Mississauga Real Estate | Buying a Home in Mississauga

My column on basement apartments earlier this month seems to have touched a nerve among homeowners and real estate agents, many of whom sent me emails. The message in the column was that simply using the term “retrofit” to signify whether an apartment was legal or not was misleading and dangerous.

Bill Johnston, past president of the Toronto Real Estate Board (TREB), wrote: “Thank you for your excellent article on basement units in the Saturday Star. They can be a minefield for the uninformed.”

Current TREB president Richard Silver agreed, saying: “It certainly is a minefield for consumers and agents unless we get some clarification.”

Brian Edwards, of Westbrook Building Inspection Services, pointed out: “I have lectured to agents over 80 times on this topic and it never ceases to amaze me how devious efforts are to hide the fact that the unit is illegal.”

Bill Owen, of Re/Max Realty Services, told me there are “thousands of illegal (units) out there, especially in Mississauga and Brampton. I see them every day.”

In fact, the minefield is even more complicated in light of provincial legislation, which came into effect at the beginning of this year.

In 2010, the Province of Ontario introduced Bill 140: the Strong Communities through Affordable Housing Act, 2011. The legislation requires municipalities to implement official plan policies and zoning bylaw provisions that will allow basement apartments or accessory units in detached and semi-detached homes and townhouses.

Although the changes to the Planning Act came into effect on Jan. 1, 2012, the province has not set a deadline by which municipalities are required to bring their bylaws in line with Bill 140.

Until the official plans and zoning bylaws are amended in each municipality, the effect of old zoning bylaws which appear to prohibit basement apartments is uncertain.

Provincial law in 1995 grandfathered existing basement apartments, but only with respect to zoning requirements. The question now is: can a municipality enforce its old zoning bylaws prohibiting a post-1995 basement apartment in the face of Bill 140 when that municipality has not yet implemented the required changes to its official plan and zoning bylaws to permit basement apartments? At the moment the answer is unclear.

Bill 140 may not apply to condominiums, since the declarations in most residential buildings contain a restriction limiting use to single-family purposes only. Hamilton lawyer Ronald Danks tells me that a number of court cases and arbitration decisions have upheld these restrictions.

The City of Toronto has prepared an excellent guidebook entitled “Second Suites: An Information Guide to Homeowners.” It is available at secondsuites.info. It notes that provisions permitting second suites throughout the City of Toronto came into effect in the summer of 2000. Homeowners are allowed to have a second dwelling unit in any single or semi-detached home, and in some rowhouses.

For a second suite to qualify as an authorized unit, it must meet residential zoning requirements, property standards bylaws, occupancy standards, health and safety requirements, and fire and electrical codes.

The Toronto guide contains a step-by-step procedure on how to create a new second suite and how to legalize (the city calls it “upgrade”) an existing suite.

A home with a basement apartment represents a huge investment and a valuable source of rental income. My recommendation for anyone owning one, or considering buying a home with an “accessory unit,” is to consult a qualified professional planner, engineer, architect or other building professional for guidance.

And if a real estate sale listing describes a home with a basement apartment using the toxic word “retrofit” — which applies only to Fire Code — the best thing to do is to find out why the unit doesn’t comply and what would be necessary to legalize it.

Morten Andersen, the broker at Royal LePage Meadowtowne Realty, recommends that purchase offers contain a clause specifically acknowledging full and complete disclosure of what aspects of the secondary unit comply, or do not comply, with legal standards.

It may not be a first but the extra complications of a Canadian real estate investment trust buying another Canadian-based REIT with non-Canadian investors played out Wednesday when Dundee REIT closed a $231.8-million financing.

Dundee raised capital to partially repay debt taken on to acquire the outstanding units of Whiterock REIT, a transaction announced two months back. In the financing, Dundee REIT also sold an additional 1.356 million units.

Those units were issued with the acquisition of Whiterock “and are being held for the benefit of former unitholders of Whiterock who are non-residents of Canada.” The reason: The non-Canadian unitholders “are ineligible to directly receive units as consideration in connection with the acquisition.” Given that inability to receive Dundee REIT units — unitholders were offered either $16.25 cash or 0.4729 units of Dundee REIT — the select group of Whiterock unitholders had to be offered an alternative.

The joint circular prepared by Dundee and Whiterock provides further clarification on this point given that Dundee’s offer was not made to those unitholders of Whiterock who are non-residents of Canada. “Upon the completion of the Acquisition, all Whiterock Unitholders who are non-residents of Canada will have their Whiterock Units redeemed by Whiterock and the Dundee Units to which they would otherwise be entitled will be issued to the Depositary, which shall as their agent … sell all such Dundee Units through the facilities of the TSX, and pay … the net proceeds of such sales…..”

Buying a home can be a daunting experience for anyone. But it can be even more intimidating if you're doing it alone.

That is why Sandra Rinomato, the host of the new show "Buy Herself," is helping female buyers with one of the most important purchases they will ever make.

Today, single women make an estimated 20 per cent of home purchases in Canada.

Women also look for many different things in a home, according to property expert Rinomato.

For some buyers, ample closet space and a modern kitchen are essentials. Others view a safe neighbourhood and a private outdoor space to enjoy as top priorities.

Whatever the criteria, single buyers must look realistically at their finances before they buy, according to Rinomato.

"It's common for solo buyers and buyers in general to have unrealistic expectations, Rinomato said on Tuesday on CTV's Canada AM.

"People dream about their dream home for years, but they don't think about the price," she said.

In 2006, Rinomato was cast as the host of HGTV's "Property Virgins."

Rinomato left the show in 2012 to film "Buy Herself" and open Sandra Rinomato Reality Inc. in Toronto.

"I always tell my clients do your homework," said Rinomato.

"Don't hold back because you're afraid," she said.

"Buy Herself" premieres on April 16 on HGTV Canada.

Canada’s booming house prices are 10% to 15% over-valued, the country’s second-biggest bank Toronto-Dominion warned this week, as its chief economist Craig Alexander called for the government to put the brakes on lending growth.

According to Alexander, if Canada’s overvalued residential market were to suddenly unravel, the market correction would be three times the magnitude of the country’s housing market crash in the early 1990s.

He would like to see “a gradual decline in sales and prices over the next several years.”

“We need to acknowledge that a significant imbalance has developed and it poses a clear and present danger to Canada’s medium-term economic outlook,” he says. “It also suggests that further actions to constrain lending growth may be prudent.”

At greatest risk is Vancouver, a magnet for foreign buyers, along with the Toronto condo market, and the broad housing markets in Quebec City and Montreal, says Alexander. “Nevertheless, beyond selected cities, it is natural to assume that it will be a shock to all real estate markets when interest rates eventually rise from their prevailing exceedingly low levels,” he said.

Local agent and OPP Canadian correspondent Nicola Way is staying calm about the prospect of the market overheating.

“Current reports indicate that the Bank of Canada may raise interest rates towards the end of 2012,” she told OPP this week.

“Therefore a small raise may cause a soft correction in home sales and prices, but it’s not going to be the dramatic bubble burst that the US saw with their sub-prime fiasco.”

“Canada’s conservative lending practice means that any interest rate increase will be rolled out slowly to avoid household debt escalating too quickly,” Way adds.

But “increasing debt is definitely an issue that is being monitored and one way to regulate it is for banks to shorten the maximum amortisation period (the length of time in which a mortgage needs to be repaid) from the current 30 years, to 25. That way homeowners will carry loans that have lower costs over the long term.”

Does Way, who runs think that overseas property buyers notice any difference if prices and lending terms in Canada do adjust?

“No,” she says, because “many purchase with cash, thereby negating exposure to domestic interest rate adjustments. The recent Knight Frank Global House Price Index showed that over the last 5 years (and through many different interest rate changes) Canada achieved a 28.7% house price increase. It’s these long-term statistics that most overseas buyers consider, together with the other opportunities that Canada presents in terms of education, lifestyle, stability, safety, etc.”

Another factor worrying economists in Canada at present is the country’s spiralling levels of household debt. Toronto-Dominion’s Craig Alexander predicts that by late 2013 the ratio will reach the 160% peak seen in the United States and Britain before their real estate corrections.

Alexander said the Bank of Canada, which has repeatedly voiced concern over housing prices and household debt, is in a bind because if it raises rates while the U.S. Federal Reserve holds rates steady, that would boost the Canadian dollar further and slow growth.

A majority of forecasters polled by Reuters last month predicted that the Canadian government would tighten mortgage rules this year.

A modest drop in housing prices and a gradual decline in home sales over the next few years is the best scenario offered in a TD Bank Group newsletter Friday.

Canadian real estate is overvalued, the group’s chief economist Craig Alexander said in his newsletter “Perspective.” The question is by how much.

Some economists expect as much as a 20-25 per cent price correction, he said. Others, including TD, forecast 10-15 per cent.

A sharp drop could come with a spike in unemployment or interest rates, causing broad economic problems, but neither prospect appears likely in the next two years, Alexander said. On the other hand, moderate economic measures could be taken to avoid such dangers.

“When driving on ice you don’t want to slam on the brakes and create a problem,” he advised in an interview. “But when the road conditions are dangerous you want to slow your speed.”

In the Toronto real estate market, the condominium building boom raises questions about whether enough buyers or renters can be found to fill them, Alexander’s paper says.

In Vancouver, the challenge for local buyers is affordability, with wealthy foreign buyers viewing the city as an attractive place to live or invest, it says.

At the same time, the Canadian Real Estate Association continues to report rising house prices in some regions. The average GTA home was worth about 8.5 per cent more in January than it was a year earlier, the association said recently giving its latest figures.

Connected to overvalued house prices is the rise in household indebtedness, fueled over the past decade by real estate secured loans, Alexander writes.

Debt-to-personal disposable income sits at more than 150 per cent, with debt rising 6.1 per cent year-over-year.

Housing overvaluation and high household debt present risks to the overall economy in the form of job loses, tighter lending conditions and house price declines, the newsletter says.

Gentle economic braking, Alexander said, might include shortening maximum mortgage amortization to 25 years from 30 years.

Mortgage lenders could assess an individual’s ability to pay a mortgage based not only on current low-interest rates but also on potentially higher future interest rates.

The minimum downpayment on a mortgage could be modestly raised to 7 per cent from 5 per cent, he suggested.

Economists forecasting a house-price correction in the 25 per cent range over the next several years include David Madani, of the Toronto research consultancy Capital Economics.

“We’re not expecting a sudden sharp collapse (in house prices) but we’re not expecting a gradual soft landing, as I think a lot of other economists are,” Madani said in an interview.

“We think this will have substantial negative implications for the broader economy,” he said. “Obviously, falling house prices will hurt household net worth, (which) will mean weaker consumption growth.”

While not forecasting one, Madani said the potential for a recession from a 25 per cent decline in house prices does exist.