In the last few weeks there have been two government announcements that affect real estate. In my opinion these announcements have been overshadowed by the capital gains tax increases, but these are important announcements that I’d like to talk about in this blog post. One’s GREAT news, the other is contradictory to building affordable housing to say the least.
Announcement 1:
From the Provincial Government, legislation has been passed to abolish of Notice of Security Interests (NOSI’s) on properties: A Win for Homeowners Against Unscrupulous Contractors and Rental Companies
I think by now most people have seen the Marketplace TV segments (or similar) where liens (NOSI) have been registered on a home without the homeowners understanding.
Generally they fall into 2 categories;
1) A contractor doing ‘free’ home upgrades, while the contract the unsuspecting homeowner signs allows for the NOIS
2) An onerous rental contract (usually for furnace, hot water tank or air conditioners) that allows the leaseholder to register a NOIS
In most cases, the victims are low income homeowners or seniors.
They are now abolished.
Now this does not mean that the rental payments are waived. And in many cases the payments may need to be bought out on closing if you are buying or selling a property with a rental contract in place. It means that the NOIS registered on the property is no longer legal.
Announcement 2:
The second announcement was from the City of Toronto, which is increasing development fees for new construction projects. This is bad news.
We all understand that there is a problem with housing affordability in the GTA. And it not only affects home ownership, it also affects rentals. New housing stock is generally condos. And a great deal of the cost of a new condo are taxes, land transfer tax & development fees. And the city just increased fees by a huge margin.
This means PART of the tax of a one bedroom condo in Toronto is going to be almost $52,000.
Let that sink in. And then think how this is going to affect developers who may not be able to sell units at market value with this impending increase.
Further reading:
Understanding Notice of Security Interests
A NOSI is a legal mechanism that allows a creditor to assert a claim over a debtor’s personal property by filing a notice with the Ontario Personal Property Security Registry (PPSR). While intended to protect creditors in commercial and consumer transactions, NOSIs have been misused by some contractors and rental companies.
Homeowners, often unaware of the implications, might sign agreements with renovators or rental companies that include clauses permitting the filing of a NOSI. This can lead to a lien being placed on their home, complicating future transactions like refinancing or selling the property.
The Problem with NOSIs for Homeowners
Unscrupulous renovators and rental companies have leveraged NOSIs to secure payment by filing liens against homeowners' properties. This practice often targets vulnerable homeowners who may not fully understand the legal and financial ramifications.
Such NOSIs can become significant burdens, making it difficult for homeowners to access credit, refinance their mortgages, or sell their homes. The fear of legal battles and the complexity of resolving these liens often leave homeowners at the mercy of these predatory practices.
Protecting yourself in a purchase or sale:
What does this mean if you’re a home buyer? As of now, all existing residential NOSIs are now deemed expired. That means that there are no longer any interest in chattels being recorded on the land registry and there will shortly be no way of determining if a property contained a rental in advance of a closing short of the Seller’s declaration in the agreement to that effect.
So, what is the effect of this change? In the absence of a NOSI security, what happens to rental contracts that are in place for chattels at a home? The best thing is to consult with your Realtor and Real Estate Lawyer to insert protective clauses into your agreement of purchase and sale, for example: “the owner vendor owns the chattel included in the agreement and conveys title to the purchaser, free and clear of all demands, claims, security interest, liens, and encumbrances of any kind whatsoever”
Legislative Changes: The Ban on NOSIs
In response to growing concerns about the misuse of NOSIs, the Ontario government has introduced legislation that bans their use. This change is part of a broader effort to protect consumers and simplify the legal landscape around security interests.
Key Provisions of the New Legislation
The new legislation, effective as of [specific date], includes several key changes:
1. **Prohibition of NOSI Filings:** Effective immediately, renovators and rental companies can no longer file NOSIs to place liens on personal homeowners’ properties. Existing NOSIs remain valid but cannot be renewed.
2. **Streamlined Registration Process:** The legislation introduces a more straightforward process for securing interests that is transparent and fair, reducing the risk of misuse.
3. **Enhanced Consumer Protection:** Homeowners now have better protection against predatory practices, ensuring that any security interests are clearly understood and agreed upon.
4. **Transitional Provisions:** Provisions are in place to manage the transition from the old system to the new one, ensuring that homeowners and creditors alike can adapt smoothly.
https://news.ontario.ca/en/release/1004636/ontario-strengthening-protections-for-homeowners-and-homebuyers
