RESEARCH OR REGRET?

Should homebuyers be warned about a property’s dark past?
By Douglas Quan 
Postmedia News June 20, 2013

Want to know if that property you’re eyeing might have been the site of a murder or suicide? Be prepared to do your own digging, real-estate experts say.

While laws and regulations require sellers and realtors to disclose physical defects of a property that may be hidden from view, there is nothing that legally requires them to disclose so-called “stigmas” attached to a property. Same goes for landlords when dealing with prospective renters.

The lack of regulation in this area was highlighted Monday by the revelation that the apartment suite once occupied by Luka Magnotta, the Montreal man accused in the high-profile killing and dismemberment one year ago of university student Lin Jun, had been rented out.

It was unclear if the tenant was aware of the suite’s dark past, The Canadian Press reported. “We don’t advertise it, obviously,” building superintendent Eric Schorer told the news agency.

Mark Weisleder, a real-estate lawyer and author in Toronto, said provincial disclosure rules need to be more explicit, especially given the number of Canadians whose cultural backgrounds may make them more sensitive to property stigmas. “Because news like this could affect someone’s decision to buy or rent, my advice would be why wouldn’t you disclose?” he said.

Most appraisers will tell you that an unnatural death that occurs in a home will have an impact on that property’s value, he said.

Weisleder advises people who are interested in a home to do searches of that address online for any related news stories. He also advises knocking on neighbours’ doors to get the scoop on any problems that may have occurred there.

“Usually, you’ll find a talkative neighbour,” he said.

Homebuyers, who are suspicious, should straight-up ask sellers whether there has ever been a murder or suicide on the property and get them to put the answer in writing as part of the offer.

One Ontario couple, Eric and Sade-Lea Tekoniemi, reportedly bought a home last year in Bowmanville only to discover that it was the scene of a double homicide 15 years earlier. They subsequently sued the former owners, the selling agent and the real-estate firm in a case that is still before the courts.

Pierre Leduc, a spokesman for the Canadian Real Estate Association, acknowledged Monday that disclosure requirements across Canada fall into a “grey area.” Homebuyers are best off to hire an expert who knows the right questions to ask and can guide them through the process, he said.

A bulletin issued in March by the Real Estate Council of Ontario encouraged agents to have “full and frank” discussions with sellers and that if stigmatizing issues associated with a property exist, agents should advise sellers to “seek legal advice regarding their rights and obligations related to the issue, and get written instructions regarding the disclosure of the stigma to buyers.”

Agents representing buyers should have detailed conversations with buyers about what issues they may be sensitive to and “be prepared to do some additional investigation or research,” the bulletin said.

The bulletin suggested that a home could be considered to have a stigma if it was used in the ongoing commission of a crime, such as drug dealing; a murder or suicide occurred at the property; the property was previously owned by a crime boss; or if there were reports the property was haunted.

Amy Spencer, president and CEO of the Rental Housing Council of B.C., which represents landlords and property managers in the province, suggested Monday that given the differing interpretations about what constitutes a stigma, it might be difficult for lawmakers to spell out what needs to be disclosed.

She said landlords should be given discretion over what information to disclose, as they need to balance privacy interests of previous tenants with the health and safety concerns of future tenants.

But if asked pointed questions about a property’s past, landlords do have an obligation to be truthful, she said.

MORTGAGE INSURANCE NEWS

CMHC could be pulled out of mortgage insurance business, Flaherty says
By Garry Marr
Financial Post Apr 27, 2012

Finance Minister Jim Flaherty would consider taking Canada Mortgage Housing Corp. out of the mortgage default insurance business he told the National Post’s editorial board.

“Over time, I don’t think it’s essential that a government financial institution provide mortgage insurance in Canada. I think what’s key is that mortgage insurance is available at a reasonable cost in Canada. I think there is a role to regulate but whether we, the Canadian people, have to be the owners and shareholders of a financial institution to do this is a question. I don’t think it’s essential in the long run.”

He offered no timetable on when the government could get out of mortgage default insurance business, just offering it up as a possibility. “We have a list of Crowns, Crown agencies that are being reviewed,” said Mr. Flaherty.

In a wide-ranging discussion on the housing market, he said he has no plans to increase CMHC’s current $600-billion loan limit, ruled out any possibility of regulating foreign real estate investment and made it clear his focus is on the governance of Crown corp. which controls about 75% of the mortgage default insurance business in the country.

“For some time now I’ve had concerns about the large commercial role that CMHC now plays. CMHC has become a significant Canadian financial institution. As you know, historically it was created with a mandate post-war to advance housing in Canada. It’s become much more that.”

The finance minister moved this week to tighten control of CMHC, placing it under the authority of the country’s banking regulator, the Office of the Superintendent of Financial Institutions. Previously, it fell under the watch of the Department of Human Resources and Skills Development.

The shift comes with CMHC closing in on the $600-billion limit the government has for how much of its portfolio will be backstopped by the taxpayer. Three years ago it was $450-billion.

By law, consumers must buy mortgage default insurance if they have less than a 20% down payment on a home and are borrowing from a federally regulated financial institution.

But CMHC has not been insuring just those loans, it has agreed to step in and insure loans — with the premiums paid by financial institutions — for lower-ratio mortgages, or what is called “portfolio” or “bulk insurance.”

He said the head of OFSI will now have the power to look at the books of CMHC the way she looks at the books of other private financial institutions in Canada. Already, the government has placed the deputy minister of finance on the board of CMHC.

“We have quite a bit of information about what the banks do and don’t do. [Superintendent] Julie Dickson had to go to some of them in the last year and say ‘you must ensure that your board policies on residential lending mortgages are carried through,” he said. “She’s quite a strict supervisor which is good for our country.”

OSFI has already been looking into CMHC and established one of the key issues for the organization is governance. “OFSI are certainly of the view there are necessary governance improvements we can do,” said Mr. Flaherty.

He made it clear there are no plans to extend CMHC’s $600-billion limit. “For a while,” said Mr. Flaherty, about how long the Crown corporation would have to exist under that limit. It was at $541-billion at the end of the third quarter of last year but business has slowed as the agency culled its portfolio business.

Mr. Flaherty’s own opinion on the housing market is that has been fuelled by low interest rates which he says he does not control. “Cheap money,” he said, noting he did talk to the banks about being unhappy about their mortgage rate wars earlier this year which had reduced the rate on a five-year closed mortgage to below 3% — an all-time low.

As to whether the market has been in part fueled by foreign buyers, as many in the real estate industry have suggested, Mr. Flaherty said his government will not get involved in that aspect of the market. “No,” he said, pausing to emphasize the point. “I don’t think there is [a role]. They key in housing from my point of view is to get the best information on housing.”