Law Times

Law timeS • September 3, 2012 junior lawyers, four clerks, two secretaries, and one law-school-bound child whom I force to read all of my columns; builders' lawyers whose job it is to oversee the thou- sands of units of condominiums and free- hold housing stock under construction and sold in the province today; and the rest of the practising real estate bar. Th e conscripted readers shouldn't ig- T here are three groups of Law Times readers who are reading this col- umn about the newly revised Tar- ion addenda. Th ey are the three nore this article like they do the other ones. Th e builders' lawyers shouldn't do so either but likely will ignore it probably because they already know, in more detail than this article can provide, what' New Tarion addenda introduce additional transparency to home pricing The Dirt COMMENT mentioned above, the most signifi cant changes under the revised addenda come under the new Schedule B. Th is com- ponent, entitled the adjustment to purchase price schedule, will require builders to lay out all of the price changes contemplated in the purchase contract in a single schedule in order to pro- vide greater transparency to the adjustments a buyer can expect on closing. More specifi cally, the new Schedule Other than the provisions addenda. Aſt er all, the new Tarion addenda have been in the works for quite some time and will very soon be mandatory attach- ments to every new-construction purchase contract entered into in the province. If, however, you have a residential real s in the new Tarion estate practice and are still reading as of this point, then read on because you need to know this stuff . Many of the revisions deal with parcels of Jeffrey Lem B will require the builder to list all of the fi xed adjustments to the purchase price a buyer will have to pay on closing. Th ey include the Tarion enrolment fee; vendor' lawyer's real estate transaction levy; dis- charge fees for the builder's construction fi nancing; fees related to maintaining re- cords of the purchaser' for any non-suffi cient funds cheques. Th e new Schedule B will also require the s deposits; and fees tied land associated with common element condominiums. Th ey get their own brand- new addenda forms that are generally similar to the existing ones for condominiums but are a bit more specifi c and, of course, refl ect diff erent critical deadlines and closing proto- cols. While important to those who deal with such parcels regularly, most residential real estate lawyers will likely send those forms straight to the pile of things they should read eventually rather than right now. builder to list all of the variable adjustments to the purchase price that the buyer will have to pay on closing, such as levies for parks, public art or other municipal charges; HST on the cost of any included appliances; increases in municipal, education or transit development charges; new taxes imposed on the unit; esti- mated municipal taxes for the year of closing and the subsequent year; interest on the bal- ance of the purchase price from and aſt er the fi nal closing to the next banking day; and the unit' hydro, sewers, and water services. Herein lies the rub. Builders must delin- eate all of these price adjustments — both it on closing no matter what the balance of the purchase contract specifi es. Another twist regarding adjustments re- s fi xed and variable — in the new Schedule B regardless of whether the main body of the contract addresses them (if the main body of the purchase con- tract deals with them, Schedule B must cross-reference the rel- evant provisions). If, for what- ever reason, the builder fails to disclose a purchase price ad- justment in Schedule B, it can't charge it or otherwise recover lates to changes made by the builder with respect to certain costs paid to third parties. Th e builder can no longer adjust the purchase price to recover such third-party costs unless it in fact pays the amount to the third party. Th at provision is retroactive to purchase con- tracts signed on or aſt er Jan. 1, 2011. Although there has been some tweaking s share of the cost of the installation of gas, of the delayed-closing rules for new homes and condominiums in the new Tarion ad- denda, the biggest change to the prescribed critical dates is actually an expanded privil- ege to contract out of them. To assuage con- cerns that the previous addenda excessively restricted the parties' freedom to contract out of critical dates, the new provisions ex- pressly permit the parties to mutually ac- celerate or extend any of them provided that each amendment includes a statutor- ily prescribed disclaimer clause that, greatly paraphrased, confi rms that the buyer fully understands that the change is completely voluntary and may aff ect the entitlement to compensation for delayed occupancy. Th e PAGE 7 exact wording is very specifi c and the ab- sence of this statutory disclaimer clause means any attempt at changing the critical dates will be unenforceable. For condominiums, the new addenda also establish the roof assembly date as the triggering event for issuing notice of a fi nal tentative occupancy date. In order to stan- dardize the defi nition of roof for diff erent types of condominium projects and to pre- vent creative ad hoc defi nitions, the new ad- denda now have a uniform one for units in townhouses and row houses and another one for typical highrise buildings. Even if we ignore the extensive provi- sions related exclusively to parcels of tied land associated with common element condominiums, the changes to the existing addenda are signifi cant and detailed and warrant more space than the editors of Law Times could possibly give me. Tim Schum- acher, vice president and general counsel at Tarion, will be presenting a must-see seg- ment on the new addenda and other Tar- ion changes at this year' Estate Lawyer event at the end of Novem- ber. By then, however, the new addenda will have already been in force for a couple of months as Oct. 1, 2012, is the mandatory adoption date and there are already certain transitional adoption rules in place. In the meantime, residential real estate practi- tioners can download information on the new addenda directly from Tarion' site as Oct. 1 is just around the corner. LT s Six-Minute Real s web Jeff rey W. Lem is a partner in the real estate group at Miller Th omson LLP. His e-mail address is jlem@millerthomson.com. W BY TERRANCE CARTER AND KAREN COOPER For Law Times Charities can still get political despite new rules u SPEAKER'S CORNER izations may be reluctant to become or stay involved in political activities. However, the basic regime for polit- ical activities by charities remains largely intact, as does the current Canada Revenue Agency policy. Th at' ith the recent spotlight by the federal government on the foreign funding of political activities by Canadian char- ities in its recent budget, registered organ- aff ecting issues related to the protection of the environ- ment through Bill C-38, An Act to Implement Certain Provisions of the Budget Tabled in Parliament on March 29, 2012, and Other Measur es. Th e bill has also changed the rules regarding the political activities of charities by adding a revised defi nition of political activity to the In- come Tax Act and creating new sanctions. In the last six months, there have been numerous al- s despite the many signifi cant legislative changes legations against environmental charities regarding the use of donations allegedly received from foreign sourc- es. In February 2012, the federal government released its strategy on counterterrorism that equated environmen- talism with white supremacy and the terrorist activities in Oklahoma City in 1995 and Norway in 2011. Further to this, various politicians have questioned the appro- priateness of foreign funding of environmental charities in Canada for the purposes of government lobbying. Of particular signifi cance is the Senate inquiry initi- charities wanting to participate in political activities. Bill C-38 adds to this chill eff ect in several ways. First, the bill amends the Income Tax Act by revising the defi - nition of political activity under s. 149.1(1). According to Bill C-38, a political activity now "includes the making of a giſt to a qualifi ed donee if it can reasonably be consid- ered that a purpose of the giſt is to support the political ac- tivities of the qualifi ed donee. meaning of the phrase "can reasonably be considered" is ambiguous. Th e focus of this change is on the intent of the donor charity as opposed to that of the recipient and will result in a double counting within the allowable limit on resources for political activities. In this regard, the existing allowable limit of 10 per cent " Without further details, the related to political activities supplement the existing regime but don't change the basic provisions for them. However, there will no doubt be enhanced scrutiny of political activities by the CRA. As a result, charities will need to be vigilant in ensuring that they understand and are compliant with the rules before embarking on or continuing in the area of political activities. To do so, charities will need to ensure that their ac- Th e new rules and sanctions introduced by Bill C-38 total amount of them. As well, charities that receive money from foreign sources for the purpose of car- rying out political activities will have to disclose the amount received, the nature of the political activity, and the country of origin of the donor. of resources on non-partisan political activities remains intact. However, a charity that funds another organiza- tion for the purpose of enabling political activities must now count that donation against its own 10-per-cent limit. At the same time, the recipient charity will count the expenditure of those funds towards its 10-per-cent limit. Bill C-38 also introduced new intermediate sanctions for excessive or unreported political activities. Where a registered charity exceeds the limits under the Income Tax Act for political activities, the CRA can impose a one- year suspension of tax receipting privileges (that' ated by Sen. Nicole Eaton on Feb. 28, 2012, to study the foreign funding of charities in Canada based upon her claims that the money was improperly infl uencing policy discussion in Canada. Th ese accusations lack credibility given the fact that there are many other segments of the charitable sector in Canada, such as universities, hospitals, and religious organizations, that receive large-scale fund- ing from foreign sources each year and against which the government has not made such allegations. However, as a result of these and other attacks on environmental chari- ties, an unfortunate chill eff ect has created fear among dition to revocation). According to the director general, these proposed intermediate sanctions will provide the charities directorate with an additional tool to encour- age compliance with existing legal requirements. Along with these legislative changes, the budget will provide the charities directorate of the CRA with additional resources of $8 million to enhance its education and compliance ac- tivities in the area of political activities. Finally, Bill C-38 requires more disclosure when s in ad- it comes to political activities. According to the CRA, the fi nancial information section will now include de- tails on giſt s intended for political activities and the www.lawtimesnews.com tivities are allowable and don't venture into the area of prohibited partisan political activities. Second, charities will need to maintain detailed books and records, par- ticularly with regard to the allocation of expenditures for political activities versus other areas, in order to withstand increased scrutiny by the CRA. Finally, chari- ties will need to carefully track what they report on their T3010 form in order to ensure that the information is accurate and that their expenditure on political activities stays within the 10-per-cent resource limit. From this overview, it should be clear that the proposals in Bill C-38 don't necessarily mean the end of political ac- tivities by charities in Canada. However, what it does mean is that charities that want to participate in political activities will need to do so with their eyes wide open. Th ey'll need to carefully study and comply with the rules set out by the CRA and enhance existing eff orts to maintain good books and records in order to be able to maintain that the amount of resources expended on political activities stays within the allowable resource limits. Political activities are still fair game for charities, but as with any game, you must know what the rules are and play by them. LT Terrance Carter is managing partner and Karen Cooper is a partner at Carters Professional Corp. Carter also acts as legal counsel to Fasken Martineau DuMoulin LLP on charitable matters.

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