When purchasing a property (other than vacant land) you need to take care in understanding the difference between chattels and fixtures to make sure that what you think is included in the deal is actually included.  Fixtures are things that are fastened or otherwise attached to the property in some way such as furnaces, garage door openers and lighting fixtures.  The law is that unless the agreement specifies otherwise, then fixtures are included in the purchase price.  Chattels are items that are not fastened or otherwise attached to the premises such as refrigerators, stoves, furniture, personal items and the like.  The law is that chattels are excluded from the purchase price unless the agreement specifies otherwise.  This is why the standard real estate agreement ask for a list of chattels to be included and a list of fixtures to be excluded.

Rarely are  fixtures excluded from the agreement as these items are usually required for the typical use of the property.  Chattels are a whole different matter.

The proper way to make sure that you know what you are purchasing is to have a thorough and complete list of chattels included in the agreement.  The list would include whatever appliances, furniture, tools etc. that you want as part of the deal.  This is important because if they are not included in the agreement then the law is that you are not entitled to them.  You can also forget trying to argue that you had some sort of side deal or verbal agreement because the standard real estate agreements contain a clause which says only the written agreement governs and that no other side deals or verbal agreements have any merit.

Unfortunately, in the rush of reaching a deal, often Chattels are described without much detail.  For instance, we often see Chattels described as “… all chattels as seen when visiting the property”.  Obviously, that can cause many disputes when the purchaser arrives and less is there than what they expected.  Another common description we see is “… all chattels excluding any personal items.”  What is personal to one person may be quite different to another person.  For this reason, we see many disputes over what was intended by this language.

Ideally, it is a good idea to do an inspection as close to the closing date as you can.  This is something that you should have inserted into the agreement  - that you have the right to attend the premises to inspect before closing.  That way you can ascertain whether the chattels that you bargained for have been left behind.  If Chattels are missing, you can ask your lawyer to try and negotiate a holdback from the purchase price until the Chattels are returned or a reduction of the purchase price. 

Unfortunately, if you don’t find out that the Chattels are missing until after closing, the options for getting compensated are not great.  Essentially, you would have to sue the vendor for breaching the contract/agreement.  That is not a very practical option given the cost and time required to pursue litigation. 

For these reasons, it is best to take the time and make the effort to outline the Chattels included in the deal.   

Most people are familiar with the principal residence exemption which allows one property to be designated as a principal residence for each “family unit” in any given year.  This prohibits two spouses from each claiming the principal residence exemption which exempts the property from capital gains tax.

The principal residence exemption has been abused by non-residents who claim the tax exemption but do not reside in Canada.  In order to prevent non-residents from claiming the exemption in the same year that they acquired the property, the government has changed the rules so that an individual will not qualify for the principal residence exemption in the year they acquired a residence if they were a non-resident of Canada in that year.

The government has also added an additional reporting requirement.  For all dispositions of property on or after January 1, 2016, individuals must report the sale of a principal residence to the Canada Revenue Agency as part of their income tax return.  If you fail to report, the CRA may impose a penalty and worse – they may deny your ability to claim the exemption!  Furthermore, the new changes allow them to review previous dispositions of real estate and to go back in time indefinitely – rather than the standard three years.

The bottom line is to make sure that you report the sale of your principal residence on your income tax return.

We frequently remind clients of the requirement to maintain current minute books. It is a legal obligation that often gets neglected as the operations of the company continue and no one comes asking. For one thing, when faced with a CRA audit, it is not pleasant to add updating the minute book to the list of tasks to prepare for the audit. Another unpleasant surprise is when we begin negotiations to sell all or a part of the company, and realize that updating the minute books will be added to the time and cost of concluding the sale. A third commonly encountered issue is the transfer of shares upon the death of a shareholder in a closely held corporation, such as a family business, triggering the need to update the minute book without the ability to have an original signature. While none of those problems is insurmountable, it is certainly preferable to update the minute book on an annual basis and following any major changes in the organization. 

Soon, corporations will have another record keeping requirement. Effective December 16, 2016, the Ontario Business Corporations Act will have a new section 140.1 mandating that “A corporation shall prepare and maintain at its registered office a register of its ownership interests in land in Ontario.” This will immediately apply for new companies incorporated on or after December 16, 2016. Existing companies will have two years to come into compliance with this requirement.

The register will have to identify the land, as well as state when a corporation acquired and, if applicable, disposed of the land. The paperwork associated with acquiring, transferring ownership, and/or selling the property must be kept. This will assist to identify the municipal address, if there is one, the unique Property Identification Number in our land registration systems, the legal description, and the assessment roll number, if any.

This additional record keeping requirement is not likely to be onerous for most of our clients, but it is important to start thinking about and not leave the creation of the register to December 15, 2018 for existing companies!