Application for “Probate” – Part I
At its simplest, “Probate” involves a Court Order appointing someone as the “Executor” (now called an “Estate Trustee”) of an Estate. Usually the Applicant is named in a Will, but if there is no Will, then the Applicant may be any person not disqualified under current jurisprudence. The objective of the appointment of an Executor (again, now, the Estate Trustee) is to carry out the wishes of the Deceased under his Will if he had one and to administer the Estate and its distribution.
Seems simple. But not always. The procedure for the Application is regulated under Court Rules and precision as well as completeness is mandatory. As in many other areas of Court processes, what is acceptable, however, in one Court office may not be acceptable in another.
The Application must also be accompanied by payment of the “Probate Fees”, now called “Estate Administration Tax” (“EAT”). This tax is calculated at $5 per thousand dollars of the value of the Estate up to $50,000 and $15 per thousand dollars of the value of the Estate above $50,000.
Now, the hard realities. The EAT is paid at the time of the Application by the Applicant before any of the Estate is distributed. Same for the legal fees arising from any legal assistance used to prepare and file the Application.
The Court Order may be delayed weeks or even longer for its delivery, making reimbursement of the Applicant’s payment of the EAT (and legals) relatively burdensome. Bank loans may be necessary but the Estate’s assets are not “security”, as they don’t belong to the Applicant/borrower.
Further, the Court may reject the Application or request either further information or a Court attendance – more time and money.
All of these issues (and most importantly, the amount of the EAT) are strong incentives for early planning, the use of effective Wills and, as much as possible, elimination or reduction of the value of the Estate that requires Probate before it occurs (and here it is worth pointing out that not all Estates require Probate).
There are several techniques available to legal counsel in estate planning. We would be pleased to share some of these with you.
Residential Tenancies
Residential tenancies are a combination of a business relationship and a personal tinderbox.
The Tenant occupies the Landlord’s personal property over which the Landlord considers its interests paramount. And the Tenant is vested with certain rights of exclusive possession and use.
Normally, the relationship is governed by the Residential Tenancies Act or by way of a Lease Agreement, the latter, usually provided by the Landlord. And usually the Tenant just signs it.
But given the overlay of the Residential Tenancies Act (the “Act”), all residential tenancy leases are also bound by the law of Ontario.
A few of the events of potential conflict between the Landlord and the Tenant arise with respect to:
- Who does what for maintenance/repairs/breakdown of equipment/snow removal/grass cutting and a host of other issues?
- What happens when the Tenant wishes to move out — or doesn’t, leaving the Landlord with the potential of having no rental stream for a period of time after the Tenant unexpectedly moves out?
- The Landlord wishes to sell.
- Access to the premises while the Tenant lives there.
And there are a ton of other issues.
In almost every case, either the Act or the lease provides direction to a situation.
But, more particularly, the relationship between the Landlord and the Tenant is a human relationship which admittedly has a business connotation, but it is still a human relationship and is fraught with all of the issues of personal orientation (and personal confrontation).
There are some simple solutions.
- Be sure there is a Lease.
- Be sure the Lease sets out who does what.
- Even if you agree on numbers 1 and 2, the Act still applies.
- Even if you agree on 1, 2 and 3, common sense should prevail.
- Lastly, if you ignore 1, 2, 3 and 4 above you will most assuredly spend money on lawyers which, without doubt, is non-revenue producing and a pain to endure and all too frequently takes longer for resolution than any of the parties might have anticipated.
Estate Administration
One of the complexities (in fact, it may be the most severe) in the administration of estates is the lack of information about what the Testator (the Deceased) had in his head regarding his business affairs before the Testator died.
All too frequently, the Widow (or Executor) is left with picking up pieces of the Deceased’s business, sometimes (and all too frequently) up in th air, not documented and accordingly relying upon personal connections or, more frequently, “understood” relationships.
Unfortunately for the Executor, these “loose ends”also result all too frequently in little estate recovery, legally uninforceable “relations”, loss of estate value and, most disturbingly for the Testator’s successors, little to show for the business of the Deceased.
So, the warning is: Every business transaction needs records. Every business “understanding” needs paper flow. Every “gentlemens’ agreement” needs a record. Every businessman who doesn’t is both foolish and actively prejudicing the family for which he is, in the first place, undertaking his business.
Warning expressed.
Family Businesses
Family businesses are the foundation of Canadian enterprises (some 80% or more of all businesses are family businesses). Likewise, family businesses in a family dispute are the cannon fodder of Litigation Lawyers. Usually, the family business works with a modicum of documentation (which, Courts, in dispute issues, seem to rely upon). The record of the family business is usually scant and based upon verbal understandings and relationships.
Not a particular condemnation of human nature – just an observation.
In all too many cases, the costs of unwinding family businesses (and usually at the time when there is a disagreement) far exceeds the costs of setting up, at the beginning and at each instance circumstances change, records of the position/understandings/agreement among the parties.
In our experience, convincing family businesses and business persons of the necessity to document/document/document is akin to pushing bamboo shoots under fingernails…. right up to the date of dispute when literally $10’s or $100’s of thousands of dollars are spent unraveling business relationships and all of the money is non-revenue producing to the business and only feeding the lawyers.
Stop this process.
Face the facts to be addressed.
Require every step to be recorded.
Everyone will thank the fellow who pushes this — yet only at the time the disagreements develop and only then as the result of the previously irritating documentation having forced everyone to the table.
Tenants and Real Estate Agents: Beware!
In a recent case, a Tenant, a medical doctor, leased space in a strip mall to open his office. The Agreement to Lease contained the standard clause permitting the Tenant’s lawyer to review and potentially negotiate the terms of the Lease. That was done. The Lease was eventually signed.
The shock occurred when the municipality having jurisdiction declared that the parking facilities were insufficient to permit a doctor’s office. Evidently, a higher threshold for parking spaces is necessary in the municipality for a doctor’s office which exceeded the allowable spaces in the strip centre.
On first blush, one would assume that the Lease is frustrated by the inability of the Landlord to deliver what would be required to build the doctor’s office. However, the Landlord’s lawyer took the position that, pursuant to the usual provisions in the Agreement to Lease permitting the Tenant’s lawyer to review the Lease, the failure to examine the zoning and by-law requirements was entirely the doctor’s deficiency and therefore the responsibility was that of the doctor.
This comes as a potential surprise to real estate agents and lawyers acting for tenants. The test and the confrontation addresses the responsibility of the Tenant’s lawyer mandated under the Agreement to Lease to review the Lease.
Most tenants would not underwrite the costs of a lawyer doing searches of municipal by-laws, zoning by-laws, work permits, construction completion and all sorts of building and compliance requirements when considering the provisions of the Agreement to Lease as against the draft Lease as provided. In fact, the incremental costs and the potential for the research resulting in virtually no useable information had previously been thought to have been beyond the capacity of most tenants.
In this case, the Doctor went several months paying the rent allowing the Landlord to seek municipal concessions. The Landlord even requested the Tenant to underwrite the costs of applications for by-law exemptions and zoning variances without letting the Tenant off the hook for rent.
THE BOTTOM LINE
Agreements to Lease should include a representation and warranty by the Landlord that the Landlord has full capacity to lease the intended space in full compliance with all zoning and by-law requirements. It appears not to be sufficient to merely provide that the Tenant’s lawyer has the
opportunity to review and comment upon the lease as compared to the Agreement to Lease.
The warning is to both Tenants and Real Estate Agents that this area is fraught with risk and, in the recent case, considerable expense on the Tenant’s head for not having insisted upon the Landlord complying with municipal requirements for space utilization.
If you would like to discuss this further, please don’t hesitate to contact us.
Municipal Cash Grab and Politics
This is largely an editorial opinion, but it is founded upon an actual case.
In 1998, sister (a doctor) and brother (an engineer), recent Canadians, acquired ½ of a duplex in Oakville, Ontario. Neither alone could, at that time, float the mortgage necessary to acquire their new home. Success followed and they acquired the other half of the duplex two years later. Sister and her direct family occupied ½ and brother, with his direct family, occupied the other half. The 2 houses, were, in reality just that: 2 houses and the title to both properties was in brother and sister as Joint Tenants in order to accommodate mortgage financing utilizing their combined incomes for credit approval.
Then an obtuse “catch-22” arose: By changing the titles (without anything else occuring) the two previously segregated and separate titles were deemed “merged” under the Planning Act (Ontario). The result was that neither sister (relative to her house) nor brother (relative to his house) could do anything with his or her own property without the other also being included. And that was notwithstanding that the two houses had separate and distinct titles at the time they acquired ownership.
The catch-22 was that the Town of Oakville by-law which had originally separated the two houses expired. The transfer of titles in 2006 occurred after the expiry of the by-law that had been in force when they acquired title which made the two houses, albeit townhouses, separate and distinct. No Plan of Subdivision had been registered by the builder of the houses prior to 1998.
The brother and sister paid their property taxes and their utilities separately metered and charged in all of the years up to 2012 (and still do).
The dilemma cried out for the Mayor and the municipal councillors to simply pass a by-law to confirm exactly what had existed in 1998 such that brother would have his house and sister would have her house. They refused to do so.
The only choices: an Application to the Town for a severance of two properties that had always been severed at a cost of approximately $13,000 or an Application for Part Lot Control Exemption at a cost of about $6,500. In all the time, the brother and the sister had paid their taxes and had separately resided in the two properties, admittedly separated only by a common wall between the two different houses. No additions were made, no pools added, no garages added, no decks added. The houses were exactly as they had been in 1998.
The Town determined that it would only address the issue by way of either a severance application or an application to exempt the properties from part lot control. In either case, at a cost between $6,500 and $13,000. The whole matter could easily have been resolved by the Town Council simply stating that the brother and sister were caught in the vortex of a Provincial law that had no intention of application to their particular case.
Accordingly, at a cost of approximately $6,500, brother and sister are making application to the Town to do what had always existed. In fact, notwithstanding solicitations to the Town to regularize this indescriminate application of disadvantageous Provincial legislation, the Town definitively states that this is a “taxing” issue and they want to collect their money before they agree that exactly what the brother and the sister had originally acquired is exactly what they have today.
To us, this is the ultimate in red-tape and bureaucracy gone mad and should not be permitted, but the law clearly indicates there is no choice but to pay the money to obtain exactly what they had always had and always intended to have.
Joint Family Ventures