Day: January 12, 2023

Important new changes to Ontario’s estate laws have come into force on January 1st, 2022. These changes are meant to better serve and reflect the modern-day experience of Ontarian’s in the new decade.

The first big change makes the virtual signing and witnessing of wills and powers of attorney a permanent option for Ontarian’s. Unfortunately, however, an ink signature is still required for wills, as electronic signatures of wills are not yet approved.

The second big change concerns a marriage’s effect on wills. Previously, if someone had an existing will but then later got married, the will was automatically revoked. This is no longer the case. As of January 2022, a will made before marriage continues to remain valid.

The third big change involves separated spouses. Under the old laws, an ex-spouse could apply for part of their deceased spouse’s estate if they were not yet legally divorced at the time of the deceased spouse’s death. However, as of January 2022, that is no longer the case. The new rules state that separated spouses will be treated the same as divorced spouses. This means that at the time of the deceased spouse’s death, if the spouses lived apart for three years as a result of the breakdown of the marriage or had a valid separation agreement (or court order or family arbitration award), then the ex-spouse of the deceased is no longer entitled to any property rights from the deceased’s estate.

Finally, the fourth big change concerns improperly drafted, witnessed & signed wills. Under the old laws, a will that did not comply with the appropriate legal formalities was automatically considered invalid & of no force or effect. However, as of January 2022, an application can be made to a court to decide on a case-by-case basis whether an improperly drafted will is valid or not. It is important to remember, however, that an ink signature is still required for wills. Therefore, a court still cannot validate a will that is signed electronically.

In conclusion, these new rules are a welcome change that help modernize Ontario’s estate laws for the 2020’s. They help facilitate better access to justice for Ontarian’s as well as aid individuals and families to better address the death of a loved one. We welcome these progressive changes, and urge you to contact us to schedule a 30-minute free consultation so we can better discuss how to plan your estate needs in light of these new developments.

With the advent of pandemic induced lockdowns, many businesses have been forced to shut their doors. As a result, there has been an influx of commercial tenants looking to transfer their commercial leases and with it, the obligation of having to pay rent. Unfortunately, however, a 2021 Ontario court decision determined that landlords could be given wide discretion to refuse the transfer of a commercial lease, even if a replacement tenant has been lined up to assume the lease.

In the case of Rabin v. 2490918 Ontario Inc., the lease in question stated that the lease could not be assigned (transferred) to another commercial tenant without the landlord’s consent. The assignment clause in the lease itself contained language that stated that consent could not be “unreasonably withheld” by the landlord. Of course, the landlord refused to allow the transfer of the commercial tenant’s lease. Therefore, the court had to come to a determination as to whether the landlord’s refusal to consent to the transfer in the circumstances was unreasonable.

The commercial tenant was a dental practice in Toronto that operated for more than four decades. The lease in question was set to expire in 2025. Earlier in the year, the tenant looked to sell its dental practice to another group of dentists, who would form a new business to assume the lease for the remainder of the term. 

When the commercial tenant requested the consent of the landlord to transfer the lease to the new commercial tenants, the landlord refused to allow it unless the existing commercial tenants agreed to the insertion of a “demolition clause” into the lease agreement. This clause would have given the landlord the ability to terminate the lease with only two years notice if it later wanted to demolish and redevelop the building. Indeed, the landlord acknowledged that its request to insert this clause was an opportunistic measure to get the tenants to move out of the building. Naturally, the new tenants did not agree to the insertion of the demolition clause as they did not want their lease term cut short.

After further negotiations took place, the landlord agreed to consent to the transfer of the commercial lease only if the new tenants provided very extensive financial information for the new dental practice, which had not even been incorporated at the time. As such, the tenants refused this request and went to court seeking an order to affect the transfer of the lease. The tenant consequently claimed that the landlord was unreasonably withholding its consent to transfer the commercial lease.

In analyzing the case at hand, the court observed that since commercial landlords where the ones who chose who to lease their property to, then they should also have the discretion of deciding whether to transfer those leases to new tenants. Indeed, the court stated that landlords can take a variety of factors into account when making such a determination. Some of these factors include the surrounding circumstances of the lease and the property itself as well as the realities of the commercial marketplace, the financial situation of the new tenants and any impact the transfer of the lease may have on other tenants in the property.

Ultimately, the court ordered that the tenant ought to be given another chance to respond to the landlord’s request for information regarding the transfer of the lease. If the landlord still withheld its consent to transfer the commercial lease, the judge observed that the tenant could seek another court order to permit the transfer.

In conclusion, commercial tenants who are experiencing difficulties in paying rent during the pandemic should take note of this decision. Their ability to transfer their lease to another commercial tenant hinges on whether the landlord provides its consent to the assignment. Even if a commercial tenant finds another party willing to assume its lease, a landlord has wide discretion in this regard, although it cannot act unreasonably in denying such a request. At the end of the day, it will come down to the facts and context of the case at hand. We welcome the insight and clarity that this decision brings, and urge you to contact us to schedule a 30-minute free consultation so we can better discuss how to plan your commercial needs in light of these new developments.

The Mortgage Stress Test

Any homebuyer in Canada looking to apply for a mortgage with an Institutional lender will encounter the mortgage stress test. This test, to put it simply, determines your ability to maintain payments of your mortgage should interest rates rise. It helps to ensure that a borrower is still able to afford their mortgage at an interest rate higher than the one stated in their contract. As we have seen in recent months, mortgage interest rates continue to fluctuate. Therefore, the Government has established and set up this test to reduce the risk involved in mortgage lending.

The test was first introduced by the Federal Government in 2018. As of June 1^st, 2021, the test has been adapted to reflect the current housing market conditions. Borrowers should expect a mortgage stress test when they are buying a home, taking out a homeowner line of credit, refinancing, or switching to another mortgage provider. A borrower will not have to undergo the stress test when renewing a mortgage with the same lender.

What Does the Stress Test Look at?

To determine affordability of a mortgage, the mortgage lender will look at the following:

• The amount of the mortgage
• Interest rates
• Mortgage amortization period
• Household income
• Current debt
• Household costs and monthly fees

The mortgage lender will then make two calculations using the above information. First, a gross debt service (GDS) ratio is calculated. This value is the percentage of your gross income that will be used to pay housing costs, such as the mortgage, utilities, and property taxes. The GDS ratio should not be more than 35%. Second, the lender will calculate a total debt service (TDS) ratio that includes all outstanding personal debt. This value should not be more than 42% of your gross income. A low GDS and TDS ratio is preferential, as it allows you to qualify for a low-interest mortgage with an Institutional lender.

To stress test your mortgage, you would need to prove you can afford to pay the higher of:

• The rate offered by your mortgage provider plus 2%, or
• 5.25% 

To improve your stress test results, the following can be done: 

• Lowering your GDS and TDS ratios by saving up to increase down payment
• Paying off as much debt before applying for a mortgage 
• Having a co-signor on your mortgage

How Can We Help? 

At 6ix Estates LLP, we represent clients in mortgage financing or refinancing transactions, both with institutional and private mortgage lenders. We will meet with all borrowers before closing to review the entire transaction, sign the documents and arrange for funds. We also offer all our services remotely. Our lawyers are happy to meet with you virtually or at a location of your choice. Get in touch with us to set up a free 30-minute consultation.