Commercial Real Estate Transactions

Everyone who buys their first house is so excited and the last thing on their minds is hiring a lawyer. 

When it comes to commercial real estate transactions, that should be one of the first things you think of.  While commercial transactions are essentially the same in terms of signing an Agreement and taking possession of new property, your lawyer is going to want to see that Agreement before signing off on the final document.

Issues in a commercial transaction are more complex, and depending on what the purpose of the property is, different searches will be required.  Due diligence is enhanced especially when it comes to obtaining title insurance and more time will need be needed to conclude the searches required for corporate purchasers, vendors and lenders.     

Some additional searches required for commercial transactions include ensuring that the property is zoned for the use and ensuring there are no open work order or permits for building, electrical and fire.  If there are tenants in the building, a review of all commercial and residential leases if it is a multi-use property.  These are just a few of the extra steps required for the transaction. 

With the addition of enhanced due diligence, financing of a commercial transaction could also be a bit tricky.  It’s not the same as a mortgage for a residential property, which usually is pre-approved as commercial transactions quite often involve investors. 

Just before you sign that Agreement, get it to the lawyers as they will need to advise if the selected closing date is reasonable and to give them a chance to review the Agreement and highlight anything that you may not be aware of. 

Christine Allan, Law Clerk

Costs in Litigation

It’s no secret that litigation can be an expensive prospect. So, it’s no surprise that litigation expenses will often inform decisions relating to how to proceed, whether to settle, or even whether someone should file a claim at all. But one factor that I find often gets left out of the calculus of litigation is the potential of cost orders.

A costs order is an order by a Judge or Associate Judge requiring one party to pay some or all of the other party’s legal costs. Legal costs include lawyer’s professional fees as well as any other relevant expenses a party incurs during the case. While cost orders are technically separate considerations from the main case, they usually correlate with their outcomes and are typically awarded to the successful party.

Cost orders should almost always factor into the decision-making process in litigation. For example, I’ve seen litigants file a lawsuit under the belief that they only have to worry about their own legal fees and that they can withdraw from the proceedings at any time without consequences if they decide that those fees become too high. That is not the case. Defendants can seek costs for the legal costs they have to pay to defend against a claim, even if a case never goes to trial.

Conversely, I’ve also seen too many people defending a vexatious or baseless claim accept an unfair settlement offer under the calculation that the amounts involved aren’t worth the legal costs needed to fight them. Again, these kinds of calculations fail to consider that you can recoup part or all of your costs by seeking a cost order at trial.

At the end of the day, litigation is multifaceted because people are multifaceted. For some, it may not be about the money as it is the principle of the issue. But should it be a factor in considering how you want to be heard before the court? Always.

Max H. Shin, Associate Lawyer

You Must Have Interest in the Property You Are Suing Over

We recently had a matter where our client was sued for conversion for allegedly selling several vehicles the Plaintiff owned.

The Plaintiff alleges that due to our client selling those vehicles, they suffered damages.

It’s important to note that these vehicles were abandoned on our client’s property and proper notices were provided prior to the disposal (not sold) of these vehicles and the Plaintiff sued almost two years after the vehicles were disposed of.

The best part of this action however, was that the Plaintiff never owned the vehicles they were claiming damages for!

During the Settlement Conference, the Plaintiff’s lawyer made the claim that a party’s name does not need to be on the title of a vehicle to be the owner.  This comment left both the Deputy Judge and I quite baffled.

Various documents were provided to “prove” the Plaintiff owned the vehicles, except for the ownership which would actually confirm who the owners of those vehicles were. 

We obtained Vehicle History Reports on these vehicles which shows the history of ownership, which established that the Plaintiff never owned those vehicles.  Despite this information, the Plaintiff then went on to make fresh allegations against our client which were not plead and further baffled the Deputy Judge and me.

If you don’t plead an allegation, that allegation is not before the Court, and can not be brought up later in the proceedings…I think I wrote a blog about that…

To sue for damages to property, whether its real property, a vehicle or anything else, a party must have an interest in that property.  That interest can be confirmed by way of title or ownership to the property.

If you are unable to establish ownership, then you have no interest to that property.  As a result, you cannot suffer damages for that property and therefore you cannot sue.  Well you can, but you will most likely not be happy with the outcome.

Murray Brown, Licensed Paralegal

They’ll Huff & They’ll Puff & They’ll Cave

I hate bullies.  I hate bullies who bluster and take positions and threaten people they perceive to be vulnerable.  I like when those same bullies fold like a house of cards when I step up to protect the victims of the bullies.

Lately there are a lot of unrepresented litigants on our Business Law files.  In Ontario, companies cannot represent themselves without permission from the Court.  That permission will be denied if the proposed corporate representatives display bad behaviour.  Sadly, bullies can’t help themselves.

Bullies love to leave lengthy voicemails for me, telling me exactly what they think of me and using “colourful” language – see you next Tuesday language, if you know what I mean.  It’s delightful. Not. It’s also helpful, because it means those bullies have to either pay for a lawyer or confront the reality of their situation.  It’s in that moment, they cave.

Bullies never have the law on their side.  Bullies never pause to consider that what they see as a threat is merely pointing out the law.  Bullies need to be shut down and stopped.

I’m a Raptors fan and once of my favourite moments this year was early in the fall when veteran Fred Van Vleet told second year player Precious Achiuwa in a huddle near the end of a game “be a wall, be a f’ing wall.”  

When it comes to bullies, I’m a wall.  I’m an f’ing wall and will stop them from coming at my clients.

Does your business litigator do that?

Inga B. Andriessen,  Principal Lawyer

Healthcare to Law

When you’re young, everyone’s favourite question is “what do you want to be when you grow up”, and, as you get older, that question is slowly replaced with the expectation of a progress update on your chosen career path.

For me, the answer was always simple; I wanted to be a physician, just like my father. This became an expectation for me to follow his steps. However, I also had it in the back of my mind that I wanted to be a lawyer. 

So, I did the thing that most Middle Eastern kids do; I went to undergrad and studied science, rather than considering all of my options and passions carefully. I began to pursue the career that was the “thing to do”, all the while not fully convinced that it was what I was cut out for. I worked in healthcare for some time before coming to the conclusion that a career in healthcare wasn’t the right fit.

It took some soul searching, some volunteer work, and seeing my lawyer sister in action, but here we are. I decided to attend law school in the United Kingdom, and it was the best decision I made for myself. 

Almost one year into my role at A&A, I still learn something new almost every day that reignites my passion for law. 

Now, I often hear my mom proudly say (in Arabic) “nothing in this country moves without a lawyer!” 

The moral of the story is: knock it, but also try it! 

You can spend years of your life planning, investing, and working towards a goal. However, you won’t know if a career is right for you until you give it a try. The only thing you can do when you realize you misunderstood your path is to try again. 

Meriam Noori, B.Sc., LL.B, Legal Assistant (soon to be Ontario Lawyer)

Seek Lawyer First, Sign After

Recently we have noticed an influx of clients coming to us after they sign a contract, asking us what their rights are.

We’re always polite and helpful, but internally we shake our heads. Help us, help you!

We then have the hard task of telling those clients that they have signed certain rights away that they did not even realize, and we are left negotiating from a disadvantage.

While yes, we are here to help you get out of a jam, we are also here to help avoid issues you may not even foresee.

If you receive a contract from another party, don’t be suckered in by the legalese and fancy formatting. The Agreement may appear ready for your signature, but you shouldn’t just sign it and accept the terms as-is. Chances are that the agreement is written to provide the greatest benefit to the party providing the contract. By signing, you could be agreeing to terms that are extremely unfair and unreasonable for your business or even you personally.  

 We look out for all your exit strategies, should relations between the parties sour. We also point out what rights you have if the other party fails to uphold their end of the bargain. Then the fun part – we negotiate the terms.

In our practice, we often see two types of clients – those that are overly optimistic regarding their business relations with another party, and those that have been burned and turned into skeptics.

We help you stay optimistic by weeding out all the possible landmines laid out silently in a contract. We help you avoid being blindsided.

So say it with me… “Before I sign, I’m going to have my lawyer take a look at this first.”  

 Robin K. Mann, Associate Lawyer

     

Using the Registrar to Discharge Vexatious PPSA Registrations in Ontario

Recently a client was notified of liens registered under the Personal Property Security Act (“PPSA”) registered against equipment it owns.

The circumstances of the registrations are quite bizarre and very interesting.  Our client was approached by individuals to purchase the equipment.   The individuals attempted to use some form of doctored government document as payment.  Our clients advised the so-called purchasers that there was no deal. 

Several days later, our client was served with some form of “Notice of Lien” for trillions of dollars  (you read that right).  The PPSA registrations claim they would accept trillions of dollars of gold ounces.  We are not kidding.

The PPSA registrations can be discharged by the Registrar, because on December 8, 2020 the Ontario Government amended the PPSA to give the Registrar the power to discharge a vexatious registration or to reject a document if it leads to a vexatious registration.

Section 66.1 (1) of the PPSA defines a vexatious registration as the registration of a document that (a) the registrar considers to have been tendered for the purpose of annoying or harassing the person named as the debtor in the document or for other improper purpose and (b) that has been tendered by or on behalf of a person who does not hold the security interest referred to in the document, or is claiming an interest that is not registerable under the PPSA.

The liens against our client’s equipment are vexatious registrations, because they were issued to clearly annoy or harass our client in a fraudulent manner, and the party registering the liens holds no security interest in the equipment.  To proceed with a PPSA registration, a Security Agreement must exist to be able to register the Lien.  A security agreement is defined in the PPSA as an agreement that creates or provides for a security interest and includes a document evidencing a security interest. 

The change in allowing the registrar to discharge these liens rather than bringing court actions frees up valuable Court time for other matters, and it not only reduces the legal fees of the party named as the debtor, but the time it takes to get the lien discharged is significantly less than going to Court.

Murray Brown, Licensed Paralegal

So you think updating your Minute Book Doesn’t Matter

We often get push back from clients when we remind them they have an annual obligation to update their Minute Books.  Many of those companies have husband and wives as shareholders and some of them just don’t understand why.

Well, the Ontario Superior Court just released a 2021 decision in Hrvoic v. Hrvoic (see the case here  https://tinyurl.com/2p8d4ycs  ) which very clearly illustrates why you need to make sure the Minute Books are accurate.

In the decision and husband and wife were both shareholders in a holding company.   All was well and then it wasn’t and the couple divorced.

The husband took the position the wife owned 30% of the shares.  However, the company paid annual dividends to them equally (they both had the same class of shares) rather than on a 70-30 basis.  The Judge noted in the decision that “there was no question that the corporate records were deficient.”   

The fair market value of the holding company was $ 10.8 million.  Due, in part, to a failure to properly document the shareholdings as he understood them, the husband is $2.16 million poorer than he should have been.

So.  Now do you think making sure your corporate records are accurate matters?

Inga B. Andriessen, Sr. Lawyer

Important Changes to Annual Returns?

It has been six months with the new Ministry of Consumer & Business Services online filing system and there have been many issues with it.  That said, there have been many positives that came from it.  We can now file online Amendments, Dissolutions and other corporate documents that we previously were not able to file online. 

What you may not know is a change happened on May 15, 2021 whereby Annual Returns were no longer included in the filing of a Corporation’s T2 Income Tax Return, which usually was filed by Accountants.  The new online Business Registry now allows for businesses to do this filing with ease.  

What is an Annual Return?  This is a requirement of the Ontario government and it is essentially a snapshot of certain information, such as confirming the registered head office and directors. 

It is important to note that if there are changes to addresses or directors, the Annual Return is not the place to record those changes.  A Notice of Change must be filed for this information to be captured.  It is always best that when changes are made to a corporation in addresses, directors or officers that they are updated as soon as possible. 

What happens if you don’t file the Annual Return? It could be the assumed that the company is inactive and could result in financial penalties, and even the dissolution of your Corporation. 

What do you need to do?  You need to either confirm with your accountant that they will be taking the necessary step in order to file your Annual Return, and if they are not, makes sure that this happens. 

As part of our yearly check in’s with our corporate clients, we ask that they confirm with their accountant that this has not been filed, and if not, offer up our assistance in filing this document on their behalf.

Whatever you do, just make sure this Annual Return is filed.  The last thing you want is having your corporation dissolved and having to retain our firm to get you back into good standing.

Christine Allan, Law Clerk

  

How Much Estate Tax Will I Pay After I Die? 

Did you know that even in death, we cannot escape the tax collector?

When we die, estate administration tax becomes payable under the process of probate. “Probate” is a court process where your estate is assessed as to value and content for the purpose of calculating estate administration tax. This tax must be paid before any beneficiaries can be paid from your estate.

These fees, which are approximately 1.5% of the value of your estate, are calculated as follows:

Estate ValueAmountPercentage
$1,000 or less$0.000%  
Over $1,000 but less than $50,000  $5 for each $1,000 comprising your estate0.5%  
Over $50,000.00$15 for each $1,000 comprising your estate1.5%  

When probate is required, it can lead to delays and increased legal fees in administrating your estate. However, there are ways to not only limit the amount of tax your estate has to pay, but also to avoid the probate process all together.

For example, when real estate transfers to a beneficiary are involved in the administration of an estate, then probate is always required. There are tips and tricks for getting around this, such as joint ownership of property.

You can also consider separating your personal and corporate assets under two separate Wills. This way, assets that would attract probate tax, such as your home, will only apply to your personal Will and not include your corporate assets.

In situations where probate tax is unavoidable, then the focus should be on limiting the taxable amount as much as possible. This can be achieved by designating beneficiaries directly through your bank and life insurance providers. These funds then flow directly to your beneficiaries as designated outside your Will and do not attract estate tax.

Remember, careful estate planning can save you (or your estate) a hefty tax bill!

Robin K. Mann, J.D., Associate Lawyer