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Law Times • November 2, 2009 NEW An online resource tool 1.800.263.3269 Bestcase earlug.indd 1 3/26/08 11:52:01 AM Focus On REAL ESTATE LAW Cost of new homes to soar next year HST could blunt housing rebound BY DARYL-LYNN CARLSON For Law Times ust as the real estate market seems to be showing signs of recovery, lawyers who prac- tise in that area are bracing for another downturn that could impact their livelihood. Beginning July 1, 2010, all J new home purchases in Ontario will be subject to the combined 13-per-cent harmonized tax. While resale home transac- tions won't be taxed at the new 13-per-cent rate, all the related services involved — from real estate commissions to home in- spections and legal fees — will. For the time being, the prov- ince has acquiesced to the con- struction industry and agreed to waive the 13 per cent for new homes costing less than $400,000. Coupled with the new tax, some lawyers expect that by next year, interest rates will indeed go up, thereby dousing any spark that may have ignited signs of a vibrant market following a slow and uncertain winter. "The practice of law at the con- sumer level is a highly competitive area," says Murray Miskin of Miskin Professional Corp. in Whitby. "Ultimately, the law- yers will probably end up making less money be- cause for one thing, there will be fewer deals in the purchase and sale of homes, so they'll be doing less volume of work. But also, they may have to make concessions to cli- ents because of the com- petitive nature of fees." Miskin's real estate practice includes residen- tial home sales throughout the GTA and into cottage country via his firm's office in Peterborough. He worries not only that the HST will stymie any possible resurgence of home sales but also that the con- struction industry could suf- fer due to the higher tax rate on new home purchases. From his vantage point money. Real estate lawyers weren't making any mon- ey," he says. "A lot of lawyers had to lay off their real estate staff and they're just starting to come back again. So this past year has been very dif- ficult for real estate practitio- ners until the market started heating up again." He suggests that if the economy continues its re- covery, the Bank of Cana- da will have no choice but to raise rates by next sum- mer, which would coincide with the new tax. While he acknowledges Steven Pearlstein doesn't think lawyers' fees will deter prospective buyers since the HST will add only $80 to the cost of legal services. in Whitby, he was front and centre during the uncertainties swirling around the Oshawa General Motors plant. Without any confidence in New forms simplify administrative work BY DARYL-LYNN CARLSON For Law Times T here are few signs a significant number of lawyers in On- tario have incorporated a new standard document for closing property transactions into their practices. The document, introduced several months ago by the Working Group on Lawyers and Real Estate, is supposed to streamline the administrative burden in property sales. The working group, with participation from volunteer real estate practitioners along with organizations such as the County & District Law Presidents' As- sociation, the Ontario Real Estate Lawyers Association, and the Ontario Bar Association, worked for nearly two years to establish a standard property sale closing form. The effort came about partly in response to last year's lender outsourcing proposal, which threatened to minimize the role of lawyers involved in real estate transactions. Through outsourcing, third parties that work in conjunction with lending institutions are able to process mortgages. Many real estate lawyers subsequently determined that a standard form that was easy for consumers to understand and also applicable for law- yers no matter where they practised in Ontario was necessary. The documents resulted following consultations with lawyers across the province after several regions, including the bar in Cam- bridge, Barrie, Hamilton, and Ottawa, took their own initiatives to standardize local real estate transaction forms for residential and commercial property sales. Most documents were based on forms from the Ontario Real Estate Association, although some jurisdictions and individual lawyers made changes based on their needs and demographics. Jerry Udell, of McTague Law Firm LLP in Windsor and a par- ticipant in the working group, says while the documents are readily See Forms, page 13 Editor-in-Chief Harvey M. Haber, Q.C., LSM and numerous leading experts as contributors jobs and the economy, people stopped buying property. "Last winter was bleak for the real estate market. Real es- tate agents weren't making any "the real estate market is a very volatile market," he says lawyers might need to become creative and offer clients deals or discounts to get them in the door. That's exactly what his firm is doing. "What we're saying to our clients is if they come to us with a deal that clos- es after the HST is in effect, we will adjust our fee so they don't have to pay extra," says Miskin. "With new homes, there's often a delay in closing, so we're trying to give the client some stability where even if there is a delay, they won't have to pay us more. We want to get the deals in and offer some help to the cli- ents who are hurting also." But within the city of Toron- to, Miskin isn't optimistic that the market will easily absorb the tax. "It may put a permanent damper on the market just like the Toronto land transfer tax has put a permanent damper on the Toronto market," he says. "The Toronto land trans- fer tax has been good for the GTA, anywhere outside of To- ronto where it's less expensive to purchase because of the land transfer tax, and I think people will factor all of these taxes into their decision-making process." According to the Ontario Real Estate Association, the HST will add between $1,747 to $2,297 to a typical sale for a new home costing less than $400,000 in the following areas: $470 for mortgage insurance; $80 for le- gal costs; $32 for home inspec- tion; and $1,150 to $1,700 for real estate commission. See Interest, page 13 Tough times call for strict measures, that's why you need… PAGE 9 Revised and updated! 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