

Another less visible, but still important, growth control mechanism under the Act is “consent to severance”. Through the granting of consent to sever, a municipality may authorize a person to subdivide land on a smaller scale, and without the need for a formal subdivision plan. These severance consents are used for a wide variety of land use and development purposes, including small scale property development.

In order to further control development allowed by severance consent, the Act empowers municipalities to attach conditions to consent approvals. The range of potential conditions is very broad, and covers anything that the approval authority feels is required for proper development. In order to provide stability to the severance consent process, the Act also imposes timelines on the processes for approving consent applications, satisfaction of conditions, and the validity of certain documentation. These timelines are highly technical in nature, and both municipalities and developers need to pay careful attention to exactly what they regulate.

In general, an applicant has one year to meet any conditions attached to the decision granting their severance consent; if they do not do so, their original application is deemed to be refused. The Act also requires that the municipality be satisfied that those conditions are met, but it does not connect that requirement to the “deemed refusal”. Once the municipality is satisfied that the conditions are met, it can issue a certificate saying that consent was granted, and that the consent is valid for at most two years from the date of issue.

While this system appears to be fairly straightforward, the technical language in the Act and the case law interpreting it has proved otherwise.

Unless a municipality imposes specific conditions in each consent decision describing when they are to be notified that the condition has been met, there is case law that establishes that a municipality cannot require that an applicant do so within the one year timeframe.

Many municipal consent authorities operate on the basis that if an applicant fails to inform them within one year that their conditions were satisfied, no consent exists. The Act, however, places such consent decisions
“in limbo” and a municipality who then refuses to grant final consent in those circumstances could be compelled to do so by a court. The court could also require the municipality to pay the legal costs of the applicant in obtaining the court order required.

All of these consequences can be avoided by municipalities simply taking a few simple steps. A municipality can attach conditions to each consent decision they issue that require the applicant to provide evidence that the other conditions involved have been satisfied within a year. Further, municipalities should be proactive in issuing consent certificates as soon as the conditions attached to a consent decision have been satisfied – doing so will immediately start the two-year validity period.

While all of this sounds like a potential windfall for land developers, developers need to consider the value of disputing the timeframe for making a consent valid. While a developer may be able to successfully obtain an order from the court extending the life of a severance consent despite the stance by the municipality that it has lapsed, these approaches can be both costly to pursue and may strain relations with the issuing municipality. Instead, developers dealing with land severance and consent issues ought to work towards being proactive in satisfying consent conditions. For example, they should appoint a single key person to manage the process of meeting the required conditions. That person should engage suppliers, consultants, and legal counsel early in the process, establish a timeline for satisfying conditions, and check in on the process regularly. Proper management will cost a developer relatively little compared to the costs required to salvage a lapsed consent decision that is necessary to accomplish a larger project.

Article written by
Michael Letourneau
, is a lawyer in the Municipal, Land Use & Development Group whose practice includes real estate law for land developers.

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Real Estate – Jacquelyn Johnson

If you are thinking of purchasing a home in the near future, the federal government has implemented some new mortgage rules that you need to be aware of. These new rules came into effect July 9, 2012, and will affect home buyers or owners who are mortgaging a property.

Most notably, for new government-backed insured mortgages, the amount of equity that can be borrowed against a property has been reduced, from 85% to 80% of the value of the property.

Another more contentious change is the reduction of the maximum amortization period from 30 years to 25 years. An amortization period is the amount of time it will take a homeowner to pay back the principal amount of a mortgage. This new shorter period means that the principal will be paid back quicker by the borrower, resulting in savings on the total amount of interest paid on that principal amount. However, it also means that the individual payments will be higher because there is less time to pay the principal back in full. This change has the effect of decreasing the total cost of a home a buyer is able to finance.

In making these changes, the government is attempting to help homeowners build up the equity in their homes quicker and to pay off their mortgages sooner, with the ultimate goal of strengthening Canada’s housing finance system. Finance Minister Jim Flaherty is seeking to cool down what many experts see as an “overheated” mortgage market, with many Canadians carrying debt loads that are beyond their comfort ranges. In fact, the average rate of debt to disposable income currently in Canada is an alarming 152%.

But in spite of the Minister’s aggressive push to inform the public of these new rules, a recent poll conducted for the Bank of Montreal showed the majority of Canadians are unaware of the changes.

Given that a home is the largest purchase most Canadians will make in their lifetimes, it is important to be aware of the rules and consequences relating to the mortgages used to finance such purchases.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

 

Author: Jacquelyn Johnson is a Lawyer at Sorbara, Schumacher, McCann LLP, one of the largest and most respected regional law firms in Ontario. Jacquelyn may be reached at (519) 741-8010 or <jjohnson@sorbaralaw.com>.   

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Corporate Commercial – Real Estate – David Sunday

When a landlord’s commercial premises are up for lease and the leasing broker locates an interested tenant, it is quite common for the prospective landlord and tenant to sign an agreement to lease as a first step towards putting in place a final lease agreement.

While an agreement to lease is no substitute for a final lease, it is important for prospective landlords and tenants to understand that signing an agreement to lease often has the same legal effect as signing a final lease itself.

Ontario’s Courts have said that, to be valid and enforceable, an agreement to lease must show the parties, give a description of the premises, set out the commencement and duration of the term, the rent, and all the material terms of the contract that are not just incidental to the relationship of landlord and tenant.  If these requirements are met, then an agreement to lease may be legally enforced, even though the parties did not ultimately agree on the final form of lease.

If the requirements for a binding agreement to lease are not met, then an agreement to lease will usually only be considered an “agreement to agree” or an “agreement to negotiate”.  In law, such “agreements to agree” are not generally treated as legally enforceable contracts.  However, even an agreement to agree may have enforceable provisions with respect to certain matters, such as forfeiture of deposit monies, and the entering into of an agreement to lease may trigger broker commission obligations.

Often agreements to lease contain a clause that says that the tenant will accept the landlord’s standard form of lease when presented subject only to minor modifications to make it consistent with the terms of the agreement to lease.  It is one thing to have such a clause included when the landlord’s standard form of lease is available to the tenant and reviewed before the tenant signs the agreement to lease, but potentially unfair to the prospective tenant if the landlord’s standard form of lease is not provided to the tenant until after the agreement to lease is signed.  Notwithstanding the potential unfairness, the Court’s will enforce such agreements to lease if the legal requirements set out above are met.

To avoid problems, parties to an agreement to lease should always ensure that:

  • the agreement to lease is clearly drafted and fully understood by both parties;
  • the agreement to lease clearly states whether it is intended to be a binding agreement to lease or non-binding in nature;
  • the agreement to lease clearly sets out the rights of the parties insofar as preparation and acceptance of the final lease agreement is concerned;
  • the agreement to lease clearly sets out what happens in the event the parties fail to agree upon a final form of lease (e.g., Are parties entitled to walk away? Are deposit monies forfeited?); and
  • any conditions included in the agreement to lease with respect to lawyer approval are clearly drafted, reflect realistic timelines, and confer sufficient rights as to allow for meaningful lawyer review and comment.

Before signing any agreement to lease, landlords and tenants should ensure that their interests are fully protected and should ask themselves if they could abide by the terms of the agreement if it were legally enforced even in the absence of a separate finalized lease agreement.

* * This article is intended only to inform or educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

 

Author: David Sunday is the Group Leader in the Municipal, Land Use & Development Law Group at Sorbara, Schumacher, McCann LLP, one of the largest and most respected regional law firms in Ontario. David may be reached at (519) 741-8010 or<dsunday@sorbaralaw.com>.

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Real Estate – David Sunday 

Ontario has commenced a formal review of the Condominium Act.  Although the review is still underway, the review panel has issued a first recommendation to require condominium managers to hold certain mandatory qualifications.

The Ministry of Consumer Services has already endorsed this early recommendation, due to its relatively broad support across most stakeholder groups, including from the Association of Condominium Managers of Ontario.

Property managers across Ontario and Waterloo Region will want to monitor this development and ensure that they are ready when mandatory qualifications become a reality.

The Stage Two Condominium Act Review report is expected to be available for public comment by the end of summer 2013. Expect it to provide further detailed recommendations with respect to the types of mandatory qualifications that are likely to be required for condominium managers at some time in the future.  You can watch for the report online at:

http://www.sse.gov.on.ca/mcs/en/Pages/condo_rev.aspx

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

 

Author: David Sunday is the Group Leader in the Municipal, Land Use & Development Law Group at Sorbara, Schumacher, McCann LLP, one of the largest and most respected regional law firms in Ontario. David may be reached at (519) 741-8010 or<dsunday@sorbaralaw.com>.

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