Condos for the Investor

Investors flock by the hordes whenever a new preconstruction development is announced. And in a city like Toronto, new developments are popping up everywhere. But how do you know which building and unit to invest in? With so many options, making a decision can be daunting. But if you plan to make money off of this project, you need to make smart choices. Plenty of investors end up in the hole…at the same time; plenty of investors come out on top. So what separates them?

Condos Often Suck

You have to think for a second about the condo market, pre-construction, and how it all works. Pre-condo developments are built with the investor in mind; they aren’t built with the home buyer in mind. Investors buy pre-construction condos based on plans and plans alone. And the majority of investors don’t think to involve themselves in the plans, or ask for changes and unique alterations. Developers can essentially build whatever they want, and trust me; they don’t always have a “comfortable living space” in mind. Developers are working under deadlines, with limited resources, and tight budgets. They are trying to develop the property as quickly as they can in order to fill investor orders. So really, they could give a hoot about the living space itself. Developers can change plans on a whim, add whatever they want, remove whatever they want, and the investor sits there and watches it all unfold; as the investor, you don’t care. You only care about how much money you make, and you don’t plan to live in the space. You’re likely planning to rent the space out for a period of time and then sell it, or you’re thinking to sell as soon as the building is registered, as the price points will typically increase once the building is registered. As a result of these factors, there are a wealth of horrendously awful layouts, substandard common areas, unfinished buildings and more.

So the Developer is Marketing to the Investorwho just wants to make money. But as the investor, you really should be thinking about these factors. This is where investors end up with a bad investment. A unit that was developed for the investor, not for the buyer, will not have the features, layout and livability that a buyer is looking for. Now, you’re likely looking for a tenant right off the bat in any case. Great; tenants are less picky than buyers and may just be willing to rent your space. But what about when you’re ready to really cash in on your investment and actually sell the unit? Who wants to buy a tiny, unlivable unit in a horribly managed building? Good luck finding a buyer.

Condos All Look the Same as a result of these factors as well. Builders are trying to get the project done. They aren’t thinking about the desirability of the units, and they aren’t thinking about resale value. What happens to the unit once it’s sold to the investor doesn’t matter to the builder. They’ve already made their money. So the builders have no issues pumping out unit after unit based on similar, if not the exact same, layout and floor plans. The builder doesn’t care if there are massive stone pillars in the middle of the living room, preventing you from fitting a full sized couch in the unit. They don’t care if the “den” is nothing more than a walk in closet. They don’t care if 3 bedrooms are squeezed into a 900 square foot space. They care about fulfilling their orders.

So the Big Take Home Here is This:As an investor, you should be heavily researching the builder before anything. Does this builder have a good track record? Is there a good management team on board with this project, with an equally impressive track record? Are there strong plans for common areas and parking etc.? Once you’ve decided that the project has a good team backing it, you need to be heavily involved in the floor plans. Request tweaks, additions and changes. Set your unit apart from the other units in the building. Make sure the unit has enough space to comfortably live; if it’s a 3 bedroom space, make sure 3 people can actually live in the space without wanting to kill each other. Ask for upgrades in the kitchen and bathroom, and make sure there are no obstructions or ugly cosmetic features that need changing. These details will make all the difference when it comes time to sell and cash in on your investment. You wouldn’t buy a new car without test driving it first, right? So why would you buy a new condo without knowing exactly what it is you’re getting

What’s the Deal with Tenants and Pets?

One of the most misunderstood aspects of the tenant/landlord relationship is the question of whether or not pets can be permitted in the unit. It can be surprisingly difficult to find definitive information on pet policy online or elsewhere. Everyone seems to have their own idea of what is permitted and what isn’t. Landlords will typically say pets are not permitted and lease agreements typically have a “no pets” clause. But is that clause enforceable? As a landlord, you need to know what you can and can’t enforce. If you don’t mind whether or not your tenant has a pet living in your rental unit, than you can disregard this post; good for you! That’s not to say that landlords should all allow pets. It is completely understandable why a landlord would want a “no pets” clause to be enforced. So for the rest of us, let’s look at the specifics. If you need help with managing tenants, or need a property management service, contact us.

Apartments, Single-Family Houses, Duplex/Townhouse

Most rental units fall into one of these three categories. Apartments can be small apartments, medium sized apartments, or large apartments, single-family houses can mean you are renting out the entire house or you are simply renting out a room or portion of the house, and duplex/townhouse is unique in the sense that a townhome is typically a single-family residence that is built into a row of homes, and a duplex is a property that holds two separate single-family residences. Most landlords will have a property that meets one of the descriptive criteria outlined above, and for you landlords I have some bad news: A no pet’s clause is completely unenforceable. With that said, according to the Landlord and Tenant Board website, landlords are within their rights to refuse rental of their unit to someone with a pet. Therein lays the importance of the screening process, as a proper screening process will give you the opportunity to ask the tenant whether or not they have a pet, and allow you to exercise your right to refuse signing a lease agreement with them. With that said if the tenant is crafty and manages to fool you into believing that they are “pet free” when in actuality they are not, your hands are tied. Once the lease agreement is signed, you are stuck; you cannot evict a tenant for having a pet. Even in the case that you included a “no pets” clause in the lease agreement, it doesn’t matter; the clause is void.

Condos

Condos, on the other hand, are a little different. In the condo world, everything is circumstantial. Some buildings allow pets, some buildings do not, and you as a landlord who owns a condo unit in the building have no say in the matter.  Every condominium listing has a “Pets Perm” code which indicates whether or not the building allows pets. As you can guess, “Y” means that pets are permitted, “N” means that they are not permitted, and “Restrict” means that some pets may be permitted, but it is based on restrictions. If a building operates under the “restrict” policy, that can mean many things. Most buildings have a restriction on the number of pets a tenant can keep, but the restrictions may be more specifics: some buildings have a weight limit when it comes to dogs, some buildings allow cats but not dogs, and some buildings will restrict certain breeds of dog and allow other breeds. What’s important to note, is that condo pet policy can change in a building over time. So it’s very important to keep up to date with the rules of your specific building. In a case where a building initially allowed pets but recently made a switch to “N” or “Restrict”, potential tenants may question you when they see dogs or other pets in the building. You’ll have to be aware of the buildings history, and explain to the tenant that these pets were “grandfathered in” prior to the no pet’s clause being implemented. Again, every building is different and some buildings may have pet rules that are manipulated or “worked around”, whereas other buildings may be very strict with a “no exceptions” stand point.

If you need help with property management, tenant management services, or looking into a property investment – contact CMG Toronto today. The best property management company in Toronto.

Keeping up to date with all of the current rules and regulations as set forth by the Landlord and Tenant board is extremely important. If you own a condo unit, you also need to be up to date with the buildings rules and regulations. Doing so will allow you to fully understand what you can and cannot implement, and what kind of “work arounds” may exist. If you have any questions, please do not hesitate to contact my team of professionals.

Technicalities Related to the Form N5

In a previous post, we covered evicting the dreaded tenant from hell. Yes, we’ve all heard of the tenant from hell. They persistently pay rent late, or not at all, they partake in illegal activities, they cause damage to your property. But what about a tenant who pays their rent regularly and on time, is generally caring of your property…but is loud, disruptive and partakes in generally “anti-social” behavior? Are you able to evict in this case? The short answer is “yes”, but the long answer is “not very easily”. Let’s take a look at why.

Landlords and tenants are bound under the rules outlined in the Ontario Residentail Tenancies Act (RTA).Under the act, you are able to terminate a tenancy for substantial interference with “reasonable enjoyment of the premises by the landlord or another tenant”. This would cover noise, constant shouting, loud music or TVs, loud pets, stinky pets, name calling, offensive conduct, and countless other behaviors that may substantially interfere with the “reasonable enjoyment of the premises by other tenants or the landlord”. The RTA labels behaviors such as this a substantial leg to stand on for terminating the tenancy. If the landlord wishes to exercise his or her rights to evict due to any of these reasons, they will need to serve the tenant a Notice of Termination in Form N5. The N5 form can be filled out or downloaded here.

The form is a mere 3 pages long, with a few boxes to tick off, as well as a tiny box in which you are to describe the details of the allegations. At first glance, it seems very simple, and it gives the impression that not much is needed. Therein lays the issue, as the form actually contains a handful of specifics that can cause your application to be immediately dismissed. You need to get it right the first time to avoid a drawn out eviction process; getting it “wrong” the first time would result in you having to start the process all over again, from scratch.

The most important aspect to get right is on page 2 under the section entitled “Details About the Reasons for this Notice”. The key to getting this right is to address the legal requirements of the “details” that you intent to provide. These legal requirements are the cause of many N5 forms being immediately dismissed; when this happens, you lose the $170 application fee along with the time and effort you’ve put into the process. At this stage, you’ll have to start over.

The RTA says that the “details” section of the N5 shall “set out the grounds for termination”. This is incredibly vague, and as a result, the Ontario Divisional Court has explained what the “details” must contain in order for the N5 form to be valid. The decision of the court is responsible for countless N5 dismissals. In that tiny 6 grid box on page two of the N5 form, you are to describethe who, what, where, why, when and how of the case. Ok, so what does that mean? To understand, you must first understand how an N5 Notice of Termination works. First of all, an N5 is a voidable notice. This means that a tenant can “void” the notice upon receiving it, simply by changing their behavior or paying for the damage caused. Consequently, the Court has stated that a landlord must provide “clear and unequivocal details about the alleged misbehavior”. Therein lies the who, what, where, why, when and how. The Court deems this as necessary for the tenant to have a complete opportunity to understand the behaviors that they are expected to stop or change in order to void the N5. If the allegations are vague, the tenant can’t reasonably know what is expected of them, and won’t be able to exercise their legal right to void the N5. Therefore, the Court has held that knowing exactly what conduct is being viewed as misbehavior is a mandatory aspect of the N5. Accordingly, a vague details section will void your form. At this stage, your application to the Ontario Landlord and Tenant Board will be immediately dismissed, and you’ll be hard pressed to get an order against the tenant.

Understanding this section of the N5 is an absolutely crucial aspect of the eviction process in relation to the aforementioned issues. Landlords would be wise to hire a professional management company, like CMG Toronto as to avoid making common mistakes that will result in a long and frustrating eviction process. We are the top Toronto property management company.

Hiring the Right Legal Aid at the Right Time

Buying a new home, or selling your home for that matter, can be an extremely stressful task. Knowing how and what to negotiate, handling any surprises brought on by the other party, preparing and reviewing legal documents, understanding how to interpret those documents; it’s a lot to take on. Typically, this is why hiring a real estate professional to help with the process makes so much sense. But you may also want to consider bringing legal aid on board early in the process. Frequently, Canadian Home buyers wait until a deal is done to bring in legal aid; they will typically sign on the dotted line first before taking the agreement to a lawyer who then registers the deed, does a title search, and handles the transfer of funds. We all know that legal aid is required for this process, but we usually ignore bringing on the aid until the very last minute, as we all want to keep our legal fees at a minimum. With that said, hiring the right legal aid early in the home-buying process can actually save you time, risk and money.

Buying or selling a home is possibly the largest transaction you will ever make. A good lawyer or paralegal can ensure that the transaction is done right, and that all of your legal rights and protections as a buyer or a seller are adhered to. Having legal aid early in the process can make a world of difference at the end of the day. People can be sneaky, don’t ever forget that. If the other party has a lawyer right from the start, their lawyer may include fine print or tricky wording that can put you in a bind once the documents are signed. If you are armed with your own legal aid, they will have the knowledge required to thoroughly comb through the agreement and pin point any clauses or wording that would put you in a bad situation.

On this note, a lawyer can also re-word and adjust aspects of the agreement in your favor. For example, a standard wording in a purchase agreement would be “conditional on financing”. However, a better wording would be “the offer is conditional on the purchaser receiving the financing he/she desires”. This will give you the option to opt out if the bank isn’t able to offer you fair financing rates. Otherwise, you may be forced into an agreement at a financing rate that you are not comfortable with.

If you plan on investing in a pre-construction development condominium, then the right legal aid will be especially important. These types of purchases can be very lucrative, but are typically riddled with fine print, added charges and catches that the average home buyer won’t notice. Agreements related to pre-condo development can often run 30-50 pages in length, and can also present some very tricky wording. For example, builders will often offer incentive to invest in their projects. One such incentive may be the builder offering to waive maintenance fees for a certain amount of time. However, the agreement itself will actually offer a rebate that would equate to what the builder thinks will be the amount that you would have paid in maintenance. What’s more is that buyers may also be surprised when their final purchase price equates to a much larger amount then they had initially thought. Builders can add on charges related to warranty protection, occupancy delays, property taxes, landscaping, development charges, and a whole lot more. A good legal aid can work around this by requesting to cap the closing costs, giving you a much more accurate idea of the final number.

Some real estate companies will offer you an experienced real estate lawyer at no extra cost, provided you close the deal with them. If this isn’t being offered, then you’d be wise to seek the help yourself. Your real estate professional will likely be able to recommend you a suitable lawyer in any case. It is generally recommended that whoever you hire should spend 90% of their time working within Real Estate. The last thing you want is to hire a “jack of all trades” who may miss important points throughout the legal proceedings. A lawyer who spends the majority of their time working in Real Estate related matters will be able to handle your needs with ease. Pricing can range greatly, but choosing the “cheapest” option won’t necessarily be your best move. This s a complicated transaction and skimping out on your legal aid may cost you more than hiring the right help from the start.

If you have any questions or concerns, please reach out to CMG Toronto for the best that the city has to offer.