The Canadian Mortgage Broker Magazine - Spring 2022

SPRING 2022 $6.95

THE MAGAZINE FOR PROFESSIONAL MORTGAGE BROKERS

MORE THAN RATE

HOW MORTGAGE BROKERS ADD VALUE p.24 ONTARIO’S LICENSING CHANGES What you need to know p.18

BROKER ON ICE

Matt Dunstone skips into the mortgage arena p.40

BUYERS’ BENEFIT

PM No. 41297283

B.C proposes cooling-off period p.42

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COMMERCIAL MORTGAGE LENDING CRITERIA Mortgage Type

Loan to Value (up to)

Loan Amount Range

Interest Rate Starting at

Retail/Office/ Industrial

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$1 M - $75 M

6.00%

Land (urban infill)

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$1 M - $75 M

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Apartments

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Res. Condo Inventory

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6.15%

RESIDENTIAL MORTGAGE LENDING CRITERIA Mortgage Type

Loan to Value (up to)

Loan Amount Range

Interest Rate Starting at

Single Family

70%

$500K - $5.0 M

5.50%

Luxury Condos

70%

$500K - $3.5 M

5.95%

Vacation

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VOLUME 7 ISSUE 2 SPRING 2022

34

18 20

features

HOUSING SUPPLY DECONSTRUCTED Understanding the scale of the current housing shortage. BY JEFF TISDALE NEW ONTARIO LICENSING REQUIREMENTS: WHAT YOU NEED TO KNOW

departments 8

Editorial

BY CHRIS FREIMOND

12

Presidents’ Reports

WORKERS’ RIGHTS: PROGRESS OR A STEP-TOO-FAR?

46 Advertisers’ Index

How changes to Ontario’s new Working for Workers Act may impact the mortgage industry. BY RAY BASI

24

28

MORE THAN RATE Mortgage brokers discuss why the best rate does not always equal the best mortgage – and why expert advice is essential during the biggest financial transaction most people will ever do. BY LISA GORDON

HIGHER STANDARDS FOR TRUSTED ADVISORS The taxing issue of negligence. BY RAY BASI

42

columns 32 Industry Profile: Geoff Parkin gives back to make a difference.

BY LISA GORDON

40 Off the Clock: Canadian curler Matt Dunstone skips into the mortgage arena.

BY LISA GORDON

44 Legal Ease: Insist on independent legal advice.

BY RAY BASI

HOMEBUYER PROTECTION Proposed cooling-off period will allow buyers of residential real estate in B.C. to walk away.

BY MICHAEL VENTRESCA AND GABRIELLE GUARINO

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CMBA-ACHC.CA SPRING 2022 I

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VOLUME 7 ISSUE 2 SPRING 2022 THE CANADIAN MORTGAGE BROKERS ASSOCIATION DIRECTORS

Sylvain Poirier (CMBA-Quebec) Kimberlee Freeman (CMBA-Ontario) Meg O’Leary (CMBA-Atlantic) Troy Resvick (CMBA-BC) EXECUTIVE DIRECTORS

Carla Giles Petra Keller CMBA - ATLANTIC Mortgage Brokers Association of Atlantic Canada 12 M - 7095 Chebucto Road, Halifax, NS B3L 0A1

CMBA - BC Mortgage Brokers Association of British Columbia 202 - 338 West 8th Avenue, Vancouver, BC V5Y 3X2

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CMBA - ONTARIO Independent Mortgage Brokers Association of Ontario 7 - 40 Winges Road, Woodbridge, ON L4L 6B2

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EDITOR

Carla Giles STAFF WRITER

Ray Basi MANAGING EDITOR

Kathleen Freimond ART DIRECTOR

Scott Laing SALES

Lalania Dykstra BILLING

Debra Hiller CONTRIBUTORS

Ray Basi Chris Freimond Carla Giles Lisa Gordon Gabrielle Guarino Jeff Tisdale Michael Ventresca IMAGES

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The views expressed in CANADIAN MORTGAGE BROKER are those of the respective contributors and are not necessarily those of the publisher or staff.

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editorial

APPLYING THE BRAKES Consumer Price Index

Jul

Jul

2017

Year-over-year percentage change

2018

Jul

Target range

2019

CPI inflation

Jul

2020

Jul

Source: Inflation-Control Target. Bankofcanada.ca

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ADOBESTOCK

Government has acted to create a more sustainable and affordable housing market, but it will take time

BY CARLA GILES, EXECUTIVE DIRECTOR, CMBA-BC AND MBIBC;

H

ome property prices have skyrocketed in Canada during the COVID-19 pandemic.

The average home price in February was $816,720, which stood for an increase of 50.6 per cent in two years.

In view of rising prices, many Canadians are struggling to find an affordable place to live, and fear being priced out of the market.

At the same time, while governments are easing COVID-19 restrictions, the Canadian economy is experiencing a significant rise in inflation. In March, inflation rose to 6.7 per cent, up from 5.7 per cent in February – the

7% 6% 5% 4% 3% 2% 1% 0% -1% Jul

2022

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highest since August 1991. Key inflationary pressures include global supply chain disruptions, commodity price volatility – worsened by the Russian invasion of Ukraine – and a tight labour market in Canada.

Amid rising prices and the prospect of higher ownership costs, housing affordability is deteriorating. RBC’s aggregate affordability measure was at its worst level in 31 years in the fourth quarter of 2021 at 49.7 per cent – this would be the share of income a household would need to cover ownership costs. The deterioration over the past year is a near-record 7.2 percentage points – exceeded only once in 1990.

Not surprisingly, the federal government has tabled a budget focused on boosting housing affordability among other priorities such as a transition to a green economy.

While the budget calls for 29 housing-related measures that amount to $10 billion over five years, RBC economist Robert Hogue believes that “many of the measures announced won’t be effective for some time.”

He explains that “individually, many of these measures aren’t likely to move the needle much or will do so only gradually over time.

But together, they send a loud message that the government is eager to do what it can to steer the market onto a more sustainable – and affordable – path.”

Analysts don’t expect the budget to ease inflationary pressures – despite some measures being targeted at increasing housing supply. Rather, the budget directs new spending that will stimulate medium-term growth. RBC economists expect interest rates to be hiked faster than previously predicted in an attempt to bring inflation down sooner.

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CMBA-ACHC.CA SPRING 2022 I

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editorial To cool down inflation, the Bank of Canada has begun to raise the policy interest rate to keep the total CPI inflation at the 2 per cent midpoint of a target range of 1 to 3 per cent over the medium term. Rates increased by 0.25 basis points in March and 0.50 basis

Sales Activity

Historical

points in April. The expectation is that rate hikes will continue over the course of the next year or two.

Mortgage brokers may be left wondering how the real estate resale market will react amid soaring inflation and the prospect of

Forecast

10-year average

700,000 650,000 600,000 550,000 500,000 450,000 400,000 350,000 2023F

2021

2022F

2019

2020

2017

2018

2016

2014

2015

2013

2011

2012

2010

2009

2007

2008

2006

2004

2005

2003

2001

2002

2000

300,000

Source: Association, C. R. E. (n.d.). CREA Updates Resale Housing Market Forecast. Retrieved April 11, 2022, from https://www.newswire.ca/news-releases/crea-updates-resale-housing-market-forecast-816217710.html

fast-rising interest rates. According to the annual RBC Home Ownership Poll, homebuying attitudes have reverted to pre-pandemic levels.

Hogue believes that the combination of federal measures, rising interest rates, and provincial government initiatives to curb foreign investment and introduce empty-homes taxes will increase borrowing costs and lead to a reduction in homebuyer demand. “To be sure, even more sellers will need to list their properties to rebalance Canada’s housing market. But we expect rising interest rates will help the process by cooling the demand side.”

In its March Housing Market forecast, the Canadian Real Estate Association (CREA) indicated that higher interest rates and ongoing supply shortages are expected to impact housing markets later this year and next. They will eventually put pressure on demand, bringing sales activity down later in 2022 and through 2023 – although CREA does not expect sales activity to fall below pre-pandemic levels.

ADDITIONAL INFORMATION FROM THE 2022 FEDERAL BUDGET SUPPLY-SIDE MEASURES n Housing Accelerator Fund ($4 billion over 5 years) managed by the CMHC to help municipalities speed up construction approval times, update zoning and permit issuance systems, and increase densification. It targets the creation of 100,000 additional units by 2024-25. n Rapid Housing Initiative extended by two years to 2023-24 ($1.5 billion) to create at least 6,000 new affordable housing units. n Loans and funding programs for co-op housing projects ($1.5 billion). The government expects this to help create 6,000 co-op housing units. n National Housing Co-investment Fund will advance the spending of $2.9 billion by 2025-26, accelerating the creation

of up to 4,300 units and the repair of up to 17,800 units for vulnerable Canadians. n A new Multigenerational Home Renovation Tax Credit of 15% on the construction of a secondary suite for a senior or adult with disability (up to a maximum cost of $50,000), providing up to $7,500 in support starting in 2023. n Bulking up the Affordable Housing Innovation Fund by an additional $200 million, including a dedicated $100 million to develop and scale up rent-toown projects. n Flexibility within federal infrastructure programs to tie access to infrastructure funding to actions by provinces, territories and municipalities to increase housing supply. n A variety of programs to foster the ‘greening’ of housing.

SPECULATION CURBS n Two-year ban on foreign buyers of non-recreational residential properties, with exemptions given to permanent residents, temporary foreign workers and students, and non-residents buying their primary residence in Canada. n Anti-flipping tax applying to capital gains made on principal residences bought and sold within less than 12 months. It will become effective January 1, 2023, and contain several exemptions to account for special life circumstances (e.g. death, divorce, new job). n All assignment sales of newly constructed homes will become fully taxable for GST/HST purposes starting May 7, 2022.

SUPPORT FOR BUYERS n Introduction of a First Home Savings Account (estimated to

Source: Budget 2022 is big on housing but won’t immediately relieve affordability crisis. (2022, April 8). thoughtleadership.rbc.com

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provide $725 million in support over five years) in 2023 in which Canadians will be able to invest up to $40,000 tax-free. n Doubling the First-Time Home Buyers’ Tax Credit amount from $5,000 to $10,000, representing up to $1,500 in additional support to homebuyers. It will apply retroactively to homes purchased since January 1, 2022. n Buyer’s bill of rights: the federal government will engage with provinces and territories over the next year to develop and implement a buyer’s bill of rights and introduce a national plan to end blind bidding. n One-time $500 payment in 2022-23 to Canadians facing housing affordability challenges.

The measure is estimated to cost $475 million, though details will be revealed at a later date.

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provincial reports

UP date CMBA PRESIDENTS’

From east to west and all points in between, Canadian mortgage brokers are working in a climate characterized by limited housing supply, increased demand and rising interest rates. We connected with all four CMBA chapter presidents to find out why there’s never been a better time to join the association.

BY LISA GORDON

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Canadian Mortgage Broker connected with the leaders of CMBA’s four provincial chapters for a synopsis of the country’s most pressing mortgage-related issues, current opportunities for industry professionals, and the latest on new programs and services targeted to mortgage brokers. Here’s what our regional presidents had to say.

CMBA-BC PRESIDENT: Deb White Owner/Mortgage Expert DLC – White House Mortgages Vernon, B.C.

A

ccording to Deb White, West Coast mortgage brokers are concerned about the B.C. government’s plan to introduce a mandatory cooling off period on residential real estate transactions. This period, the details of which are still to be determined, will allow buyers to change their minds and cancel a purchase with no or fewer legal consequences.

Since last fall, the regulator has been consulting with industry stakeholders

to determine what this new legislation will look like. In particular, the agency is focusing on practices such as blind bidding as well as waiving conditions that traditionally have protected the buyer.

“Our suggestion was the introduction of a mandatory sevenday subject removal condition on all purchases,” said White. “We have been in talks with BCFSA and they have our opinion on this, but right now there is uncertainty. We have no idea what they are going to do.

“The B.C. Real Estate Association held a press conference and suggested a five-day period before the house goes on the market where people can see it, and get their financing in line before offers go to the seller,” she continued.

“But what happens if four offers come in on a property and then the successful bidder later backs out? What happens to the other three offers – do you go back to them? As well, one buyer could hypothetically put in an offer on multiple homes and then walk away from all but one.”

White said CMBA-BC is cognizant of BCFSA and other industry updates and has regularly communicated information to its 1,300-plus members.

“We’re all nervous about what could happen, to be honest. We’re not sure what it will involve or when the changes could happen, but we will make sure our membership knows exactly what is going on at all times. Our board is very open and the feedback from members has been really good. We’re engaging more with our membership.”

She said the market in B.C. is very robust.

“We understand that BCFSA is trying to calm the market down a bit.

A house in Burnaby went subject-free, with open-ended dates, for $850,000 over asking. In my area, I’ve seen houses go $141,000 over asking. The question is, how is that happening? Are houses being undervalued? It is hard to pinpoint what’s driving the market.

Interest rates are increasing, and I think that will slow the market a bit.”

With COVID-19 regulations easing, White said B.C. brokers are anxious to “learn, engage and get back to the basics.

“The pandemic changed a lot of our perspectives about the way we do things,” she continued. “We haven’t seen our stakeholders and business partners in so long. I think this is a great opportunity to restart the industry. We can capitalize on that, in the sense that we can get to know our partners better.”

CMBA-BC held a special general meeting in March and is also moving its AGM from November to May, by popular request of the membership.

White also said in-person conferences are being planned, although they will be smaller regionally-based events this year instead of one big function.

The association is also planning more educational offerings to help train new mortgage brokers. One example is a workshop on how to properly complete B.C.’s mortgage forms.

“Members want help with training new brokers,” said White. “We want to teach those students the tools of the trade. We offer a potpourri of practical topics introducing over a dozen subjects relevant to new brokers. Some are even misunderstood by senior brokers. Our goal is to ensure we offer a wealth of information from A to Z for all of our brokers.”

She pointed to recent changes at the CMBA-BC board level and said the current board of directors is “an amazing, forward-thinking board of 11 people that includes directors from all corners of the province.”

As well, CMBA-BC’s new executive director, Carla Giles – who is also co-executive director of CMBA national – is like “a breath of fresh air.”

“We have had some bumps and bruises over the past few years, but the board is working to turn it around,” concluded White. “Come in; we welcome you with open arms. We are listening and we are enabling a reorganization to better advance our mission.

We are revamping everything – it’s like a renovation on our association to bring it up to date.”

CMBA-ONTARIO PRESIDENT: Shubha Dasgupta CEO, Pineapple Toronto, Ontario

S

imilar to other Canadian provinces, Ontario has suffered from repeated COVID-19 lockdowns.

In late March, restrictions were lifting and Shubha Dasgupta, president of CMBA-Ontario, was looking forward to re-engaging with chapter members.

“Our ability to provide a sense of togetherness and unity has been limited over the past two years,” he said. “There’s a lot of what I call overall industry fatigue. People are tired of COVID, the restrictions and virtual meetings. From a membership standpoint, we have been doing our best to keep members engaged. We hosted virtual events for networking and educational purposes, to help members gain knowledge and expertise.”

Dasgupta said education is definitely a priority for the Ontario chapter.

“We help new mortgage agents get into the industry and make sure they have all the knowledge required to build a successful business. We are writing a new educational curriculum and offering courses to help them understand the processes.”

He also reminded brokers that they are required to take continuing education credits through CMBAOntario in order to renew their provincial mortgage broker licence.

The deadline for courses to be completed is March 31.

In terms of reconnecting with members, CMBA-Ontario held an in-person gala, conference and tradeshow from April 6-7. Dasgupta said

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provincial reports

the chapter used this time to celebrate recent accomplishments, network with peers and learn about new mortgage industry products and services. He said the new rising interest rate environment will certainly be a topic of discussion.

“From a mortgage perspective, Ontario is facing a few things,” he said.

“We have rising interest rates for the first time in years. There is a housing supply shortage – more and more people are looking to get into home ownership, but they are faced with an inventory crisis. This is causing a lot of frustration for homebuyers.”

He believes Ontario mortgage brokers can help alleviate some of that frustration by educating mortgage consumers about how potential rate increases might look for them. When it comes to the supply shortage, he said CMBA-Ontario will continue to connect with regulators and government to help promote industry understanding.

“One of the things that we are beginning to see is a more balanced market,” Dasgupta continued. “For the last two years, I like to say we’ve been going 150 km/h down Highway 401.

Right now, we’ve pulled back to about 120 km/h. We’re still seeing significant activity, but it feels like we’re moving at a bit of a slower pace.

“We’ve seen some homebuyers pull back from the market; but at the same time, we’ve also seen an increase in listings. It has created a more balanced and healthy environment.”

Post-pandemic, Dasgupta said mortgage brokers will play a role in helping Canadians navigate through high levels of household debt combined with rising interest rates. Technology will also play a factor as the industry adopts new, more seamless ways of doing business.

CMBA-Ontario will continue to keep its 1,000 members armed with the most current and relevant market information. Dasgupta flagged pending Financial Services Regulatory Authority (FSRA) changes that will implement tiered licensing for mortgage brokers who want to offer private lending 14

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solutions – changes that aim to protect consumers during these transactions.

CMBA-Ontario has also launched an exclusive affinity program to help members access specific resources, products and services, including telecommunications services and custom-tailored clothing for men and women.

Dasgupta encouraged anyone interested in getting involved with the industry to consider running for a seat on the CMBA-Ontario board of directors, since elections are coming up soon.

“We are always looking for mortgage brokers to make an impact.”

CMBA-QUEBEC PRESIDENT: Sylvain Poirier President, PrêtsHypothèque.ca, Brossard, Quebec

S

ylvain Poirier calls it “the big picture” – the three pillars that define why CMBAQuebec exists.

“We are here to provide education to our members and the public; to be the voice of the mortgage broker in Quebec; and to promote ethical business practices in the industry,” he said.

With about 245 current members, the Quebec chapter is targeting growth in 2022, as it focuses on increasing membership as well as general awareness of the association.

Poirier said the 11-member board is committed to “go to the next level” as it works to deliver even more value-added services to members.

Education is a big focus, with CMBA-Quebec in the midst of website improvements.

This will facilitate the delivery of online courses to fulfil the provincial requirement for mortgage brokers to earn 24 professional development units (PDUs) over a two-year period. When brokers join the association, said Poirier, they will be offered two free PDU courses.

The chapter has hired a company specializing in communications for non-profit organizations, and for a low fee they are processing member renewals and maintaining social media accounts and other communications vehicles.

“That will remove pressure from the administration,” explained Poirier. “We also want to hire a part-time person who will answer emails, handle social media and prepare for meetings.”

After a two-year global pandemic, CMBA-Quebec is focused on a restart that will see it renew efforts to connect with legislators, members and other mortgage industry stakeholders. The idea is that with increased exposure, more mortgage professionals will be motivated to join the association. Board members have committed to reconnecting with the brokers within their own companies as well.

To increase good governance, Poirier separated the chapter board into six committees. Each one – including advertising, social media and events, for example – reports its progress at the next meeting. He said it has been a successful strategy to improve the quality of the work that is being done, as the board “can reach little goals to build on the big goals of the association. We are working so hard to improve the association and promote it to members, and to be the voice of brokers to the media.”

Membership value has been increased through the previously-mentioned educational credits. CMBA-Quebec is also working to establish partnerships with relevant providers, such as insurance companies that will deliver health and dental insurance and E&O coverage, as well as partnerships with Staples, computer companies, and the like. Poirier said the chapter is also forging partnerships with similar organizations and agencies in Quebec.

He is optimistic about the future.

CMBA-Quebec has already made great strides with the regulator, the Autorité des Marchés Financiers (AMF). Poirier himself has represented the industry during interviews with several radio and television programs.

“I sit on two committees with the regulator to represent the association.

Every time there is a change or modification, they come to us right away. Right now, we have an issue with the PDUs, for example. As of April 30 this year, every broker in Quebec must have completed 24 PDU credits, a requirement that must be filled every two years.

“The focus is getting people to get

these done,” said Poirier. “The regulator is communicating with us.”

In the end, CMBA-Quebec aims to share best practices with provincial brokers, emphasize the value of continuing education, and to be recognized as the official voice of the mortgage broker community.

Poirier said the advice and support the chapter has received from CMBA’s national office has been invaluable.

“We always rely on CMBA, even for videos to promote the PDUs,” he concluded. “They are very helpful to us.

Without them, we would not exist. The national office helped us get started and provides expertise and tools.”

CMBA-ATLANTIC PRESIDENT: Don MacMillan Principal Mortgage Broker The Mortgage Centre – Estate Mortgage Inc., Moncton, N.B.

O

n Canada’s East Coast, Don MacMillan at CMBA-Atlantic reports that one of the biggest challenges is low housing inventory.

Buyers are looking, but residential listings are limited – as they are in most parts of Canada.

“A lot of people will say the rising interest rates are also a concern,” said MacMillan. “But I think it’s just a bit of a concern. I’d like people to talk to us about what this means for them, specifically.”

With 46 members, CMBA-Atlantic represents all four Atlantic provinces.

Similar to the other chapters, it is focused on professional development and promoting mortgage broker education.

“We’ve recently launched our monthly roundtable discussions on mortgage basics for new brokers,” he reported.

“We’ve invited new brokers to come together and throw out some of the challenges, concerns and problems they have, and we discuss them as a group.”

CMBA-Atlantic board members par-

ticipate in the roundtables, lending their experience to help facilitate discussion.

“We are trying to make sure we invite brokers from all brokerages,” continued MacMillan. “There is a gap in the training piece, where new brokers may not have their concerns adequately addressed.

“Secondly, we’re trying to do what we can as far as talking about industry in social media. It’s about the education piece for brokers as well as clients, who need to understand the benefits of working with a mortgage broker.”

He predicted that once housing supply issues are addressed, the market will “explode.”

As well, he said rising property values are allowing people to utilize the equity in their properties to renovate, consolidate debts or buy summer properties.

“We are seeing people refinance their home to buy a piece of land in the country, perhaps accelerating their

retirement plans,” said MacMillan. “The pandemic did show us there is a lot of flexibility in where we work from. People are realizing they can’t retire at 50, but they can spend more time in the country and still work at 50.”

CMBA-Atlantic recently helped Nova Scotia brokers make the transition to new mortgage industry regulation, which took effect last November.

“We spent a lot of time liaising between brokers and regulators,” recalled MacMillan. “Recently, we held a discussion with Nova Scotia brokers to let them come to us and air their concerns anonymously – and then we took them to the regulator and had a positive discussion about possible changes and amendments to the new legislation.”

A key point is that Nova Scotia and New Brunswick are now regulated provinces, and mortgage professionals must either have a licence to operate in these provinces, or deal with a locally licensed broker.

From a member communications perspective, CMBA-Atlantic offered regular webinars and Zoom meetings during the pandemic. The chapter feels digital platforms still offer value to members, and plans to continue offering online programs and services.

“There is a fine balance with those meetings,” said MacMillan. “If we can provide enough valuable information and save people the time of going in person, they are worth it. For example, I am the only board member in New Brunswick. Online platforms allow me to meet with the board remotely instead of spending a whole day travelling.”

While CMBA-Atlantic will not have a major conference or tradeshow this year, MacMillan said the chapter is discussing “a bit of a road show and meeting members face-to-face, to get out and say hello. We intend to hit all four provinces and get member feedback to make improvements.”

For 2022, CMBA-Atlantic will focus on expanding its board and increasing its membership.

“We are looking to grow for sure,” concluded MacMillan.

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elevating standards

THREE NEW LICENCE CLASSES HAVE BEEN PROPOSED

1 2 T 3 NEW ONTARIO LICENSING REQUIREMENTS: WHAT YOU NEED TO KNOW

BY CHRIS FREIMOND

MORTGAGE AGENT LEVEL 1 LICENCE authorizes licensees to deal and trade in mortgages provided by: n Financial institutions, as defined in section 1 of the MBLAA. n Lenders approved by Canada Mortgage and Housing Corporation (CMHC) under the National Housing Act (NHA).

MORTGAGE AGENT LEVEL 2 LICENCE authorizes licensees to deal and trade in mortgages provided by: n Financial institutions, as defined

he proposed new licensing provisions for mortgage brokers in Ontario are good for the industry as a whole and an important first step in elevating the standards of the profession, says Sadiq Boodoo, principal broker, president and CEO of Approved Financial Services and a board member of CMBA-Ontario.

“Anything that requires more education and makes sure we are all able to better serve our clients and better protect investors is a good thing,” says Boodoo. “I think these changes will create at least a baseline standard for the industry and set a minimum level of knowledge requirements and experience for brokers so that we all operate from the same base of knowledge and experience.”

The new licensing provisions are part of the Ontario government’s proposed amendments to Ontario Regulation 409/07 under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA). If approved, the new licensing categories would take effect on April 1, 2023, starting with a 12-month transition period for brokers to meet the new licensing requirements.

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in section 1 of the MBLAA. n Lenders approved by CMHC under the NHA. n All other lenders, such as mortgage investment companies, syndicates, private individuals, agents, brokers and brokerages.

MORTGAGE BROKER LICENCE authorizes licensees to deal and trade in mortgages provided by: n Financial institutions, as defined

in section 1 of the MBLAA. n Lenders approved by CMHC under the NHA. n All other lenders, such as mortgage investment companies, syndicates, private individuals and brokerages.

MORTGAGE BROKERS CAN SUPERVISE MORTGAGE AGENTS (LEVELS 1 AND 2) AND CAN BE APPOINTED AS THE PRINCIPAL BROKER FOR A BROKERAGE.

The proposed new licensing requirements flow from a report to the Minister of Finance on the Legislative Review of the MBLAA that recommended the Ministry of Finance work with Financial Services Regulatory Authority of Ontario (FSRA), in consultation with the industry, to propose options for licensing schemes that better respond to the unique practices required by certain segments of the mortgage market.

Stakeholder feedback received during the MBLAA review process indicated that licensees working with private mortgage lenders and raising capital require a specific set of competencies, which should be reflected in the licensing and education requirements.

In response, the Government of Ontario proposed effective April 1, 2023: n The establishment of a separate licence for mortgage agents who transact in private mortgages and arrange investments for private investors/mortgage lenders. n Enhanced education and experience requirements for mortgage agents and brokers.

Boodoo, who was is a member of the technical advisory committee that provided feedback to the FSRA on the guidelines, says the proposed licence for mortgage agents includes enhanced requirements that address the need for agents (as well as brokers) to have additional education, knowledge and experience regarding private mortgages.

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“Private mortgages may have terms and conditions that pose unfamiliar risks to consumers, given that they are not underwritten in the same way as those offered by more traditional financial institutions,” he says.

“Mortgage agents and brokers must have the appropriate expertise to recommend products that meet consumers’ needs. They must take reasonable steps to properly understand, assess and inform consumers of any potential risks associated with private mortgages or mortgage investments.”

According to FRSA guidelines published to help brokers understand and interpret the new licensing requirements, the proposed changes support the following outcomes: n Education/competency requirements that better align with activities in the mortgage market. n Enhanced consumer protection as borrowers and lenders/investors receive appropriate levels of information and recommendations to make informed decisions relevant to their mortgages/mortgage investments. n Enhanced confidence in the mortgage brokering industry as licensees are prepared for

their career in the mortgage brokering sector.

Stakeholder comments on the FSRA guidelines received by the March 31 deadline included concern that some brokers who currently work with private mortgage lenders and arrange investments for private investors could be disadvantaged by the new licensing system if they do not yet have the education or experience to meet the requirements. It was suggested that the status of brokers who find themselves in this position be “grandfathered.” However, the FSRA indicated that this would not happen.

Instead, starting this fall, brokers who wish to transition to mortgage agent level 2 or mortgage broker licence status will be able to take the Private Mortgages Course and Challenge Exam and complete the requirements by April 1, 2023, when the new regulations take effect – but must meet the education requirements by March 31, 2024.

Boodoo says the challenge with grandfathering is the toss up between time and experience, which don't necessarily correlate.

“Someone who has been a broker for 10 or 15 years may have less experience brokering private mortgages than another broker who has been licensed for only two years but specializes in private lending, so it’s hard to see a correlation between time and experience,” he says.

Sadiq Boodoo, principal broker, president and CEO of Approved Financial Services and a board member of CMBA-Ontario

Boodoo says brokers who believe their experience and knowledge warrants grandfathering should have no problem passing a challenge exam or a course based on their knowledge and experience.

Some brokers, even with many years of experience, may not know what they don’t know, he adds, and taking the course could improve their knowledge and make them even better advisors to their clients.

“We may feel confident because of the number of deals and the type of deals we’ve done, but there could be elements of the lending space that we have never experienced or encountered and that could come up in the challenge exam,” says Boodoo.

His advice to principal brokers who may have concerns about their ability to pass the challenge exam is to take the course if they have the time because there is no harm in learning even more about mortgages and being in a better position to pass the exam.

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workers’ rights

How changes to Ontario’s new Working for Workers Act may impact the mortgage industry

BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC

PROGRES OR A STEP-TOO-FAR?

T

he Working for Workers Act, 2021 (Act) became law in Ontario on December 2, 2021, and changed employment relations significantly. Some Ontarians will welcome the enhancement of workers’ rights; others will think the Act goes too far. Regardless, it applies to all of Ontario. As provinces tend to borrow legislative and policy initiatives from one another, it is possible that in time other provinces will follow the lead.

We will look at the following three categories of changes that may impact, using generic terms, mortgage broker and brokerage employment relations: n n n

Prohibiting Non-compete Agreements Disconnecting from Work Washroom Access

In this article, I refer to employees and employers for the sake of consistency with the Act, but the reader should be thinking of the discussion in terms of mortgage brokers and mortgage brokerages.

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workers’ rights PROHIBITING NON-COMPETE AGREEMENTS A non-compete agreement is one that seeks to prohibit an employee from engaging in any business, work, occupation, profession, project, or other activity that is in competition with the employer’s business after the employment relationship between the employee and the employer ends.

Subject to limited exceptions, the Act prohibits employers from entering into non-compete agreements with employees. Any non-complete agreement entered into after October 25, 2021, is void. The Ontario Supreme Court in Parekh et al v. Schecter et al, 2022 ONSC 302 decided that the Act does not void non-compete clauses that were entered into prior to October 25, 2021.

There are exceptions to the general rule.

Non-compete agreements will be permitted if there is a sale or lease of a business or part of a business and, as part of the sale, the seller enters into a non-compete clause and, immediately following the sale, the seller becomes an employee of the purchaser.

As well, an employer is not prohibited from entering into a non-compete agreement with an employee who is an executive. An executive is: any person who holds the office of chief executive officer, president, chief administrative officer, chief operating officer, chief financial officer, chief information officer, chief legal officer, chief human resources officer or chief corporate development officer, or holds any other chief executive position.

It is unlikely that assigning or withholding one of the indicated position titles alone will determine whether the person is an executive.

Likely, there will eventually be guidance as to what functions, duties, or work performance would cause an employee to be considered an executive for purposes of the Act. The prohibition concerning non-compete agreements does not apply to prevent non-compete agreements with independent contractors or consultants. Nor does it prohibit the use of non-solicitation agreements prohibiting ex-employees from soliciting the employer’s employees and clients. Further, it does not prohibit agreements requiring ex-employees to maintain confidentiality as to any proprietary information of trade secrets of the employer.

Aside from the Act and any guidance from the Ministry of Labour, mortgage brokers 22

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and brokerages should keep in mind that non-compete clauses that are too broad can be considered restraint of trade violations and accordingly be unenforceable.

The prohibition makes it easier for employees who are no longer bound by a non-compete agreement to find employment with their employer’s competitors after leaving their employment. It broadens an employee’s employment opportunities and increases an employer’s pool of potential employees.

DISCONNECTING FROM WORK Modern technologies and consequences of the pandemic have resulted in more employees working from home. Some employees are unable to disconnect from the office and are contacted by their employer during off-hours. This can have a negative impact on an employee’s work-life balance and well-being. It can lead to stress and burnout for the employee and can expose employers to claims for overtime.

The Act requires employers with 25 or more employees by June 2, 2022, to implement a written policy on disconnecting from work during non-working hours. In following years, employers are required to put a new policy in place or amend an existing policy by no later than March 1.

The Act defines disconnecting from work as: not engaging in work-related communications, including emails, telephone calls, video calls or the sending or reviewing of other messages, so as to be free from the performance of work.

The Ontario Ministry of Labour includes the following guidance as to the contents of a disconnecting from work policy: n An employer determines the content of its disconnecting from work policy. (This makes some sense as the same disconnecting from work policy would not be a good fit for every size and type of employer.) n Employers are not required to create a new right for employees to disconnect from work. (For example, employees already have rights concerning not working during off-hours, eating periods, vacation and public holidays.) n The Ontario Employment Standards Act does not specify the information an employer must include in its disconnecting from work policy, so long as the policy is about disconnecting from work.

n An employer may choose to have multiple

disconnecting from work policies for different groups of employees or differentiate between groups of employees in a single disconnecting from work policy.

Some suggestions of what a policy might address include the following: n Expectations, if any, for an employee to read or reply to work-related emails or answer work-related phone calls after their shift is over. n The employer’s expectations for different situations, such as depending on the time of day of the communication, the subject matter of the communication, or who is contacting the employee (for example the client, supervisor, colleague). n The employer’s requirements for employees turning on out-of-office notifications and/or changing their voicemail messages, when they are not scheduled to work, to communicate that they will not be responding until the next scheduled workday.

The policy must be dated, as must be any changes made to it. The policy is to be provided to employees within 30 days of it being finalized or within 30 days of the employee being hired. Any changes to the policy must be given to each employee within 30days of the changes being made. Employers are to keep a copy of a policy for at least three years after it is no longer in effect.

WASHROOM ACCESS Workplace owners must provide washroom access to persons making deliveries to or from the workplace. This does not apply if: n Access is not reasonable for health and safety reasons; n Access is not reasonable for reasons related to security, location, condition, or nature of the workplace; or n The washroom is in or can only be accessed through a dwelling.

CONCLUSION The Act is new law. Undoubtedly over time legislators and policy-makers will refine/ detail its provisions and courts will assist in interpreting it. Ontario brokerages should, from time to time, check for further guidance from the Ministry of Labour website at: labour.gov.on.ca/english/es/.

This article is not intended as legal advice.

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best advice

Mortgage brokers discuss why the best rate does not always equal the best mortgage – and why expert advice is essential during the biggest financial transaction most people will ever do

A

BY LISA GORDON

ny mortgage broker will tell you that the first question a borrower usually asks is, “So, what’s the best rate you can get me?”

But when it comes to the biggest financial purchase you’ll ever make, there’s a lot beneath the surface when it comes to choosing the best mortgage. In fact, the best rate does not always equal the best mortgage.

In the past, financing a home purchase involved going down to the local bank and basically taking whatever mortgage they offered.

There wasn’t a lot of choice for buyers, who found themselves pigeon-holed into standard, one-size-fits-all mortgages.

“It’s like going to buy a TV and you can only look at Sony models,” said Kristi Knippel, a mortgage broker with One St. Mortgage in Saskatoon, Sask. “Or, running shoes. What if you don’t like Nike?

You have to have options that fit and are comfortable, and (when it comes to mortgages) that’s what a mortgage broker provides.”

Knippel, who has been working in the financial industry for 28 years, left her role as a big bank adviser because she felt constrained when it came to offering clients the best products.

“I view myself as a holistic adviser and I like to find products to match the client’s lifestyle,” she explained. “As a mortgage broker, I can offer more options. When I deal with a client, the only thing I look at is what is their current situation, and what are their needs today and in the future? I never view myself as a salesperson. I’m there to provide advice. If someone calls in, I give them my best advice even if it means returning to their existing lender.”

While Knippel said she sometimes loses business by referring people back to their current lender, she has no regrets. “I’ve always operated by the idea that if I do good by people, they will do good by me. I tell them they can pay me by recommending me to their friends or family – they can be an advocate for our industry, understanding that without mortgage brokers, quality will diminish.”

When she worked at the bank, she admitted that she had no idea what other lenders were offering. But, as a broker, she knows what’s happening at all the institutions.

“If I don’t, I have contacts and I can find out. Banks don’t know, nor do they care, what others are offering. They are responsible to their shareholders if they don’t perform financially, so they sell their product and no one else’s.”

Knippel considers herself a professional who offers a top quality service to her clients.

“It’s a business like any other business, where

MORE THAN Kristi Knippel

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Marci Deane

you should be compensated if you do a good job. Borrowers don’t pay us, the lenders do, but I can say there is very little difference in the amount of compensation from lender to lender – in fact, I honestly don’t pay attention to the compensation on a particular mortgage, because they are all roughly the same.

“I run my business for myself,” she continued. “I’m not a big bank. I do the best for my clients that I can because I work for them. If I don’t feel I can provide the best, I will help them with next steps and perhaps refer them to a financial institution.”

Like Knippel, North Vancouver mortgage broker Marci Deane spent a decade working at one of the big banks and has more than 25 years of experience in the finance industry.

She’s been a licensed broker since 2007 and launched her own brokerage – Ask Marci About Mortgages – in 2013.

Although Deane has sub-brokers working with her, she is a very active mortgage professional who closes deals every day.

“I have a big book of business and my clients are my priority. When clients do an intro call with me, we talk about how I am an independent adviser and I work the same way as a real

estate agent. I get paid when we fund a mortgage. So, my job is to provide the best service with the idea that I will get paid at the end of the transaction. That’s what a consumer needs to look for in a mortgage broker. To be very honest, I think that you want to find someone whose passion is mortgages and helping people.

You’ll feel that from your first interview.”

Deane’s business hinges largely on referrals from her extensive business network as well as repeat clients. She knows there is a whole team involved with a real estate transaction – financial planners, Realtors, lawyers – and she tries to establish relationships with the rest of a client’s advisers immediately.

“Look for someone who is willing to work with your whole team,” she advised. “Having experts on your side is so important. As mortgage brokers, what we do and what we study and focus on all day long is mortgages. That’s all we do. Just like when you have a health problem, you go to a specialist. Or, if there is something wrong with your car, you go back to the dealer.

You always want the expert as opposed to the jack of all trades.

“In the banking world, you’re dealing with people who are selling many different products

N RATE Denise Laframboise

at the branch, compared to a mortgage broker who only understands mortgages and makes it their business to know what else is out there in the market.”

Deane said mortgage brokers are bound by ethical and regulatory requirements, and, in B.C., they are subject to continuing education requirements in order to re-license every two years.

“We have to abide by our licensing. On top of being licensed and regulated for disclosure, etc., most of us are members of a professional association. And in B.C., we must disclose our finder’s fees to borrowers on a Form 10, so our clients know exactly how much we are getting paid.”

STRATEGIC ADVICE Denise Laframboise is no stranger to mortgages. She has purchased several properties over the years, and currently owns four that are all mortgaged with different lenders because “the best fit today for one property may not be the best fit tomorrow.”

This is Laframboise’s sixth year in the mortgage business. “Prior to this, I was in healthcare, but part of the reason I came into

Kaela Fraser

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best advice

this industry is that we had rental properties and the information I got from people at the banks was lacking. I was looking for advice and strategy for how to accumulate wealth through real estate. There was no guidance or assistance planning for our next property.”

Laframboise said banks offered her fixed or variable rate options, but that was it. She and her husband had to do their research on investment properties and come armed with relevant questions. Even then, they were often unsatisfied with the answers.

“So, while we were the ideal clients that could qualify anywhere, it didn’t matter without expert advice,” said Laframboise, who now owns and operates LaframboiseMortgage.ca in Whitby, Ont. “My clientele is similar to me. For me, it’s about giving them more strategic options to help them achieve their goals. Bank rates and products are similar everywhere, so it’s more about the nuances of what you can or can’t do.

How we restructure a mortgage on a primary residence may make or break the ability to buy a rental or create tax advantages, if we do it right. That advice and strategy is what I was looking for as a consumer and never found.”

She said that while most mortgage brokers have their clients’ best interests at heart, it pays to research.

“Meet with brokers and ask questions,” she advised. “What is their experience? How many lenders do they work with and what’s their education? It’s OK to interview potential brokers because this is the biggest financial purchase of your life. Talk to a few people, find out who you feel most comfortable with.”

Laframboise, too, has advised clients to stay at their existing lender if it makes the most financial sense. “It doesn’t always make sense to change for rate alone. I’ve done three mortgages for myself in the past year, and not placed once at the lowest rate. I care about the penalties and other benefits, like pre-payments and whether it is portable, that suit my situation.”

In one case, she witnessed clients who had to pay a massive $54,000 penalty when their bank forgot to collect the necessary documentation to port their mortgage. After they purchased, they were told they did not qualify to port.

“In this example, the clients asked if they qualified, but a full pre-approval wasn’t done before they bought,” said Laframboise. “We 26

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helped them with a different lender, but it would have been much cheaper for the clients to not pay that massive penalty. Proper advice was lacking. It’s the equivalent of going car shopping and going to the different dealerships for a minivan. The dealer that doesn’t sell minivans will still try to sell you a truck, no matter what, because that is all they have to offer – even if it isn’t what you need.”

With 58 institutional lenders at her fingertips, Laframboise feels the right mortgage exists for everyone.

“If you want the best-suited option for you, anybody who is really good at this business and in it for the long haul will tell you that strategic advice is key. It’s invaluable.

“Rates are pretty much the same everywhere,” she added. “I tell clients all the time, on the day you buy a house we probably have 10 lenders offering the same rate special. But do we need to add a line of credit? Or can we in the future? Do we need a collateral charge for future borrowing? Is the product re-advanceable?

What are the penalties? Is there a good online portal, or does the client like to have a physical branch where they can make payments? These things matter and can save or cost you money.”

Laframboise appreciates anyone who is out there in the industry trying to educate consumers. She said people need to understand more than just rate and realize the questions they should be asking when they are making such significant financial decisions.

PRESERVING COMPETITION While some have proposed a fee-based model for mortgage advice, several brokers feel that will damage the industry by removing the very reason why mortgage brokers exist.

“In essence, if you take away that element of free advice, people will turn back to the banks,” said Kaela Fraser. She and her twin sister, Krystal, founded The Mortgage Duo in Dawson Creek, B.C., in 2014.

“In that case, if they can walk into their bank and get it done without upfront costs, they will, instead of paying a broker up front.

It’s kind of backtracking on why this industry was created in the first place, by eliminating that element of competition.”

She explained further: “Mortgage brokers were born because banks were biased and only sold their own products. Now there is competi-

tion and banks are competing by lowering rates.

But when there is no competition, service levels can decrease.”

Fraser also pointed out that bank representatives are often new to the job, with little mortgage experience.

“There is no requirement to have a certain level of knowledge,” she said. “As mortgage brokers, our incentive is to get the mortgage done, while the bank rep gets a salary. It’s not their reputation or their commission on the line. So, there is more incentive for us to get it done, to know our lenders and their guidelines.”

For example, mortgage brokers are a borrower’s best resource when it comes to deals that are unique or a touch different.

“If someone comes along and they have rental income that will make or break them being able to purchase, we have a large number of lenders we can access that allow varying degrees of rental income,” noted Fraser.

“Having access to those options makes a big difference. It can be very case specific, as to why you have to go to one lender or another.

You may not qualify under certain guidelines.

When it comes down to it, getting the best rate isn’t hard to do – finding the right mortgage can be harder.”

She pointed out that brokers often work outside bank hours and can provide additional services, such as help with appraisals, inspections and setting up property taxes. Plus, when it comes to pulling documents and doing credit checks, your broker only has to do it once within a 30-day period, versus several times by each individual bank.

While Fraser agreed that the difference between lender payments to brokers is slight, she said experienced brokers often prefer a particular lender because of how they perform, not because of what they pay.

“Sometimes, it comes down to the relationship built and how quickly things can be processed, which in turn can save the client money,” she said. “There could be a lender bias for other reasons besides compensation.”

In the end, it’s about obtaining the best advice for the biggest purchase of your life.

“Do your due diligence and choose a mortgage broker who aligns with your interests,” concluded Fraser. “Look at references; their reputation. You build that relationship and feel confident in their expert advice.”

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HIGHER STANDARDS FOR TRUSTED ADVISORS The Taxing Issue of Negligence

BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC

As mortgage brokers increasingly move toward the trusted advisor and away from the solely intermediary end of the service scale, the standard of service expected of them increases accordingly. What standard of service is a mortgage broker who is a trusted advisor required to provide to a client to avoid being negligent and responsible for a client’s losses? The BC Court of Appeal’s recent decision in Tellini v. Bell Alliance, 2022 BCCA 106, while involving the services provided by a lawyer, provides some guidance for mortgage brokers.

BACKGROUND In the Tellini case, a non-resident and non-citizen client was made to pay transfer taxes related to her taking registered ownership of real estate. She claimed that she incurred the taxes because her lawyer had given her negligent legal advice. She went to court to recover the amount from the lawyer and the lawyer’s law firm.

WHAT HAPPENED? A common-law couple, both Indian citizens, owned a residential strata lot in North Vancouver. As part of a November 2016 separation agreement, the male part28

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ner agreed to transfer his interest in the lot to his female partner (Tellini). The agreement was reached amicably, and there was no particular urgency to register the transfer in the land title office.

Tellini hired a lawyer to register the transfer of the strata lot, together with a mortgage. The commitment letter for the mortgage would expire on March 13, 2017.

At their first meeting on December 21, 2016, the lawyer informed Tellini that submitting a transfer of registered ownership to the land title office attracts tax under the Property Transfer Tax Act

(Act). She explained the Act exempts payment of the tax where the transfer is made pursuant to a separation agreement if, at the time of the transfer, the receiving spouse is either a permanent resident or a Canadian citizen.

She also explained that a further 15 per cent foreign buyer’s tax would be payable if Tellini was neither a citizen nor permanent resident at the time the transfer was submitted for registration.

Both taxes are based on the fair market value of the property. The lawyer used the 2016 assessment as the basis for calculating the tax due.

R

keep notes

NOTES In addition to addressing the standard of care required issue, the Tellini case provided comments as to the importance of keeping file notes.

The trial court noted that the evidence of the lawyer and the client who was suing her “differed in a number of respects.”

Because the lawyer had not kept notes on undoubtedly significant matters, the trial court believed the client rather than the lawyer on every point where there was a conflict of evidence. The Court of Appeal disagreed with this approach and said the fact that the lawyer did not keep notes of significant conversations with her client clearly fell below the standard of a reasonable solicitor; however, it would be unfair to disbelieve her evidence for that reason alone and deny her the opportunity of convincing the Court of the truth of her testimony. The Court of Appeal did not address this point in great detail as it decided the case in favour of the lawyer even on the client’s version of the evidence.

Of course, mortgage brokers are not lawyers, and the expectations and standards of the two groups are different. However, as mortgage brokers as a group are seen increasingly as trusted advisors than intermediaries and as they are the ‘expert’ in their respective relationship, their file notes on at least significant facts would be important in resolving differences with their clients as to recollections, what occurred, who said what when, and so on. The value of the notes would increase according to their completeness and with how close they were prepared to the times of the recorded events. Mortgage brokers are encouraged to keep thorough and timely notes.

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keep notes

ON DECEMBER 22, 2016, the lawyer confirmed by email the advice that both taxes would be payable if the property was transferred before Tellini became a permanent resident.

ON DECEMBER 30, 2016, the bank declined Tellini’s request to increase the mortgage amount by $60,000, the approximate amount needed to pay the taxes. The bank indicated a new application would need to be made, a three-month penalty of about $2,600 would result, the new mortgage may have a higher interest rate and different term, and a new appraisal would be needed. Tellini declined to go the new application route.

ON JANUARY 3, 2017, Tellini received a new property

assessment notice showing a property value increase of 38 per cent. The January 3 assessment applied from July 1, 2016, to June 30, 2017, thus applying to the subject transfer and thereby increasing the amount of transfer and foreign buyer taxes.

ON JANUARY 10, 2017, Tellini advised the lawyer she had

the money for the taxes and asked when she should sign the papers. The transfer and mortgage were signed on January 13 and were filed on January 16. Tellini paid the property transfer tax assessment and the foreign buyer’s tax based on the 2016 notice of assessment.

ON MARCH 15, 2017, the British Columbia government

issued an order exempting foreign buyers from the tax if they became permanent residents of Canada within a year of purchasing the property. The order was published on March 21, albeit obscurely in a bulletin, and in the BC Gazette on March 28.

The order was to take effect as of August 2, 2017.

ON DECEMBER 6, 2017, Tellini was invited to apply for permanent resident status; she applied on December 21 and became a permanent resident on February 27, 2018.

ON JANUARY 5, 2018, the government reassessed Tellini’s

taxes on the basis that the fair market value was to be calculated on the 2017 assessment and not, as had been done, the 2016 assessment. This resulted in a balance owing of approximately $23,500, which Tellini ultimately paid.

ON OCTOBER 18, 2018, the government denied Tellini’s

application for a refund of the foreign buyers’ tax because she had become a permanent resident a few weeks earlier than the oneyear criteria.

Tellini sued her lawyer for giving her negligent advice concerning the taxes. She argued that if she had been properly advised, she would have waited to register the transfer until after she became a permanent resident. This would have exempted her from both taxes.

OUTCOME The Court of Appeal said that the transfer tax was based on the value of the property at the time of the transfer being registered, that being the value shown on the 2017 and not the 2016 assessment. Evidence had already been accepted that Tellini was going to register the transfer before the bank’s commitment expired on March 13, 2017; she was not going to go past that date to wait until she obtained permanent residency. The lawyer’s advice to use the 2016 value did not increase the amount of tax payable; it simply meant that the tax authorities could reassess using the 2017 assessment and collect the amount that was payable all along. The lawyer’s advice was not the cause of that increase.

The Court of Appeal also said that even though the lawyer’s failure to advise Tellini to wait to file the transfer ultimately did in fact cause Tellini to not qualify for the refund of the foreign buyers’ tax, that loss was too remote to hold the lawyer liable for negligence. The lawyer could not have reasonably foreseen that the province would enact the one-year refund entitlement after the date on which the transfer was submitted for registration. The entitlement did not even exist at the time the lawyer gave the advice and did not get published until eight days after the bank’s mortgage commitment letter would have expired. The creation of the entitlement was a surprising and highly unlikely event for which the lawyer could not be held responsible.

TAKEAWAYS Mortgage brokers should keep file notes.

These notes should cover at least any significant occurrences and conversations related to the file and should be made as close as possible to the time the recorded events occurred.

Mortgage brokers need to ensure they are equipped to act as trusted advisors or should limit the scope of their services accordingly.

A client service agreement setting out the limited services may assist in this regard.

It is recommended mortgage brokers gain education that allows them to perform at the standard of service expected of a trusted advisor.

This article is not intended as legal advice.

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TO MAKE A DIFFERENCE

IVING BAC

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Mortgage industry veteran Geoff Parkin believes that education and mentorship will help brokers elevate the profession

BY LISA GORDON

A

One lesson he’s learned after his considerable mortgage industry experience is the value of a knowledgeable mortgage broker – particularly since many homebuyers find the process difficult to understand.

“Getting advice from a mortgage broker is essential,” said Parkin. “There are many products available to a client, all with their own unique pros and cons. There is tremendous value to the advice provided by brokers, which can be underestimated by borrowers.”

That’s where his interest in mentoring and volunteering comes into play.

“I think it’s important for everyone in our industry to give back a little bit of their time to improve and develop the industry,” he said.

Parkin himself is no stranger to giving back. He volunteered as president of the Mortgage Brokers Association of British Columbia 11 years ago, and has been serving on the finance committee for the BC Children’s Hospital Foundation for the past 16 years.

“I got involved with the hospital because my youngest daughter has been a regular patient there, having five heart surgeries in her lifetime,” he said.

fter 25 years in the financial services industry, Geoff Parkin knows one thing for sure: education and mentorship are the keys to elevating the mortgage broker profession in British Columbia and across the country.

Parkin began his career as a Chartered Professional Accountant and Financial Analyst with Pacific Coast Savings Credit Union and Coast Capital Savings Credit Union. Formerly of Victoria, the 52-yearold now lives in White Rock with his wife (he has two daughters who are currently in university). A self-professed finance geek, Parkin has been the CEO of Select Mortgage for 17 years, where he and about 60 brokers provide services for Greater Vancouver and Vancouver Island.

What’s different about Select Mortgage? Parkin said that unlike many mortgage companies, Select Mortgage is not owned by a large financial institution. This allows the company to retain its detailed client focus, while at the same time generating enough volume to negotiate low mortgage rates.

Client service is extremely important to Parkin, who said he enjoys “helping clients along through what is potentially one of the biggest financial transactions in their lives.”

Aside from his CEO role, Parkin is the current president of the Mortgage Brokers Institute of British Columbia (MBIBC). That organization provides professional I enjoy coaching and mentoring brokers as they’re coming into the industry, education to mortgage brokers so they can meet mandatory re-licensing helping them get set up and be effective and successful in their careers. requirements prescribed by the B.C. I think it’s important for everyone in our industry to give back a little bit of Financial Services Authority. their time to improve and develop the industry.

“Every two years our brokers have to be re-licensed,” he explained. “As So, what does Parkin do in his limited part of that re-licensing, they have to take a number of courses and the institute provides that course amount of spare time? content so they can do their re-licensing program.”

“My favourite thing to do is travel, so Parkin got involved with MBIBC because he wants to see increased educational opportunities for that’s been a bit hard the past couple of mortgage brokers. years. I have a bit of catching up to do,” “I think a lot of that is making sure, as an industry, that we don’t see mortgages as transactional interhe said. “I run with my dog, enjoy hiking actions, but really see it as financial advice,” he told Canadian Mortgage Broker. “(A broker’s) interacand ride my motorcycle, because it’s my tions with clients should give them material or other consideration that is beyond the actual mortgage mid-life crisis. It’s not a Harley – that’s what transaction, including some aspects of the financial planning that goes along with mortgages.” everyone asks me – (but) accountants and He added: “Brokers should provide information on the strategic use of debt, debt for investing, use Harleys just don’t go together.” of debt in retirement, basic tax knowledge around real estate, and even knowledge in areas such as wills, His favourite ride is from Vancouver estates and life insurance considerations. Brokers may not provide full advice on each of these areas, but through Washington State to Mount Bakthey should make it part of the conversation with clients.” er, where “there are lots of twisty roads Aside from promoting formal industry education, Parkin enjoys working with new and inexperienced and it runs through farmland, through mortgage brokers. “I enjoy coaching and mentoring brokers as they’re coming into the industry, helping them get set up and be effective and successful in their careers.” foothills, and up to the mountains.”

“

SUPPLIED

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supply and demand

HOUSING SUPPLY ONSTRUCTED Understanding the scale of the current housing shortage

T

BY JEFF TISDALE o say that the past couple of years in British Columbia’s housing market have been interesting is, in a word, interesting.

The resurgence of the housing market late in 2020 and throughout 2021 has certainly exacerbated our current housing situation with every no-subject, over-asking, multiple offer increasing unaffordability. Compounding this crisis is the growing chorus of ‘we need more supply’ – sure, but first let’s ask a few fundamental questions: 1. How much supply?

2. What type of housing product?

3. Is this just a Vancouver or Metro Vancouver problem?

To begin understanding the scale of this challenge, the Landcor Team took a closer look at the residential market in 10 of the largest municipalities in British Columbia. In the following two tables, we took a detailed look at the current housing stock in these communities, separated by (a) Market Housing and (b) Purpose-Built Rental. The idea here is to better understand the opportunity when the general term ‘housing supply’ is mentioned as part of solving the housing crisis. In other words, where should conversations be focused, and with what housing type?

Consider the following insights from a May 2021 report by Scotiabank chief economist JeanFrançois Perrault.

“The international perspective can be helpful here, particularly since observers like to compare the evolution of Canadian home prices against international comparators. Housing choices vary by country and city, so there is clearly not a one-size-fits-all number of housing units per population.

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supply and demand

1

Market Housing Stock Municipality

Population (2021)

A closer look at the 10 largest municipalities in B.C. Ranked in terms of population.

Population growth (2016 – 2021) Housing Stock Mix (2021)

Housing Units / 1,000 population

Vancouver

662,248

4.87%

Attached: 17,058

Condo: 94,924

Detached: 109,430

334

Surrey

568,332

9.74%

Attached: 36,611

Condo: 26,352

Detached: 111,738

307

Burnaby

249,125

7.03%

Attached: 13,797

Condo: 35,400

Detached: 36,884

346

Richmond

209,037

5.86%

Attached: 16,359

Condo: 29,869

Detached: 31,494

372

Abbotsford

153,524

8.58%

Attached: 7,396

Condo: 9,244

Detached: 36,884

349

Coquitlam

148,625

6.71%

Attached: 6,854

Condo: 15,491

Detached: 29,959

352

Kelowna

144,576

13.5%

Attached: 8,095

Condo: 12,664

Detached: 32,297

239

Township of Langley

132,603

13.06%

Attached: 10,255

Condo: 4,321

Detached: 28,253

323

Saanich

117,735

3.14%

Attached: 3,859

Condo: 5,652

Detached: 35,549

383

Delta

108,455

6.08%

Attached: 3,330

Condo: 3,878

Detached: 29,599

339

Source: Statistics Canada | Census Profile, 2021 Census of Population; Landcor Data Corporation Note: Detached units: Single-Family Dwelling = 1 unit; Single-Family Dwelling with Basement Suite (legal) = 2 units

The number of housing units in Canada falls quite a bit short relative to most other countries as is clear from chart 2. Across the G7, the average number of housing units per 1,000 residents is 471. To put our number in perspective, it would take an additional 1.8 million homes in Canada to achieve this level of supply of housing relative to population. Simply catching up to the UK, which has 433 units per thousand citizens,

2 Purpose-Built Rental

would require roughly an additional 250,000 homes in Canada. Catching up to the U.S., we would require another 99,000 units. To put these gaps in perspective, we have averaged 188,000 home completions in the last 10 years.”

Market Housing is one part of the supply issue. The other side of the supply equation is the Purpose-Built Stock (multi-family, non-strata) and the critical role it plays in providing housing

to many who are unable to or simply choose not to participate in the latter.

In the table below, we start to see where opportunities exist to shore up this form of housing to raise overall housing stock. The column with the consolidated score represents the sum of both the Market and Purpose-Built Rental stock, which can now be more directly compared to the G7 average as cited earlier by Mr. Perrault.

A closer look at the 10 largest municipalities in B.C. Ranked in terms of population.

Population (2021)

Dwellings (2021)

Multi-Family Units (2021)

Multi-Family Units / 1,000 population

Vancouver

662,248

4,960

83,214

126

460

Surrey

568,332

170

9,048

16

323

Burnaby

249,125

439

17,766

71

417

Richmond

209,037

95

5,742

27

399

Abbotsford

153,524

121

4,511

29

378

Coquitlam

148,625

115

5,476

37

389

Kelowna

144,576

269

8,714

39

278

Township of Langley

132,603

33

1,372

10

333

Saanich

117,735

156

4,909

41

424

Delta

108,455

54

2,346

22

361

Municipality

Source: Statistics Canada | Census Profile, 2021 Census of Population; Landcor Data Corporation NOTE: ‘Dwelling’ refers to the building envelope, whereas ‘Units’ refers to the livable units contained within the dwelling

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CONSOLIDATED Housing Units / 1,000 population

continued on pg. 38

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supply and demand

3

G7 Housing Shortfall

A closer look at the 10 largest municipalities in B.C. Ranked in terms of population.

With an understanding of where and what the housing stock shortfall is, we can then simply calculate (assuming the current mix) how many units are needed to meet the 2021 G7 average of 470 units per 1,000 population. The shortfall numbers presented below are absent of housing stock currently under construction.

Municipality

Population (2021)

Housing Stock Mix (2021)

Housing Stock Shortfall Per 2021 ~ G7 Average (470 units per 1,000 population)

Vancouver 662,248

Attached: 17,058 Detached: 109,430

Condo: 94,924 Multi-Family Units: 83,214

Attached: 363 Detached: 2,331

Condo: 2,022 Multi-Family Units: 1,773

Surrey 568,332

Attached: 36,611 Detached: 111,738

Condo: 26,352 Multi-Family Units: 9,048

Attached: 11,426 Detached: 34,873

Condo: 8,224 Multi-Family Units: 2,824

Burnaby 249,125

Attached: 13,797 Detached: 36,884

Condo: 35,400 Multi-Family Units: 17,766

Attached: 1,560 Detached: 4,171

Condo: 4,003 Multi-Family Units: 2,009

Richmond 209,037

Attached: 16,359 Detached: 31,494

Condo: 29,869 Multi-Family Units: 5,742

Attached: 2,462 Detached: 4,739

Condo: 4,494 Multi-Family Units: 864

Abbotsford 153,524

Attached: 7,396 Detached: 30,380

Condo: 9,244 Multi-Family Units: 4,511

Attached: 1,447 Detached: 7,218

Condo: 1,809 Multi-Family Units: 883

Coquitlam 148,625

Attached: 6,854 Detached: 29,959

Condo: 15,491 Multi-Family Units: 5,476

Attached: 1,185 Detached: 5,178

Condo: 2,678 Multi-Family Units: 946

Kelowna 144,576

Attached: 8,095 Detached: 32,297

Condo: 12,664 Multi-Family Units: 8,714

Attached: 3,306 Detached: 13,191

Condo: 5,172 Multi-Family Units: 3,559

Township of Langley 132,603

Attached: 10,255 Detached: 28,253

Condo: 4,321 Multi-Family Units: 1,372

Attached: 2,982 Detached: 8,215

Condo: 1,256 Multi-Family Units: 399

Saanich 117,735

Attached: 3,859 Detached: 35,549

Condo: 5,652 Multi-Family Units: 4,909

Attached: 374 Detached: 3,448

Condo: 548 Multi-Family Units: 3,638

Delta 108,455

Attached: 3,330 Detached: 29,599

Condo: 3,878 Multi-Family Units: 2,346

Attached: 772 Detached: 6,864

Condo: 899 Multi-Family Units: 544

Source: Statistics Canada | Census Profile, 2021 Census of Population; Landcor Data Corporation Note: Detached units: Single-Family Dwelling = 1 unit; Single-Family Dwelling with Basement Suite (legal) = 2 units

As we break apart our housing stock into two main buckets, Market and Purpose-Built Rental, we start to see some interesting observations and, more importantly, opportunities. To begin with, we quite clearly see that B.C.’s largest centre, Vancouver, is slightly below the 2021 G7 average, but above the national average.

On the other hand, the City of Surrey – tapped to be British Columbia’s largest city by 2030 – has work to do to catch up on housing stock for the thousands of people expected to migrate to the city over the next eight years.

From a pure data perspective, opportunities exist for a shift from single-family homes into Condo and Purpose-Built Rental stock to enable more entrants into the residential real estate market.

Casting our eyes towards the summer playland, Kelowna, we see our lowest scoring metric with 278 housing units per 1,000 residents.

Fortunately, there is significant condo and 38

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purpose-built rental building under construction in the downtown core (unfinished developments were not counted), along with major projects queued up at both the former Tolko site on Lake Okanagan and the Sun-Rype plant in the North End. Both projects, once completed, are expected to bring a significant lift to the downtown core’s housing stock.

The use of data to reveal insights about housing supply and product mix – and consider future scenarios – can be helpful in finding a solution to a very complex problem: one that requires dynamic land use planning, input from a variety of market participants and all levels of government to enable a forum to collectively design workable/sustainable solutions.

The need to prioritize action and develop workable solutions to the housing crisis seems at times to be too daunting of a task; however, our ability to collectively address these issues has never been better! From a technology stand-

point, machine learning and AI are enabling us to break down complex problems in an increasingly rapid solution cycle.

To this end, perhaps a slightly different or new approach could be explored to develop workable solutions that leverage these broad experiences. In the technology/big data space, I often observe large, well-funded organizations (i.e., Google, Amazon, Microsoft etc.) look outwards to their ecosystem and call for solutions to very complex problems. These are often incentivized with monetary rewards for the best solution adopted.

I suggest the widespread approach of industry round table discussions, while interesting, are not structured and motivated to provide actionable solutions to many of the complex housing issues.

Jeff Tisdale is CEO at Landcor Data Corporation.

brokers off-the-clock

Canadian curler Matt Dunstone skips into the mortgage arena

BY LISA GORDON

THE NEW ‘SHERIFF’

W

hen he spoke with Canadian Mortgage Broker, Matt Dunstone and his team were competing in the 2022 Tim Hortons Brier as one of three wild card teams in the annual Canadian curling competition.

Dunstone’s crew, representing the Highland Curling Club in Regina, Sask., had started the tournament 5 and 0. He had just played that morning and had another match that evening. In between games, he took time to chat with the magazine and “send out a couple of mortgage commitments.”

If you’re a curling fan, you probably know the name Matt Dunstone. The 26-year-old skip continues to climb the world curling rankings. He is a two-time Canadian junior champion and has brought home two World junior bronze medals. He represented Canada at the third leg of the 2018-19 Curling World Cup, where the team won the event.

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GRAND SLAM OF CURLING AND CURLING CANADA

But although you may have heard his name in a curling context, you may not know that Dunstone is also making inroads in the mortgage industry.

The ‘Sheriff ’ – his nickname in the curling community – is determined to earn similar stripes in mortgage finance.

As he continues to work at his craft on the ice, he feels very fortunate to earn a living doing two things he really enjoys.

Dunstone’s mortgage industry journey can be traced to 2018, when the Canadian curler packed up his belongings and left his home province of Manitoba to settle in Kamloops, B.C., with his girlfriend, fellow curler Erin Pincott. Two years later, Dunstone decided to purchase his first home.

“A friend of mine and teammate, Braeden Moskowy, was a mortgage broker and he helped me,” recalls Dunstone, who added that he’s always had a passion for real estate and wanted to learn more.

“One of my characteristics is that I like to help people and help make their dreams come true,” he said about his second career as a mortgage broker.

Dunstone feels the industry is the perfect fit for him because he needs a flexible schedule and work that can be done from afar.

“I am on the road two to three weeks a month out of province, and curling season runs from September to May. I needed something sustainable that I could do from anywhere,” he said. The skip also acknowledged that it is difficult to earn a living as a professional curler and having a second career is common in the industry.

Previously, Dunstone had strung together part-time jobs here and there for six to seven years. When curling slowed down due to COVID-19 restrictions, he found he had a little extra time on his hands to pursue other interests.

“I was able to start school in November of 2020 and got my licence by the middle of June 2021,” he recalled. “I already had an idea of which brokerage I wanted to work with, and I work with great people at DLC Integra Mortgage.”

Dunstone mostly assists first-time homebuyers. He feels he can relate well due to his own age and recent experience buying his first home. He said that doing media interviews at curling events has helped him to communicate with buyers.

“I am very comfortable talking to people I have just met, thanks to all the opportunities I have had to do television and other interviews. So, I feel very confident speaking with new homebuyers.”

“

I am on the road two to three weeks a month out of province, and curling season runs from September to May. I needed something sustainable that I could do from anywhere.

Opposite: Matt Dunstone is looking to apply the same determination and skills that have made him a successful curler to his burgeoning career as a mortgage broker.

Left: Dunstone with the trophy he received after defeating Brad Gushue and winning the 2019 Masters event.

Dunstone said he wants to build long-term relationships with his clients and hopes they will look to him when, or if, they purchase another home.

But Dunstone doesn’t only advocate for young homebuyers. He is a passionate promoter of talented younger curlers, helping them get more recognition to enable them to have a better chance at making it a career.

“Development of younger players is a bit of an issue,” he said.

He has coached at junior travelling camps and helped create – and is one of the event chairs for – the inaugural SGI Canada Best of the West Under-30 Curling Championship. The event is scheduled to run from April 22 to 24, 2022 at the Nutana Curling Club in Saskatoon. What started as a conversation in December 2020 between Dunstone and some fellow curlers will become reality as television teams and corporate sponsors have been secured.

There will be 24 teams representing Alberta, British Columbia, Manitoba and Saskatchewan at the three-day tournament. The trio of organizers, including Dunstone, Dustin Mikush and Rylan Kleiter, hopes to shine the spotlight on young curling stars in Western Canada. Dunstone, who will not play in the championship, hopes the event will become a prestigious annual staple in the curling community.

One thing is certain: Matt Dunstone’s future will be a busy one that revolves around helping others achieve their goals and dreams. Whether he’s curling an epic game or writing a mortgage deal off the ice, he’s no stranger to getting the job done right.

This interview with Matt Dunstone continues our series Brokers off the Clock.

In every issue, we ask a mortgage broker to tell us what they like to do when they’re not behind a desk. Be it working with animals, travelling to exotic places or researching your family roots, we want to know how you unwind. Would you like to be profiled in a future edition – or suggest a fellow mortgage broker? Contact info@cmba-achc.ca

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SELLER BEWARE? Proposed “cooling-off period” will allow buyers of residential real estate in B.C. to walk away

BY MICHAEL VENTRESCA AND GABRIELLE GUARINO

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homebuyer protection

P ?

urchasers of residential real property in British Columbia (B.C.) may soon benefit from a statutory “cooling-off period” — to be known as the Homebuyer Protection Period — under changes to the Property Law Act (British Columbia) introduced by the province on March 28, 2022.

The new licensing provisions are part of the Ontario government’s proposed amendments to Ontario Regulation 409/07 under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA). If approved, the new licensing categories would take effect on April 1, 2023, starting with a 12-month transition period for brokers to meet the new licensing requirements.

If brought into force, Bill 12 – 2022: Property Law Amendment Act, 2022 would provide purchasers of residential real property with a right to rescind (cancel) a purchase and sale agreement within a specified number of days (to be determined by regulations) following acceptance.

Structured as a statutory right of rescission, the amendments would allow purchasers to walk away from a signed purchase and sale agreement, whether or not the agreement gives them that right, simply by giving written notice to the vendor. This new right would not apply to purchase and sale agreements for new developments, which already benefit from a seven-day statutory right of rescission under the Real Estate Development Marketing Act (British Columbia).

Nor would this right apply after the transaction has completed and title has transferred.

These changes come in response to government concerns that B.C.’s highly competitive housing market places undue pressure on purchasers to submit offers without conditions designed to protect their interests, such as home inspection and financing conditions, and mark the government’s latest foray into B.C.’s residential real estate market.

Many details surrounding the content and implementation of the Homebuyer Protection Period are expected to be defined by forthcoming regulations, including:

n the duration of the cooling-off period; n any financial compensation to be paid by

the purchaser to the vendor for exercising its right of rescission; n if, and in what circumstances, a purchaser

can waive its right of rescission; n impacts on deposits, including the

timing for payment of a deposit and the return of a deposit if the purchaser exercises its right of rescission; n the definition of “residential real property”

and if exemptions will apply for certain classes (for instance, if properties classified or zoned as “residential” that are commercial in nature, such as development property, apartment complexes and mixed-use developments, will be exempt); n exemptions for certain classes of purchas-

ers or purchase and sale agreements; and

n if the right of rescission will apply uni-

formly across the province or if regional variations will apply as was suggested by the government’s press release.

The above details, and potentially other consumer protection issues, are expected to be informed by a consultation that the B.C. Financial Services Authority (BCFSA) has completed with various industry stakeholders. The results of the BCFSA’s consultation are expected in spring 2022 and will inform the regulations that will be used to implement the Homebuyer Protection Period by summer 2022.

This article republished with permission of Blakes. Michael Ventresca is a partner in the Vancouver office of Blakes. Gabrielle Guarino is an articling student at the firm.

For more information: blakes.com

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Insisting on independent legal advice being obtained is safer than proceeding without it

SHIELD

OR

SWORD

BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC

Does the absence of independent legal advice (ILA) for the borrower/guarantor make a mortgage unenforceable? Mortgage brokers should find the recent case of Aditcorp Holding Inc. v. 2535679 Ontario Inc., 2022 ONSC 854 helpful in considering this question.

WHAT HAPPENED? 2535679 Ontario Inc. (253) was the registered owner of commercial property. Sudesh Muthunawagonna (Sudesh) was the shareholder of 253.

253 granted a third mortgage in favour of the lender securing a principal sum of $825,000, behind mortgages of $6 million and $1.6 million. Monthly interest-only payments were required; the mortgage term was just over one year. Sudesh guaranteed the mortgage.

Sudesh had completed grade 10 in Sri Lanka before immigrating to Canada, and he had no schooling in Canada. His first language is Sinhalese. He is able to speak conversational English, although his ability to read and write English is limited. Sudesh operated a recycling business at the security property through a corporation. He has signed mortgage documents in the past.

The commitment letter provided that “[f]or all mortgages over the amount of $50,000 independent legal advice for the mortgagor is required.” The mortgage broker recommended that Sudesh retain a 44

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certain law firm, and 253 retained that firm. Sudesh had received the mortgage commitment by email from the broker the night before he signed the mortgage; he signed it and sent it back. He did not read it because he knew that the mortgage broker was arranging a mortgage loan, he had signed many papers with her before that occasion, and he trusted her.

Sudesh and his wife met with the lawyer, not knowing that he was also the lawyer for the lender. The lawyer’s office told Sudesh that he was getting a new mortgage and there were a lot of papers to sign. The lawyer did not go through the documents as Sudesh was signing them, he just told him in general what was going on and showed Sudesh and his wife where to sign. Sudesh knew that the documents were for the mortgage loan, and he did not ask questions.

Sudesh gave evidence that he and 253 did not receive any legal advice; he and his wife were simply given the mortgage documents and told to sign. They did as they were told. The lawyer did not give

legal ease

? evidence. Regardless, the advice provided was not independent.

253 received the benefit of the advances made under the mortgage.

The mortgage went into default, and the lenders applied to the court for the appointment of a receiver. 253 and Sudesh claimed that because they were denied independent legal advice, a requirement of the commitment, the mortgage was unenforceable against them.

ISSUE Is the mortgage void and unenforceable because 253 and Sudesh did not receive ILA?

DISCUSSION Where a contract requires that ILA be obtained, it is important to determine for whose benefit the ILA is required.

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The lender may require that the borrower/guarantor receive it to avoid, if possible, later claims of unconscionability, fraud, misrepresentation, inequality of bargaining power, undue influence, and so forth. The burden of proving each of these claims would be on the person seeking to set the agreement aside. A certificate showing that the person seeking to set the agreement aside had received ILA would make it harder to prove their claim. Such a clause in an agreement is accordingly really for the benefit of the lender. By proceeding with such a transaction, the lender may be understood to have waived the clause. That aside, the borrower/guarantor is free to get ILA on their own initiative and without any regard to the contents of the contract.

However, where the ILA is for the mutual benefit of the parties or the benefit of the borrower/guarantor, the receiving of ILA may be considered a condition of the agreement. In other words, there is to be no agreement unless it is entered into with the parties having received ILA. For example, a wife signed a settlement agreement requiring that she “shall provide a certificate of independent legal advice with respect to the settlement.” The agreement contained an obligation for the wife to enter into a promissory note and mortgage.

She never provided such a certificate.

The lawyer for the other party gave evidence that the requirement was a matter of prudence and protection for both parties and their lawyers. This was consistent with the way things had unfolded and the fact the husband was in bankruptcy. It was unlikely anyone giving ILA would have recommended to the wife that she sign the promissory note and mortgage. The requirement for ILA was for the protection of the wife; without the condition of ILA being received being satisfied, there was no agreement.

In the Aditcorp case, there was no evidence to show the purpose of the clause requiring ILA. It was a standard term rather than a negotiated term.

The requirement for ILA was for the benefit of the lender. The lender was entitled to waive it. The lenders did not breach the terms of the commitment by proceeding with the mortgage transaction in the absence of ILA having been received by 253 or Sudesh.

OUTCOME The court did not accept that the mortgage was unenforceable due to 253 and Sudesh having not received ILA.

Mortgage brokers should keep in mind that while the mortgage may be enforceable against the borrower, the borrower may have a claim against the lawyer for acting in a conflict of interest in breach of the duty owed to the client.

TAKEAWAYS The absence of ILA is not necessarily fatal to the enforcement of a mortgage. Where it is a negotiated term for the benefit of the borrower or both parties, it can be treated as a condition to the mortgage transaction. Where it is a non-negotiated term for the benefit of the lender, the lender can waive it (either explicitly or implicitly) and proceed with the transaction. This will leave the lender without a certificate of ILA to use as part of the defence to claims of unconscionability, fraud, misrepresentation, inequality of bargaining power, undue influence, and so forth. It nevertheless remains for the person making the claim to prove it.

Mortgage brokers should keep in mind that while the mortgage may be enforceable against the borrower, the borrower may have a claim against the lawyer for acting in a conflict of interest in breach of the duty owed to the client. This can be a part of a claim against a lawyer for being negligent in serving the client.

Mortgage brokers should also keep in mind that ILA can protect against the client claiming that they were misled or unduly influenced by the broker. It is a great shield for the broker to have in the arsenal. Simply put, insisting on ILA being obtained is safer than proceeding without it.

This article is not intended as legal advice.

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