Law Times

Law Times • June 15, 2009 FOCUS PAGE 13 More restructurings and foreclosures expected Continued from page 9 resolution of commercial disputes. He points out that lenders can no longer readily unload debt to secondary lenders so "they're in unfamiliar terri- tory. Because real estate doesn't have the value that it once did, they don't have the ability to refinance easily." As a result, property owners' alterna- tives could be limited, especially if they put off notifying the lender for too long. "I see it happening in the context of an operating business which may own some real property and that property has been used as collateral security to support loans that the business has received from its in- stitutional lenders," says Dunn. "And now the business may be suffer- ing and the lender is starting to get ner- vous about the viability of the business operation, the debtor can't rely as much on the value of the property to secure the loans. At one point in time, if you had a property that's worth $100 million, the lender may lend $60 million against it. But their approach now is either they're not giving that property any value to sup- port ongoing loans, or they're going to value it at 50 cents on the dollar." Both Dunn and Pearlstein say lend- Changes to benefit all parties Continued from page 9 thorough in their due dili- gence. "One of the things real es- tate lawyers should be doing as part of a title search on a commercial or industrial prop- erty is a search of the MOE's Brownfields Environmental Site Registry," he says, although based on questions posed by attendees to the OBA session, Atcheson says he suspects many lawyers have not incorporated that process into their full and off-title searches. centage of real "I think only a small per- estate practi- tioners are including a review of the Brownfields registry web site in a title search at this stage," says Atcheson. "But it's a valuable tool that lawyers can use to allow their clients to better understand the property they are purchasing." He adds that matters involv- ing environmental searches and due diligence are moving to the fore, so lawyers must keep step or put their clients at risk. In the long term, the changes will benefit all parties. "The min- istry's intention is to encourage brownfield revitalization and for the most part the changes are a step in the right direction," he says. "But there are some modi- fications required" in the way lawyers handle certain land sales transactions. Once the proposed amend- ments are introduced, it's expect- ed there will be a transition period providing a window of 12 months to file a new record of site condi- tion based on the former criteria. After that, all new RSCs will be subject to the new regime. LT www.lawtimesnews.com Built just for you Together we have all the tools The TitlePLUS® Program works with you to help protect your clients from title risks.1 assist you, through our legal services coverage2 real estate partner! result of an error or omission in your real estate transactions. To ensure your clients get the most comprehensive coverage in one policy, take a look at the TitlePLUS Program, your Bar-related® With the right tools we , by reducing the inconvenience of dealing with a loss as the ers will eventually find out about a business' financial difficulties, al- though there's certainly no obligation by lawyers to keep tabs on clients' financial viability. "It's always prefer- able for a debtor to con- tact a lawyer and work through a strategy that they can present to the lender before the lender has twigged to the fact that there's financial difficulty," Dunn says. "If the lender is already aware that the company is in difficulty and has made a demand, if you engage your lawyer at that point, there are very little options." They expect there will be more re- While there has been a rise in mortgage enforcement, pow- ers of sale, and foreclosures, 'it's not been a tidal wave,' says Steven Pearlstein. TitlePlus_LT_Nov3_08.qxd 10/27/08 11:11 AM Page 1 mercial real estate group at Davies Ward structuring and foreclosures later this summer and early fall as businesses adhering to a calendar year find they have no other alternative. Jeffrey Lem, a partner in the Com- Phillips & Vineberg LLP and Law Times col- umnist, also spoke at the session, contributing in- sights into government obligations that can usurp other creditors. He notes that the federal government has a statutory right to "deemed trusts" for any amount a business owes for GST, Employment Insurance premiums, income tax, and Cana- da Pension Plan contri- butions deducted from employees at source. "So, if an employer actually deducts these amounts from his or her employees' paycheques but then pockets the money and fails to remit these amounts to the relevant federal agencies, the fed- eral government can claim priority for any such unpaid amounts from any other creditor that has realized on the deadbeat tax payer's assets," explains Lem. "We call these federal-government- deemed trusts 'super-priorities' because they have priority over every other cred- itor. These deemed trusts are particularly insidious because, although they rank ahead of any other creditor's claim, the government does not have to register notice of their deemed trusts anywhere, nor is it particularly convenient for a mortgage lender to find out the extent of any existing deemed trust claims be- fore making its own mortgage loan." He says although deemed trusts as super-priorities have been statute for more than a decade, "only a handful of the lawyers in the mortgage lending bar has had much experience in dealing with them or fully appreciates the dangers that they pose to mortgage lenders." He says that's because until the past year, mortgage lending has been on a "relentless bull run," negating any need for lawyers to deal with powers-of-sale or foreclosures. The session also included presentations by Craig Carter of Fasken Martineau Du- Moulin LLP, Rod Davidge of Osler Hosk- in & Harcourt LLP, Sheldon Disenhouse of Fraser Milner Casgrain LLP, and D.J. 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