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Mortgage rules contributed to “lacklustre” start to 2018 says Poloz

BoC is forecasting growth of 2% for 2018

Steve Randall
Canadian Real Estate Wealth

The tightened mortgage underwriting rules which came into effect at the start of the year have contributed to a slower start for the Canadian economy.

Bank of Canada governor Stephen Poloz told the House of Commons Standing Committee on Finance that two key issues led to slower-than-expected growth in the first quarter of 2018.

Firstly, the changes to the B20 mortgage rules and other policy measures which saw some homebuying transactions pulled forward into the last quarter of 2017. The slowdown this caused should “naturally reverse” Mr Poloz said.

Weaker experts were also an issue but again the governor expects this to reverse in due course.

The BoC is forecasting growth of 2% for 2018 and an above-potential rise in the years to come, while inflation is expected to remain elevated this year before easing to 2% in 2019.

On wages, Mr Poloz said that there are encouraging signs of growth over the past 18 months. However, he acknowledged that the 3% growth seen in the most recent data includes a temporary hike from new minimum wages in some provinces.

Household debt remains a concern.

Governor Poloz told the committee Monday that it will take more time to assess the impact of rising interest rates on household’s ability to service debts.

But he added that there are signs that borrowing is slowing as consumers adjust to higher rates and new mortgage rules.

Copyright © 2018 Key Media Pty Ltd

Appeal launched after Murrayville condo pre-sale contracts cancelled by court decision

Condo pre-sale buyers fight for their units

Dan Fumano
The Province

A group of dissatisfied would-be condo-buyers are appealing a B.C. Supreme Court decision to cancel pre-sale contracts for an embattled Langley development.

A B.C. Supreme Court judge ruled this month that 40 pre-sale contracts, entered into over the last three years by dozens of people who sought to buy condos in the troubled Murrayville House development, were void.

The property is entangled in lawsuits, and its developer, Mark John Chandler, is simultaneously facing a police investigation, regulatory action, and fighting extradition to the U.S. to face fraud charges there.

A court-appointed receiver overseeing the 92-unit Murrayville House had recommended allowing 40 of the pre-sale buyers to complete their purchases and take possession of their units, a position supported by the Office of the Superintendent of Real Estate, a provincial watchdog agency.

But a group of private lenders who financed the Murrayville project opposed the receiver’s recommendation, arguing the contracts were all expired and the units must be re-sold at current market rates, in order to capture more value for the creditors.

Justice Shelley Fitzpatrick ruled that the contracts had expired, and the condos should be re-marketed immediately and sold, though she said she had “great sympathy for the position of the pre-sale purchasers who have become embroiled in this litigation and who have now potentially lost the ability to obtain what they hoped would be their homes.” She ordered the would-be buyers get “first refusal” for their units, although many buyers said they would not be able to afford the units at current market prices, estimated to be almost 50 per cent higher than the contract prices.

A notice of application to appeal was filed last week on behalf of eight of the pre-sale buyers, seeking to set aside Fitzpatrick’s decision. For the grounds of the appeal, the lawyers have alleged the court erred by failing to give weight to public policy concerns, and by accepting financial information from the developer “as fact, without any, or adequate, evidence.”

The lenders had said that although the situation of the pre-sale buyers was unfortunate, the judge’s decision was the only appropriate one.

Diego Solimano, the lawyer who filed the notice of appeal, said Friday: “This matter affects all consumers of real estate in British Columbia. Anyone who has purchased or is thinking of purchasing real estate in British Columbia should be concerned.”

“The right of first refusal, which has been offered to those individual purchasers, is illusory as many of the individual purchasers are now priced out of the market, if they are forced to buy the same unit that they purchased with a written contract in 2015, but now at 2018 market prices,” he said. 

This month’s court decision, Solimano said, “goes to the heart of, and undermines, consumer protection legislation in British Columbia.”

Solimano said any others affected by the Murrayville decision and interested in joining the appeal, should contact his office at info@solimanolaw.ca

© 2018 Postmedia Network Inc.

Alternative lender thriving on new market realities

Credit unions picking up the bank rejects

Allison McNeely
Canadian Real Estate Wealth

When prospective borrowers sit down in the boardroom to negotiate a loan at one of Canada’s largest alternative lenders, they’re greeted by a sculpture of a gun with its barrel twisted back toward the shooter.

“We tell the borrowers if you are dishonest to us, it’s like pulling a loaded gun on yourself,” says Eli Dadouch, 52, founder and chief executive officer of Toronto-based Firm Capital. The company lends to home buyers, builders, developers, and landlords that bigger banks can’t or won’t touch, charging more than twice as much for the risk.

It’s been a lucrative business. In addition to the gun sculpture, Dadouch’s extensive contemporary art collection at the company’s office in the city’s north end includes pieces by U.S. pop artist Steve Kaufman and photographer Rodney Smith. With new mortgage rules pushing more home buyers to alternative lenders like Firm Capital, business may be about to get even more lucrative.

“We think there will be some opportunities because the credit unions will pick up the vast majority of the bank rejects. It goes down the food chain.” said Dadouch, sitting in Firm Capital’s boardroom, where espresso and cookies are served. “We’ll get their business.”

Business Boost

Alternative lenders are playing a growing role in Canada’s real estate market as the industry searches for new sources of financing, risk-averse banks become more picky, and investors look for yield.

The march to the private market has been driven in part by a desire to reduce taxpayer exposure to housing, which has until recently, been on steroids. Federal and provincial governments have gradually been tightening the screws, reducing amortizations, instituting foreign-buyer taxes and making it tougher to get a mortgage.

The moves have begun to bite. About 49 percent of all outstanding mortgages were uninsured at the end of last year, up from 36 percent five years ago. And the housing market in Toronto, Canada’s biggest city, has abruptly slowed, with average prices plunging 14 percent in March from a year earlier, the biggest drop since 1991.

Sure Bet

That doesn’t worry Dadouch, who thinks any slump is temporary in Toronto due to the simple fact that more people want to own a home than there is land or homes available. He met Firm Capital’s Chief Financial Officer, Jonathan Mair, buying distressed debt from him in the early 1990s, when interest rates rates reached double-digits and several trust companies collapsed in the recession. Even at that time, portfolios of residential mortgages sold to investors at only a slight discount to face value, Dadouch said.

“I think single-family always does really well in this country,” he said. Single-family mortgage lending currently makes up about 15 percent of the company’s business. The company has about C$1.3 billion ($1 billion) in mortgage assets, including C$562 million in its publicly traded mortgage investment corporation at Dec. 31.

MICs will likely grow to about 14 percent of transaction volume in Canada under new the new mortgage rules from about 10 percent now, according to research from Canadian Imperial Bank of Commerce last year.

One Hour

Firm Capital’s specialty is lending for terms up to 24 months, after which the borrower will ideally refinance the loan at one of the country’s big banks, or if things aren’t going well, head to another private mortgage investment corporation. Its public mortgage portfolio has an average interest rate of 8.3 percent, compared with about 3 percent for home loans at the big banks.

“In this liquid market, whenever there’s a problem, somebody refinances us,” he said. “You never want to be the last guy on the stick. Leave enough room to get taken out.”

Dadouch got into real estate as a teenager managing properties for his parents before starting a mortgage business with his father in 1988. He kept growing Firm Capital after his father’s death in 1990, and it currently employs 80 to 90 people, he said.

Unlike the traditional bank lenders, Firm Capital doesn’t focus on a prospective borrower’s credit score when considering a residential mortgage deal, lending primarily on asset value, Dadouch said. They also rely on borrower integrity when dealing with builders and developers, making a decision within an hour about whether or not they’ll be willing to extend credit, he said. They’ll do one deal in 10 that they’re shown, Dadouch said.

“We have no pressure to lend money for the sake of lending money,” he said. “When your commodity is cash, they’ll come to you wherever you are.”

Art Financing

Firm Capital has sold a handful of real estate projects in the last 10 years after borrowers couldn’t pay. He can’t remember the last time they had to sell a single-family home to recoup their investment, he said.

“We honor every commitment we give,” he said. “We will work with a good guy who runs into trouble.”

The company provides first mortgages, secondary debt, mezzanine and equity financing in transactions anywhere from C$1 million to C$50 million for builders and developers, Dadouch said. But they’re willing to go higher — the company provided a first mortgage for C$147 million to finance the construction of Canada’s tallest condo tower, The One, located in Toronto’s upscale Yorkville neighborhood. They also have a small art finance business, a nod to Dadouch’s passion.

Last Resort

“They’re very entrepreneurial, flexible, and creative in the types of deals they do,” Michael McTaggart, a partner in PwC’s corporate advisory and restructuring group, said by phone from Toronto. “When I go up there, I do my homework.”

The company counts former Canadian Finance Minister Joe Oliver and Frank Newbould, a retired judge who oversaw high-profile bankruptcies like Nortel Networks Corp., among its board of directors.

There’s no question Firm Capital would be considered a lender of last resort for a home buyer given the punitive fees that mortgage investment corporations can levy, sometimes around 20 percent all-in, including other professional fees, said Shawn Stillman, a broker at Mortgage Outlet. Nevertheless, he’s seeing greater demand for mortgage investment corporations from his clients that have been shut out of the housing market due to the new regulation, he said.

“Would they be the first lender I would go with? Absolutely not,” Stillman said by phone from Toronto. “But if there wasn’t this demand for the money, they wouldn’t be in business.”

Dadouch doesn’t disagree: “Nobody deals with us, or any other MIC out there, because they like any of us,” he said. “They come to us because there’s a story.” 

Copyright Bloomberg News

Copyright © 2018 Key Media Pty Ltd

Don’t base child and spousal support on my million-dollar income, B.C. realtor tells divorce court

High-end West Van realtor worries family lifestyle is now unsustainable, judgment reveals

Bethany Lindsay

A real estate agent from West Vancouver has brought housing market uncertainty into his divorce proceedings, arguing a slowdown caused by government policies has made his family’s jet-setting lifestyle unsustainable.

Jason Soprovich’s realty company, of which he is the sole shareholder, has raked in more than $13 million in the last seven years, according to a B.C. Supreme Court judgment posted online last week.

But as he hashes out a divorce agreement with his ex, his legal team is arguing that the future of the real estate market is so hazy, the firm’s past performance isn’t a great indicator of what he can afford to pay in spousal and child support.

Soprovich argued “that it would be devastating to him if his income for support purposes is based on an average of the realty company’s past three years’ net income,” Master Leslie Muir wrote in the judgment.

“He says that the real estate market slowed down from 2016 to 2017 and is likely to slow further down in 2018.”

ason Soprovich Realty Inc. brought in $2.95 million in pre-tax net income in 2016, according to the judgment. Last year, the firm made about a third of that amount, or $1 million.

The causes of that decline, Soprovich told the court, include the foreign buyers’ tax, tightened mortgage rules and rising interest rates. He argued that anticipation of more measures from the NDP government is also affecting the market.

Soprovich was married to Monica Thiessen for 17 years before they separated in the fall, and they lived a luxurious life during those years, according to the judgment.

The couple were members of the ritzy Hollyburn Club and the Capilano Golf and Country Club, and their children have always gone to private school. The family made annual visits to Hawaii, Las Vegas and L.A.

Thiessen worked part time throughout the marriage, arranging open houses and showing homes to buyers while the children were at school, according to the judgment.

‘Reason to be pessimistic’

But the family’s extravagant way of life will have to change, Soprovich argued.

“His view is that the standard of living that the parties have enjoyed in the past was and is unsustainable,” Muir wrote.

The court agreed that the skyward trajectory that has marked the local real estate market for years appears to have ended.

“I accept that the respondent has reason to be pessimistic about the real estate market and hence his income,” Muir said.

But, she added, “It is reasonable to assume that much of the impact of the changes to the real estate market referred to by the respondent has been reflected in the market by now.”

While the couple hammers out a divorce agreement, the court has asked Soprovich to pay $12,318 a month in interim child support and $22,960 in spousal support.

©2018 CBC/Radio-Canada.

Lily Terrace 23203 Francis Avenue For Langley 24 one and two bedroom homes by Lanstone Homes

Boutique build adds modern touch at Fort Langley?s Lily Terrace

Michael Bernard
The Vancouver Sun

Project: Lily Terrace

Project Location: 23203 Francis Ave., Fort Langley

Project Scope: 24 one- and two-bedroom residences ranging from 1,015 sq. ft. to 1,659 sq. ft. with a mix of heritage elements in historic village of Fort Langley. An easy walk to amenities, including restaurants, cafes, grocery stores and other services.

Prices: From the mid $900,000s

Developer: Lanstone Homes

Architect: Site Lines Architecture

Interior Designer: Sara Brown and Co.

Sales Centre: 9054 Glover Rd., Fort Langley

Centre Hours: By appointment only

Sales phone: 604.371.3899

Website: www.lilyterrace.ca

Occupancy Date: Spring 2019

Designing in today’s world where consumers have long lists of what they want in their modern home is the nature of the job for many architects. Overlay the demand of a municipal council that requires builders to abide by heritage guidelines and that job becomes even more challenging.

Gord Klassen, principal architect of Site Lines Architecture Inc., and his Fort Langley-based team faced that dual task in designing Lily Terrace, a 24-unit condominium complex inside the heritage boundaries of Fort Langley.

“We had a planner consultant that did a 43-page booklet that gave us a rationale for how to design,” said Klassen, describing the process of summarizing the history of the former Hudson’s Bay fur trading post and the colony of British Columbia’s first provisional capital.

“The intent (of council) was to “lock into” the historic period of Fort Langley as opposed to letting it change as time goes on.”

Fortunately, Klassen and his team had a range of design choices, which reflected the various styles of the village community that dates back to 1827.

“The term that comes up is diverse—from whole classic to Gothic revival, Edwardian to Early Modern and Arts and Crafts. We pick bits and pieces of everything, but mainly from Arts and Crafts and so far it has worked.

“We were able to get what the developer wanted and come up with something we are proud of.”

What emerged on paper is a three-storey building with single-level homes on three floors, and a pleasing street façade framed by pitched roofs that start on the second floor.

Developer Lanson Foster says Lily Terrace, whose three-quarter-acre site includes 17,000 sq. ft. of office and retail space, is unique in Fort Langley.

“Our goal was to design for a luxury boutique project with some commercial space. The single family units range from about 1,000 sq. ft. to 1,700 sq. ft, or one-bedroom-and-den to two-bedroom-and-den homes.”

Foster said the project should appeal to both the downsizer market and as well as professional families who are interested in the location as a lifestyle choice. “If you want to buy a condo in Fort Langley, there is no other product like this available.”

Foster, whose track record includes building single-family homes in the area, said the product reflects a higher than typical level of luxury: from wide-plank engineered hardwood flooring and high-end plumbing fixtures to premium appliances and well-appointed kitchen spaces, with fittings such as built-in spice racks and pull-out pantries. The homes also have nine-foot ceilings with top floor homes boasting vaulted ceilings.

Kitchen appliances include a 36-inch french-door refrigerator and a 46-bottle wine fridge, both by Sub Zero; a 36-inch Bertozzoni gas oven, six-burner cooktop and a speed oven, a Fisher & Paykel double dishwasher and a chimney-style fan unit.

In the master ensuite are floor-mounted faucets feeding into a free-standing tub, and a frameless glass shower enclosure with a curbless porcelain tile base with low profile drains. Double vanities feature quartzite countertops, undermount sinks and wall-mounted faucets and ample storage.

Homes are heated and cooled with Mitsubishi forced air ductless mechanical systems.

When she first considered Lily Terrace, project interior designer Sara Brown said, “I want my studio space within this building!”

“Fort Langley has always been one of my favourite communities. I have worked with Lanstone Homes on many single family custom homes within the Fort and also have some friends who live in the neighbourhood.”

She said the interior design needed to be modern enough to appeal to the current design trends, yet heritage enough to not feel out of place within the community.

“I immediately envisioned matte black finishes paired with polished marble and a wide-plank, heavily charactered natural-hardwood floor,” she said. “The modern farmhouse trend is everywhere right now, and I knew it would work beautifully in this building.”

Lily Terrace reflects the fact that finishes have evolved over the last few years from the “greys” of five years ago to light, natural wood tones paired with whites, and saddle brown leather and matte black with brushed gold accents, she said.

“With a blend of texture, warm finishes and the detail of superb craftsmanship, developments like Lily Terrace are able to achieve the look and feel of a custom home.”   

The surrounding environment also reflects what buyers want: doctors’ and dentists’ offices nearby, lots of cafes and restaurants as well as banks and grocery stores, all within easy walking distance, said Foster.

Another desirable amenity is the Fort-to-Fort Trail, a 7.9-kilometre path that takes walkers and cyclists through pastoral farmland between the HBC’s original fur trading fort and the Fort Carin site.

On Lily Terrace’s rooftop are common amenities for the residents, including a 1,100-sq.-ft. seated lounge area with a gas BBQ fire pit, and a play area for children. There are two underground parking spaces for each suite, including some private garage space, liberally sized locker space, electric car stations and surface parking for visitors.

The homes, scheduled for completion in spring 2019, are covered by a two, five and 10 year Travelers Company of Canada warranty.

© 2018 Postmedia Network Inc.

Strata council can’t make a policy change to how notice is issued or received

Council can?t change policy

Tony Gioventu
The Province

Dear Tony:

Our strata council and strata manager have sent the following notice to owners advising that the only way we can give notice or request any items from the strata corporation is through the property manager.  The council claim they have made a policy change with the instruction of the strata manager that no one may deliver a notice to any council member, and any such notices would be deemed to be void.

We have read the strata act and cannot find where the strata council or property manager has the authority to change how notice is issued or how it is received.

As a result of this change, several owners have had their requests for hearings declined and have been denied access to information. To the owners this looks like a slick way of preventing access to our strata information.

Could you please clarify how notice can be issued?

Devon M. North Vancouver

Dear Devon:

No, neither the strata council or manager may make a policy change to how notice is issued or received. A notice, record or other document that is required or permitted under the Strata Property Act or Regulations must be given to the strata in one of the following methods:

  1. a) by leaving it with a council member
  2. b) by mailing it to the strata corporation at its most recent address filed in the Land Title Registry
  3. c) by faxing or emailing to the strata corporation to the contacts provided or to a council member if a fax or email has been provided for the purpose of receiving notice or by putting it through the mail slot or in the mail box used by the strata corporation for this purpose.  

When a strata management company is contracted, they are acting as an agent of your strata corporation, and they may also be a destination for giving notice if they have provided an address, fax or email address. The Act in this section does not permit strata corporations to change or amend the form of notice that is provided or received.  The strata corporation must inform the owners who the council members are, and the council members must receive notice if it is delivered to them.  It is then up to the council member to inform the other council members the details and purpose of the notice.

Strata council members need to be vigilant about the procedures of having received notice.  The best solution is one location for address, email and fax so the council and manager can closely monitor what requests and notice have been received; however, because notice can be served on any council member, they need to be educated to understand the requirements for processing the notice immediately as many notices have requests that are time sensitive and could adversely affect your strata corporation. 

For strata corporations with rental bylaw limitations, a request for a hardship exemption requires a written decision within two weeks if no hearing is requested, or within one week of a hearing, otherwise the exemption is automatically granted.   Requests for hearings require the hearing must be held within four weeks after the request and notice of a Civil Resolution or Court action requires a response within the prescribed time period otherwise judgements may be made without the strata corporation involvement.  Requests for documents must be filled within 14 days of the request, seven days for a request of bylaws and rules, and a Form F Payment Certificate and Form B Information Certificate must be provided within seven days.  

© 2018 Postmedia Network Inc.