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Source: https://ottawa.law/feed/

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<title>Before you become a director or an officer of a corporation, read this!</title>
<link>https://ottawa.law/beforeyoubecomeadirector/</link>
<dc:creator><![CDATA[Marc Ouimet-McPherson]]></dc:creator>
<pubDate>Tue, 31 Oct 2023 23:49:50 +0000</pubDate>
<category><![CDATA[Business]]></category>
<category><![CDATA[#business]]></category>
<category><![CDATA[#directors]]></category>
<category><![CDATA[#officers]]></category>
<guid isPermaLink="false">https://ottawa.law/?p=2939</guid>
<description><![CDATA[It can be an exciting opportunity to join a corporation as a director or an officer. It might be appealing to put a prestigious role on your resume, to take on a new learning experience, to be compensated for your contributions to a company, to build connections with others in the business community, and to […]
The post <a href="https://ottawa.law/beforeyoubecomeadirector/">Before you become a director or an officer of a corporation, read this!</a> appeared first on <a href="https://ottawa.law"></a>.
]]></description>
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It can be an exciting opportunity to join a corporation as a director or an officer. It might be appealing to put a prestigious role on your resume, to take on a new learning experience, to be compensated for your contributions to a company, to build connections with others in the business community, and to help a company whose business is near and dear to you. Indeed, becoming a director or an officer of a corporation can come with many benefits, but it also comes with risks.Before you jump headfirst into a new and exciting role as a director or an officer of an Ontario corporation, it is important to be aware of the duties you will have and the liabilities you may face. Many people assume that because a corporation is its own legal person under the law, that its directors and officers cannot be held personally liable for its losses, but the truth is, they can. As a director or officer, you may be held personally liable for: a) losses the corporation incurs as a result of you breaching your duty of loyalty or duty of care to the corporation;b) transactions you approve on behalf of the corporation while it is insolvent or that could result in the corporation becoming insolvent (e.g. paying dividends, redeeming shares, or repaying loans);c) up to 6 months of unpaid wages and 12 months of unpaid vacation pay for employees of the corporation;d) employment insurance, income tax, or CPP contributions that the corporation has not properly deducted from its employees’ pay;e) HST unpaid by the corporation; andf) losses the corporation incurs as a result of you acting outside of the scope of your duties.What is meant by “duty of loyalty” and “duty of care”? Duty of loyaltyAs a director or an officer, you will be required to act honestly, in good faith, and in the best interests of the corporation as a whole. This means putting the corporation’s interests above your own, which involves:a) keeping the corporation’s information confidential;b) not using your position in the corporation to develop a competing business or to profit personally from the corporation’s dealings (e.g. not setting up a business deal with the corporation that will benefit someone related to you);c) not serving on a board of another corporation with a competing business at the same time; andd) disclosing all potential and actual conflicts of interest (e.g. information about agreements or transactions you intend to enter or will be involved in that are potentially relevant to the company).As a director or an officer, you must not share the corporation’s confidential information, like its trade secrets or client lists. This duty of confidentiality continues even after you leave the company. For as long as the information remains the property of the company, you must keep it confidential.Unless you have signed a non-competition agreement, you may start, join, or sit on the board of a competing business after you resign, but you cannot use the company’s confidential information or take advantage of your former director or officer roles to solicit the company’s customers.You must avoid situations where your obligations to the company and your personal interests may conflict. If, as a director or officer, you may be involved in a conflict of interest with the corporation, you must disclose the conflict of interest to the board of directors as soon as you become aware of it. If you do not disclose a potential or actual conflict of interest with the corporation, the corporation or its shareholders may apply to a court to cancel your conflicting contract or transaction and force you to repay any profits or gains you realized from it. Be aware that disclosing a conflict of interest will not relieve you from any of your duties, like putting the company’s interests before your own.In addition, if you are a director or officer AND a shareholder of the same company, you must put your obligations as a director or officer ahead of your interests as a shareholder. If you are a director of more than one company at the same time, you must ensure that you are carrying out all of your obligations to each of those corporations.Be aware that your general duty of loyalty to the company will continue for a reasonable period after you resign from your position as a director or officer. The more important you were to the company and the longer you served in your capacity as director or officer, the longer your duty of loyalty will last.Duty of careIn carrying out your role as a director or an officer, you will be required to exercise the same care, diligence, and skill that a reasonably prudent person would exercise in similar circumstances. You will be held to the standard of a person with your skills, training, or accreditation. Part of this duty of care is ensuring that the corporation is compliant with all applicable laws and regulations and its own by-laws (e.g. the Ontario Business Corporations Act and any tax, environmental, and employment legislation), and you must report any non-compliance immediately.What does it mean to act outside the scope of my duties?Subject to any shareholder agreement that says otherwise, as a director, you will be responsible for managing and supervising the corporation’s affairs, and as an officer, you will be responsible for the management powers and duties delegated to you by the directors. Officer titles and their descriptions vary from corporation to corporation. You can generally locate information about the board of directors and its obligations, your officer role, and information about who can sign documents on behalf of the corporation in the corporation’s by-laws. If you act outside of your role as either a director or an officer (including signing a contract you did not have authority to sign), you may be held personally liable for any damages the company incurs as a result of your actions.How can I defend myself if I am accused of not fulfilling my duties?If you have been accused of failing to carry out your director or officer duties, you may have a defence if you can prove to a court that you acted in good faith and on reliable information. However, to relieve you of liability, a judge will expect you to have applied a certain degree of diligence, prudence, and/or sound business judgment in doing what you did. Ignorance is not a defence, so it is paramount that, from the day you step into your role as a director or an officer, you keep yourself well-informed of your duties and of the business’ affairs, activities, goals, and finances. If you are a director, be proactive by attending all board meetings and reviewing all minutes, and, as a director or an officer, keep detailed records of how you are carrying out your duties.Other modes of protectionBefore you consent to becoming a director or an officer of a corporation find out:a)<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-variant-position: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> if the corporation has directors and officers (D&O) liability insurance and ask to see the policy. This type of insurance coverage is intended to protect you from personal liability. Be aware, though, that D&O insurance typically only protects you in instances where you have acted within your capacity as a director or officer and usually excludes fraud and criminal offences; andb)<span style="text-indent: -0.25in; color: var( --e-global-color-text ); font-style: var( --e-global-typography-text-font-style ); text-transform: var( --e-global-typography-text-text-transform ); font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-variant-position: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> if the corporation indemnifies its directors and officers against personal liability when they have acted at the corporation’s request. Typically, this type of indemnity can be found in the corporation’s by-laws. Be aware that the corporation legally cannot indemnify you unless you have acted “honestly and in good faith with a view to the best interests of the corporation”.ConclusionServing as a director or an officer of a corporation can be a great way to get involved in a business if you understand your obligations and protect yourself from the get-go. When in doubt, contact a business lawyer who can arm you with the information you need before you say, “yes”. </div>
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The post <a href="https://ottawa.law/beforeyoubecomeadirector/">Before you become a director or an officer of a corporation, read this!</a> appeared first on <a href="https://ottawa.law"></a>.
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<item>
<title>How do I ensure that my independent contractors are not my employees?</title>
<link>https://ottawa.law/indepcontractor/</link>
<dc:creator><![CDATA[Marc Ouimet-McPherson]]></dc:creator>
<pubDate>Fri, 16 Jun 2023 09:53:50 +0000</pubDate>
<category><![CDATA[Business]]></category>
<category><![CDATA[#business]]></category>
<category><![CDATA[#employees]]></category>
<category><![CDATA[#independentcontractor]]></category>
<guid isPermaLink="false">https://ottawa.law/?p=2864</guid>
<description><![CDATA[As a business owner, you might prefer to hire independent contractors instead of employees so you can receive services as needed without having to provide your contractors with employment benefits. This manner of contracting for services can be beneficial, but if you do not have a proper agreement in place and if you do not […]
The post <a href="https://ottawa.law/indepcontractor/">How do I ensure that my independent contractors are not my employees?</a> appeared first on <a href="https://ottawa.law"></a>.
]]></description>
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As a business owner, you might prefer to hire independent contractors instead of employees so you can receive services as needed without having to provide your contractors with employment benefits. This manner of contracting for services can be beneficial, but if you do not have a proper agreement in place and if you do not maintain an obvious client-contractor relationship (as opposed to an employer-employee relationship), your contractors may be deemed to be your employees.
 
When circumstances lead a court or the Canada Revenue Agency to consider your contractors to be your employees, you become responsible for giving your contractors benefits under the Employment Standards Act, 2000 (ESA) (i.e. vacation, sick days, and severance pay), and for withholding and remitting income tax from your contractors’ pay.
 
To significantly reduce the risk of your contractors being viewed as your employees, your written agreement with each contractor should contain a number of key provisions, including but not limited to the following:
 
1.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    The term of the agreement should have a set beginning and end date or should end when the project for which the contractor was hired is complete. The longer your contractor works for you, including by repeatedly extending the term of the agreement or by having an open-ended term, the more likely he/she will be considered your employee;
 
2.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    Your contractor should have control over how and when he/she provides the services (i.e. methods, work hours, and location). The more control you have over how, when, and where your contractor works for you, the more likely your contractor will be viewed as your employee;
 
3.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    Your contractor should be required to provide and use his/her own tools and materials and should incur all expenses related to performing the services;
 
4.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    Your agreement should permit your contractor to work for other clients and companies while he/she is working for you. Allowing your contractor to work for others, even your competitors, during the term of your agreement will decrease the risk of your contractor being considered your employee;
 
5.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    Your contractor should be required to invoice you for his/her services periodically;
 
6.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    Your agreement should clearly state that your contractor will provide the services as your contractor, that he/she is not your employee and has no entitlements under the Employment Standards Act nor to any benefits from you; and
 
7.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    Your contractor should acknowledge that he/she is obligated to report all compensation received from you as income and agree to pay all self-employment and any other taxes on that income.
 
Keep in mind that your behaviour is equally as important as your agreement. If your agreement includes all of the key provisions but your behaviour suggests that your contractor is your employee, you will still be exposed to risk.  Before you hire a contractor, ask a qualified business lawyer to prepare or tweak your agreement and advise you on how to interact with your contractor. </div>
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The post <a href="https://ottawa.law/indepcontractor/">How do I ensure that my independent contractors are not my employees?</a> appeared first on <a href="https://ottawa.law"></a>.
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<title>Cracking Open the Condo Status Certificate: What to Look For Before You Buy</title>
<link>https://ottawa.law/cracking-open-the-condo-status-certificate-what-to-look-for-before-you-buy/</link>
<dc:creator><![CDATA[Marc Ouimet-McPherson]]></dc:creator>
<pubDate>Fri, 26 May 2023 10:51:35 +0000</pubDate>
<category><![CDATA[Real Estate]]></category>
<guid isPermaLink="false">https://ottawa.law/?p=2841</guid>
<description><![CDATA[Buying a condominium is an exciting milestone in life. The allure of low-maintenance living, shared amenities, and a sense of community can be hard to resist. However, before you sign on the dotted line and embark on your condo-living adventure, there’s a critical document you need to examine – the condo status certificate. The condo […]
The post <a href="https://ottawa.law/cracking-open-the-condo-status-certificate-what-to-look-for-before-you-buy/">Cracking Open the Condo Status Certificate: What to Look For Before You Buy</a> appeared first on <a href="https://ottawa.law"></a>.
]]></description>
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Buying a condominium is an exciting milestone in life. The allure of low-maintenance living, shared amenities, and a sense of community can be hard to resist. However, before you sign on the dotted line and embark on your condo-living adventure, there’s a critical document you need to examine – the condo status certificate.<o:p></o:p>
The condo status certificate is a treasure trove of information that holds the key to understanding the current state of the condo corporation and the unit you’re interested in. It provides a comprehensive snapshot of various aspects that can significantly impact your ownership experience and financial well-being.<o:p></o:p>
In this blog post, we’ll delve into the intricacies of the condo status certificate and highlight the crucial details you should pay attention to before making your purchase. By thoroughly reviewing these details and ensuring that all aspects of the condo corporation and the unit itself are in good standing, you can make an informed decision that aligns with your needs and preferences.<o:p></o:p>
When reviewing a condo status certificate, you should look for several important details, including:<o:p></o:p>
1. The current balance of the condo corporation’s reserve fund:  – The reserve fund is a savings account held by the condo corporation to cover major repairs, replacements, or unexpected expenses.  – The status certificate should disclose the current balance of the reserve fund, which gives you an idea of the financial health of the condo corporation.  – A healthy reserve fund balance is important to ensure that there are sufficient funds to address future repairs and maintenance.
<o:p></o:p>
2. Any outstanding common expenses or special assessments owed by the unit owner: – Common expenses are the costs incurred by the condo corporation for the operation, maintenance, and repair of the common elements. – The status certificate should specify if there are any outstanding common expenses owed by the unit owner. – Special assessments refer to additional charges levied on unit owners for unexpected repairs or improvements. – It is important to be aware of any outstanding amounts to ensure you are not inheriting a financial burden.
<o:p></o:p>
3. The condo corporation’s insurance coverage: – The status certificate should provide details about the insurance coverage carried by the condo corporation. – This includes information about the type of insurance policies, coverage limits, deductibles, and any exclusions. – Understanding the insurance coverage helps you assess the level of protection provided and identify any potential gaps or risks.
<o:p></o:p>
4. The status of any legal actions or disputes involving the condo corporation: – The status certificate should disclose whether there are any ongoing legal actions, disputes, or claims involving the condo corporation. – This information is crucial as it can impact the financial stability and reputation of the condocorporation.
<o:p></o:p>
5. Any planned or completed alterations to the unit or common elements: – The status certificate should mention any alterations made to the unit or common elements.  – This helps you understand if any modifications have been done to the property and whether they comply with regulations and bylaws.
<o:p></o:p>
6. The condo corporation’s rules and regulations:    – The status certificate should include a copy of the condo corporation’s rules and regulations.    – These rules outline the restrictions, obligations, and rights of the unit owners. – Reviewing them allows you to ensure that they align with your preferences, your lifestyle and your intentions for the property.
<o:p></o:p>
7. The status of any outstanding maintenance or repair issues: – The status certificate should provide information about any pending or outstanding maintenance or repair issues within the condo corporation.  – This helps you assess the overall condition of the property and anticipate any potential expenses or inconvenience.
<o:p></o:p>
8. The status of any planned or completed capital improvements or repairs: – The status certificate should disclose any planned or completed capital improvements or repairs to the common elements. – Knowing about these improvements allows you to understand the condo corporation’s commitment to maintaining and enhancing the property.<o:p></o:p>
9. The minutes of recent condo corporation meetings:    – The status certificate may include the minutes from recent condo corporation meetings. – These minutes provide insights into the discussions, decisions, and actions taken by the condo corporation. – Reviewing the minutes helps you stay informed about the governance and management of the condominium. Note: If you decide to buy, always be sure to review all notices received from the Condo Management Company and to attend all condo meetings to stay apprised over everything going on. <o:p></o:p>
10. The condo corporation’s declaration, bylaws, and rules:  – The status certificate should include copies of the condo corporation’s declaration, bylaws, and rules. – These documents outline the legal framework and regulations governing the condominium. – Reading them allows you to understand your rights, obligations, and the overall governance structure, specially if you plan on being on the Board of Directors in the future.<o:p></o:p>
By thoroughly reviewing these details, you can make an informed decision about purchasing the condo. You should consult with a real estate lawyer or other professional to help you understand the implications of the information contained in the condo status certificate.<o:p></o:p>

You always want to buy with your eyes wide open and all of the information. Don’t be fooled into buying without properly reviewing the status certificate. <o:p></o:p>Call us with any questions at 343-888-8913.  </div>
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The post <a href="https://ottawa.law/cracking-open-the-condo-status-certificate-what-to-look-for-before-you-buy/">Cracking Open the Condo Status Certificate: What to Look For Before You Buy</a> appeared first on <a href="https://ottawa.law"></a>.
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<title>Empowering Your Corporation: Options for Business Financing</title>
<link>https://ottawa.law/borrowing-for-your-business/</link>
<dc:creator><![CDATA[Marc Ouimet-McPherson]]></dc:creator>
<pubDate>Fri, 19 May 2023 10:03:53 +0000</pubDate>
<category><![CDATA[Business]]></category>
<category><![CDATA[#Borrowing]]></category>
<category><![CDATA[#business]]></category>
<category><![CDATA[#smb]]></category>
<guid isPermaLink="false">https://ottawa.law/?p=2838</guid>
<description><![CDATA[A loan is secured when the borrower puts up an asset (or assets) of value as collateral, which you, as the creditor, can seize if the borrower does not repay your loan. The bigger the loan, the more collateral you will need to secure it. A loan can be secured in many ways, including: a […]
The post <a href="https://ottawa.law/borrowing-for-your-business/">Empowering Your Corporation: Options for Business Financing</a> appeared first on <a href="https://ottawa.law"></a>.
]]></description>
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<p style="mso-margin-bottom-alt:auto;text-align:justify;
line-height:normal;background:white">A loan is secured when the borrower puts up an asset
(or assets) of value as collateral, which you, as the creditor, can seize if
the borrower does not repay your loan. The bigger the loan, the more collateral
you will need to secure it. <p style="mso-margin-bottom-alt:auto;text-align:justify;
line-height:normal;background:white"><span style="mso-fareast-font-family:"Times New Roman";
mso-bidi-font-family:Calibri;mso-bidi-theme-font:minor-latin;color:black;
mso-fareast-language:EN-CA">A loan can be secured in many ways, including:<o:p></o:p><ol start="1" type="1">
<li style="color:black;mso-margin-top-alt:auto;margin-bottom:
0in;text-align:justify;line-height:normal;mso-list:l0 level1 lfo1;
tab-stops:list .5in;background:white;vertical-align:baseline">a
security agreement against the borrower’s personal property;<o:p></o:p></li>
<li style="color:black;mso-margin-top-alt:auto;margin-bottom:
0in;text-align:justify;line-height:normal;mso-list:l0 level1 lfo1;
tab-stops:list .5in;background:white;vertical-align:baseline">if you
are selling shares to the borrower, a share pledge agreement that gives you
rights to the shares if the borrower defaults;<o:p></o:p></li>
<li style="color:black;mso-margin-top-alt:auto;margin-bottom:
0in;text-align:justify;line-height:normal;mso-list:l0 level1 lfo1;
tab-stops:list .5in;background:white;vertical-align:baseline">a
personal guarantee from a third party;<o:p></o:p></li>
<li style="color:black;mso-margin-top-alt:auto;margin-bottom:
0in;text-align:justify;line-height:normal;mso-list:l0 level1 lfo1;
tab-stops:list .5in;background:white;vertical-align:baseline">a
mortgage against the borrower’s real property (land); and/or<o:p></o:p></li>
<li style="color:black;mso-margin-top-alt:auto;margin-bottom:
0in;text-align:justify;line-height:normal;mso-list:l0 level1 lfo1;
tab-stops:list .5in;background:white;vertical-align:baseline">a life
insurance policy taken out by the borrower naming you as the beneficiary.<o:p></o:p></li>
</ol><p style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;
text-align:justify;line-height:normal;mso-outline-level:2;background:white"><span style="mso-fareast-font-family:"Times New Roman";mso-bidi-font-family:Calibri;
mso-bidi-theme-font:minor-latin;color:black;mso-fareast-language:EN-CA">1. Security
agreement<o:p></o:p><p style="mso-margin-bottom-alt:auto;text-align:justify;
line-height:normal;background:white"><span style="mso-fareast-font-family:"Times New Roman";
mso-bidi-font-family:Calibri;mso-bidi-theme-font:minor-latin;color:black;
mso-fareast-language:EN-CA">A security agreement can either give you a security
interest in a specific asset, like a car or piece of equipment, or it can give
you a general security interest in all of the debtor’s personal property
(except for the borrower’s house or other real property). A security agreement
can either act as security for only the current loan, or, if you plan to loan
additional amounts to the borrower in the future, it can act as security for
the current loan and any future loans you may advance. <o:p></o:p><p style="mso-margin-bottom-alt:auto;text-align:justify;
line-height:normal;background:white"><span style="mso-fareast-font-family:"Times New Roman";
mso-bidi-font-family:Calibri;mso-bidi-theme-font:minor-latin;color:black;
mso-fareast-language:EN-CA">A security agreement should always be in writing,
and a security interest should always be registered in the Personal Property
Security Registry as quickly as possible after the agreement is signed. Otherwise,
unless you have physical possession of the collateral, another creditor may
register a security interest in the same assets ahead of you, giving them priority
over the collateral if the debtor defaults under their loan. <o:p></o:p><p style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;
text-align:justify;line-height:normal;mso-outline-level:2;background:white"><span style="mso-fareast-font-family:"Times New Roman";mso-bidi-font-family:Calibri;
mso-bidi-theme-font:minor-latin;color:black;mso-fareast-language:EN-CA">2. Share
pledge agreement<o:p></o:p><p style="mso-margin-bottom-alt:auto;text-align:justify;
line-height:normal;background:white"><span style="mso-fareast-font-family:"Times New Roman";
mso-bidi-font-family:Calibri;mso-bidi-theme-font:minor-latin;color:black;
mso-fareast-language:EN-CA">In a share purchase transaction where you have
provided financing to the purchaser (borrower), you may require the purchaser
(borrower) to sign a share pledge agreement. This type of agreement gives you
rights to the purchased shares if the borrower defaults, such as voting or
receiving dividends, as if you were still the owner of the shares, and/or
seizing and selling the shares to recover the unpaid balance of the loan. Be
aware that after the share purchase transaction closes, there is always a risk
that the purchaser (borrower) will deplete the business, diminishing the value
of the shares that have been pledged.<o:p></o:p><p style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;
text-align:justify;line-height:normal;mso-outline-level:2;background:white"><span style="mso-fareast-font-family:"Times New Roman";mso-bidi-font-family:Calibri;
mso-bidi-theme-font:minor-latin;color:black;mso-fareast-language:EN-CA">3. Personal
guarantee<o:p></o:p><p style="mso-margin-top-alt:auto;margin-bottom:0in;text-align:
justify;line-height:normal;background:white;vertical-align:baseline"><span style="mso-fareast-font-family:"Times New Roman";mso-bidi-font-family:Calibri;
mso-bidi-theme-font:minor-latin;color:black;mso-fareast-language:EN-CA">If the
borrower is a newly established company or an individual with limited assets, it
may be to your benefit to require one or more third parties (guarantor(s)) to
guarantee the loan (e.g. if the borrower is a corporation, this could be a
majority owner, or if the borrower is an individual, this could be a friend or relative
with deep pockets). A guarantor promises to repay the loan if the borrower defaults.
<o:p></o:p><p style="mso-margin-top-alt:auto;margin-bottom:0in;text-align:
justify;line-height:normal;background:white;vertical-align:baseline"><span style="mso-fareast-font-family:"Times New Roman";mso-bidi-font-family:Calibri;
mso-bidi-theme-font:minor-latin;color:black;mso-fareast-language:EN-CA">In a
share purchase transaction where you have provided financing to the purchaser
(borrower), you might require the corporation whose shares you just sold to the
purchaser (borrower) to guarantee the loan. You might also obtain a security
interest in the corporation’s personal property or a mortgage over the
corporation’s real property to reduce the risk of the purchaser (borrower)
depleting the company of its assets before your loan is repaid.<o:p></o:p><p style="mso-margin-top-alt:auto;margin-bottom:0in;text-align:
justify;line-height:normal;background:white;vertical-align:baseline"><span style="mso-fareast-font-family:"Times New Roman";mso-bidi-font-family:Calibri;
mso-bidi-theme-font:minor-latin;color:black;mso-fareast-language:EN-CA">Be
aware that certain circumstances can make it difficult to enforce a personal
guarantee, such as when a guarantor goes bankrupt. <o:p></o:p><p style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;
text-align:justify;line-height:normal;mso-outline-level:2;background:white"><span style="mso-fareast-font-family:"Times New Roman";mso-bidi-font-family:Calibri;
mso-bidi-theme-font:minor-latin;color:black;mso-fareast-language:EN-CA">4. Mortgages<o:p></o:p><p style="mso-margin-bottom-alt:auto;text-align:justify;
line-height:normal;background:white"><span style="mso-fareast-font-family:"Times New Roman";
mso-bidi-font-family:Calibri;mso-bidi-theme-font:minor-latin;color:black;
mso-fareast-language:EN-CA">You can also negotiate for a mortgage over the borrower’s
real property. In an asset purchase transaction where you have provided
financing to the purchaser (borrower) and where real estate is among the assets
sold, you might require the borrower to grant you a mortgage over that particular
asset.<o:p></o:p><p style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;
text-align:justify;line-height:normal;mso-outline-level:2;background:white"><span style="mso-fareast-font-family:"Times New Roman";mso-bidi-font-family:Calibri;
mso-bidi-theme-font:minor-latin;color:black;mso-fareast-language:EN-CA">5. Life
insurance <o:p></o:p><p style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;
text-align:justify;line-height:normal;mso-outline-level:2;background:white"><span style="mso-fareast-font-family:"Times New Roman";mso-bidi-font-family:Calibri;
mso-bidi-theme-font:minor-latin;color:black;mso-fareast-language:EN-CA">Another
option for security, sometimes used in a share transaction with vendor
financing, is to require the borrower to take out a life insurance policy
against his/her life, for the term of the loan and name you as the beneficiary.
This can offer extra protection in the event that the borrower passes away
before the loan is repaid.<o:p></o:p><p style="mso-margin-bottom-alt:auto;text-align:justify;
line-height:normal;background:white"><span style="mso-fareast-font-family:
"Times New Roman";mso-bidi-font-family:Calibri;mso-bidi-theme-font:minor-latin;
color:black;mso-fareast-language:EN-CA">Conclusion<o:p></o:p>
<p style="mso-margin-bottom-alt:auto;text-align:justify;
line-height:normal;background:white"><span style="mso-fareast-font-family:"Times New Roman";
mso-bidi-font-family:Calibri;mso-bidi-theme-font:minor-latin;color:black;
mso-fareast-language:EN-CA">Before you sign a loan agreement or a purchase and
sale agreement with vendor financing, it is important to have a lawyer carefully
negotiate the terms of the loan or transaction and to obtain appropriate security
on your behalf, so you will have peace of mind that your loan will be repaid.<o:p></o:p> </div>
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The post <a href="https://ottawa.law/borrowing-for-your-business/">Empowering Your Corporation: Options for Business Financing</a> appeared first on <a href="https://ottawa.law"></a>.
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<title>Putting Your Trust in the Right Person: Tips for Choosing an Executor in Ontario</title>
<link>https://ottawa.law/putting-your-trust-in-the-right-person/</link>
<dc:creator><![CDATA[Marc Ouimet-McPherson]]></dc:creator>
<pubDate>Thu, 11 May 2023 09:29:25 +0000</pubDate>
<category><![CDATA[Estate Planning]]></category>
<category><![CDATA[Executor]]></category>
<category><![CDATA[ontario]]></category>
<category><![CDATA[Probate]]></category>
<category><![CDATA[Will]]></category>
<guid isPermaLink="false">https://ottawa.law/?p=2831</guid>
<description><![CDATA[One of the most common questions during our initial client meetings. Choosing an executor (also known as a “personal representative” or “estate trustee”) is an important decision when creating your estate plan in Ontario. Here are some factors to consider when choosing your executor: Trustworthiness: Your executor will have significant responsibilities, including managing your assets, […]
The post <a href="https://ottawa.law/putting-your-trust-in-the-right-person/">Putting Your Trust in the Right Person: Tips for Choosing an Executor in Ontario</a> appeared first on <a href="https://ottawa.law"></a>.
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One of the most common questions during our initial client meetings. Choosing an executor (also known as a “personal representative” or “estate trustee”) is an important decision when creating your estate plan in Ontario.Here are some factors to consider when choosing your executor:<ol><li>Trustworthiness: Your executor will have significant responsibilities, including managing your assets, paying your debts, and distributing your property according to your wishes. Therefore, you’ll want to choose someone trustworthy and responsible.</li></ol><ol start="2"><li>Availability: Your executor should be willing and able to fulfill their duties when the time comes. Consider whether the person you’re considering has the time and availability to take on this role.</li></ol><ol start="3"><li>Legal and financial knowledge: An executor should understand legal and financial matters to manage your estate properly. They don’t need to be an expert, but some knowledge in these areas can be helpful.</li></ol><ol start="4"><li>Conflict resolution skills: Choosing someone who can handle potential conflicts that may arise during the estate administration process is essential. They should be able to communicate effectively with family members and other beneficiaries.</li></ol><ol start="5"><li>Age and health: You’ll want to choose someone who is likely to outlive you and is in good health. If you select an older or unwell executor, they may only be able to fulfill their duties or may pass away after your estate is settled.</li></ol><ol start="6"><li>Age and stage of life: Consider the age and stage of life of the person you’re considering. For example, suppose you’re choosing a family member. In that case, consider whether they have young children or a demanding job that may make it difficult for them to take on an executor’s responsibilities.</li></ol><ol start="7"><li>Relationship: Consider your relationship with the person you’re considering. Choosing a family member is unnecessary, but choosing someone you trust and who understands your wishes is essential.</li></ol><ol start="8"><li>Personality: Consider whether the person you’re considering has a well-suited personality to manage an estate. They should be organized, detail-oriented, and able to work well under pressure.</li></ol><ol start="10"><li>Communication Skills: Choosing an executor who can communicate effectively with beneficiaries and other parties involved in the estate administration process is essential. They should be able to explain complex legal and financial matters clearly and concisely.</li></ol><ol start="11"><li>Location: Consider whether your executor lives near your assets. If they live far away, it may be easier for them to manage your estate.</li></ol><ol start="12"><li>Experience: If your estate is complex, choosing an executor with experience managing estates may be beneficial. This could be a lawyer, accountant, or another professional.</li></ol>Once you have considered these factors, you can choose your executor and include their name and contact information in your will. It’s also a good idea to discuss your choice with them ahead of time to ensure they are willing to take on this responsibility.For any estate planning questions, reach out to us at 343-888-8934 or <a href="mailto:advice@ottawa.law">advice@ottawa.law</a> </div>
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The post <a href="https://ottawa.law/putting-your-trust-in-the-right-person/">Putting Your Trust in the Right Person: Tips for Choosing an Executor in Ontario</a> appeared first on <a href="https://ottawa.law"></a>.
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<title>Should I loan the purchase price to the buyer of my business?</title>
<link>https://ottawa.law/should-i-loan-the-purchase-price-to-the-buyer-of-my-business/</link>
<dc:creator><![CDATA[Marc Ouimet-McPherson]]></dc:creator>
<pubDate>Mon, 01 May 2023 07:30:13 +0000</pubDate>
<category><![CDATA[Business]]></category>
<category><![CDATA[#business]]></category>
<category><![CDATA[Selling your business]]></category>
<guid isPermaLink="false">https://ottawa.law/?p=2796</guid>
<description><![CDATA[In our last blog, “Should I accept financing from the seller to buy my business?”, we discussed some of the pros and cons of a buyer accepting vendor financing. This blog, on the flip side, discusses the pros and cons of vendor financing for the seller. Benefits of vendor financing for the seller: Reduced delays. […]
The post <a href="https://ottawa.law/should-i-loan-the-purchase-price-to-the-buyer-of-my-business/">Should I loan the purchase price to the buyer of my business?</a> appeared first on <a href="https://ottawa.law"></a>.
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In our last blog, “Should I accept financing from the seller to buy my business?”, we discussed some of the pros and cons of a buyer accepting vendor financing. This blog, on the flip side, discusses the pros and cons of vendor financing for the seller.
Benefits of vendor financing for the seller:
<ul>
<li>Reduced delays. Some buyers cannot qualify for a loan from a financial institution, and if they can, the process of securing and then receiving the loan can take time. If you lend the purchase price to the buyer instead, this can reduce delays and increase the chances of the deal closing.</li>
<li>Interest. Through vendor financing, you have the benefit of receiving the value of the company through the purchase price plus interest, and you can usually set a higher interest rate than bank rates.</li>
<li>Tax benefits. By lending to the buyer, you defer income (your receipt of the purchase price), which can carry tax benefits.</li>
<li>Consistent pay. If you will be unemployed once you sell your business, receiving consistent payments from the buyer over time can be a helpful form of regular cash flow.</li>
<li>Peace of mind. Having a loan arrangement with the buyer will keep you connected to the buyer for some time, which can give you peace of mind that the business is in good hands.</li>
</ul>
Disadvantages of vendor financing for the seller:
<ul>
<li>Security. It can be difficult to negotiate for adequate security for the loan, such as a mortgage, personal guarantee, registered security interest, share pledge, and/or life insurance policy. If the buyer is obtaining financing from more than one source, it can also be difficult to ensure that your security interest will come before other lenders’ security interests in the same assets.</li>
<li>Negotiating. Although vendor financing can help avoid delays that would come from waiting for traditional financing, it can also cause delays by adding another arrangement and more terms to the deal to negotiate.</li>
<li>Risk of default. There is a risk that the buyer will default. This becomes even more serious when the buyer defaults under another loan at the same time, and the other lender has first priority over the buyer’s assets.</li>
</ul>
When deciding whether to finance your buyer’s purchase of your business, it is best to speak with a qualified accountant and a business lawyer who can assist you with determining whether a vendor financing arrangement is right for you. </div>
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The post <a href="https://ottawa.law/should-i-loan-the-purchase-price-to-the-buyer-of-my-business/">Should I loan the purchase price to the buyer of my business?</a> appeared first on <a href="https://ottawa.law"></a>.
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<title>Should I accept financing from the seller to buy my business?</title>
<link>https://ottawa.law/should-i-accept-financing-from-the-seller-to-buy-my-business/</link>
<dc:creator><![CDATA[Marc Ouimet-McPherson]]></dc:creator>
<pubDate>Thu, 27 Apr 2023 07:15:06 +0000</pubDate>
<category><![CDATA[Business]]></category>
<category><![CDATA[Buying a business]]></category>
<guid isPermaLink="false">https://ottawa.law/?p=2794</guid>
<description><![CDATA[If you would like to buy a business but are having difficulty securing a traditional loan from a bank or credit union, you might consider negotiating with the seller for vendor financing. Vendor financing is an arrangement where the seller agrees to loan some or all of the purchase price to the buyer, and it […]
The post <a href="https://ottawa.law/should-i-accept-financing-from-the-seller-to-buy-my-business/">Should I accept financing from the seller to buy my business?</a> appeared first on <a href="https://ottawa.law"></a>.
]]></description>
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If you would like to buy a business but are having difficulty securing a traditional loan from a bank or credit union, you might consider negotiating with the seller for vendor financing. Vendor financing is an arrangement where the seller agrees to loan some or all of the purchase price to the buyer, and it is an arrangement that can be both beneficial and costly for the buyer.
Benefits of vendor financing for the buyer: 
<ul>
<li>Extra financing. Borrowing from the seller can increase your chances of receiving a second loan from your bank. Your bank may see the seller’s willingness to loan money to you as an indication that the business you are buying is profitable and that you will be able to repay a loan.</li>
</ul>
<ul>
<li>Security. If you borrow from the seller to make a purchase and you discover, after the deal closes, that the seller was not truthful about certain aspects of the business, you may be able to offset your losses from the balance of the loan.</li>
</ul>
<ul>
<li>Support. A seller who has financed the sale of its business will have a vested interest in the company’s ongoing success and will be more likely to support the business through its transition by introducing the buyer to clients and contacts, offering training, and sharing key knowledge about the business.</li>
</ul>
Disadvantages of vendor financing for the buyer:
<ul>
<li>Interest. Vendor financing is usually granted at a higher interest rate than what would be offered by a financial institution.</li>
<li>Seller security. The seller will likely insist that you secure the loan by granting a mortgage, personal guarantee, registered security interest, share pledge, and/or a life insurance policy. If you miss a payment, you risk losing control or ownership of the business or of your personal property. Keep in mind, though, that most lenders, including your bank, expect security.</li>
<li>Negotiating. Although vendor financing can help avoid delays that would come from waiting for traditional financing, it can also cause delays by adding another arrangement and more terms to the deal to negotiate.</li>
<li>Default. If you have financing from both the seller and your bank, a default under one loan might put you in default under the other.</li>
</ul>
When deciding whether to negotiate with the seller for vendor financing, it is best to speak with a qualified accountant and a business lawyer who can assist you with determining whether vendor financing is right for you.
 
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The post <a href="https://ottawa.law/should-i-accept-financing-from-the-seller-to-buy-my-business/">Should I accept financing from the seller to buy my business?</a> appeared first on <a href="https://ottawa.law"></a>.
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<title>Is only a spouse able to claim as a dependant? Did a recent decision expand it to children?</title>
<link>https://ottawa.law/dependant-relief-children/</link>
<dc:creator><![CDATA[Marc Ouimet-McPherson]]></dc:creator>
<pubDate>Sat, 08 Apr 2023 12:27:47 +0000</pubDate>
<category><![CDATA[Estate Planning]]></category>
<category><![CDATA[children]]></category>
<category><![CDATA[dependant relief]]></category>
<category><![CDATA[ontario]]></category>
<guid isPermaLink="false">https://ottawa.law/?p=2786</guid>
<description><![CDATA[The short answer is “no” – it is not new law. However, it is very fact specific. I talk about this when I teach estate planning: Beware who may be able to claim dependant relief due to your actions. What you do during your lifetime has an impact when you pass. You may only want […]
The post <a href="https://ottawa.law/dependant-relief-children/">Is only a spouse able to claim as a dependant? Did a recent decision expand it to children?</a> appeared first on <a href="https://ottawa.law"></a>.
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The short answer is “no” – it is not new law. However, it is very fact specific. I talk about this when I teach estate planning: Beware who may be able to claim dependant relief due to your actions. What you do during your lifetime has an impact when you pass. You may only want to help but this may be setting up the possibly of such a claim succeeding before the courts, and leading to issues within your family.
A recent decision in Ontario shows how the Court has the power to help people who need it (if they are overlooked in an estate plan or Will), and you don’t need to be a spouse. Kids can get it too.
In the case of Shafman v. Shafman, the mother died in 2019, leaving three sons.  Her youngest son, Herbey, who was 67 when his mother died, filed an application for dependent support under The Succession Law Reform Act. Not often used by children, but certainly available depending on the circumstances.
Section 57(1) of the SLRA says that a child of the dead is a dependant if the child “to whom the deceased was providing support or was under a legal obligation to provide support immediately before his or her death.”
Section 58 of the SLRA says that the Court has the power to give support “where a deceased, whether testate or intestate, has not made adequate provision for the proper support or his dependants or any of them, the court, on application, may order that such provision as it considers adequate be made out of the estate of the deceased for the proper support of the dependants, or any of them”
Therefore, the son had to show two things:
1)<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    that his mother was taking care of him right before she died and
2)<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    that she had not made enough arrangements for him in her Will or Estate Plan.
The assets of the mother were worth about $3 million, but they were split between Herbey’s brothers, Jerry and Allan.  Instead, she bought Herbey an annuity in 2013, which gave him a fixed income of $1,070.29 each month.  In the her Will, Jerry and Allan are also required to give Herbey $500 every month from the rental money made by the Estate’s assets.  Both sides agreed that the deceased told Herbey to take $160 from the deceased’s coin-operated laundry room every month.   Herbey got $1,730.29 from these sources of money, which he said wasn’t enough to meet his needs.
The Court decided that the pension and money from the coin-operated laundry room were proof that the person who died was taking care of Herbey right before she died.
The Court also agreed that the dead usually gave Herbey money and sometimes a place to live. 
Even though Herbey did not live with the deceased, the Court agreed that he slept at her home more than once a week and was given food.  The Court also looked at a letter that the dead woman wrote to her lawyer in 2014. In it, she said that she had been helping Herbey for 25 years.
The court decided that Herbey needed his mother to take care of him and that $1,730.29 per month was not enough to meet his needs. To make up for the gap, the Court told the Estate Trustees to pay Herbey an extra $942.05 each month on an ongoing basis.
Although, not often used by a child, this legislative remedy is available depending on the circumstances.
The key takeaways are:
1)<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    This remedy is not automatic;
2)<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    This remedy is only available to an actual “dependant” – the Applicant has to prove it; and
3)<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';">    The court will look at all circumstances prior to death, and the treatment by the deceased of that “dependant” before their passing.
This is one of the many reasons why you should talk to lawyer to plan for your estate as we will delve into this possibility and many others.
For any estate or estate planning question, contact us at 343-888-8913 or <a style="font-family: Arial, sans-serif; font-size: 12pt; font-weight: var( --e-global-typography-text-font-weight );" href="mailto:advice@ottawa.law">advice@ottawa.law</a> to set up an initial consultation. </div>
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The post <a href="https://ottawa.law/dependant-relief-children/">Is only a spouse able to claim as a dependant? Did a recent decision expand it to children?</a> appeared first on <a href="https://ottawa.law"></a>.
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<title>Charitable giving in your Will</title>
<link>https://ottawa.law/charitable-giving-in-your-will/</link>
<dc:creator><![CDATA[Marc Ouimet-McPherson]]></dc:creator>
<pubDate>Fri, 31 Mar 2023 13:08:12 +0000</pubDate>
<category><![CDATA[Estate Planning]]></category>
<category><![CDATA[Charitable Giving]]></category>
<category><![CDATA[Tax Savings]]></category>
<guid isPermaLink="false">https://ottawa.law/?p=2779</guid>
<description><![CDATA[We all give to charity in some way, whether it’s with our money or with our time. But putting a gift to charity in a Will can be hard because you will ask yourself: “Am I going to leave my loved ones nothing?” When you die, your estate will probably get a big tax bill. […]
The post <a href="https://ottawa.law/charitable-giving-in-your-will/">Charitable giving in your Will</a> appeared first on <a href="https://ottawa.law"></a>.
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We all give to charity in some way, whether it’s with our money or with our time. But putting a gift to charity in a Will can be hard because you will ask yourself: “Am I going to leave my loved ones nothing?”When you die, your estate will probably get a big tax bill. Giving to charity in your Will can lower or even get rid of taxes, while still leaving the same amount of money to your heirs.How could this be? Well, it’s not that hard. Canada has some of the best tax breaks in the world to urge people to give more money to charity, especially from their estates. Still, many Canadians don’t know about these perks.What can happen:Take Bob and Linda (names changed due to confidentiality), two of my clients who are both in their mid-70s. They worked hard for years, pay their bills, and do their best to plan for their taxes. They are now retired.We reviewed their estate plan and discovered (to their surprise) that when they died, they would leave behind close to $2.3 million. They were very happy until they found out that their death tax bill would be $541,000. They were going to give the government almost a quarter of the money they had worked hard for.Bob and Linda never really thought about giving a gift to charity that wasn’t in the form of a cheque.” When they heard about a cause that moved them, they would take out money and give it. So, when I offered that they give a big part of their estate to charity in their Will, they just looked at me like I was “off my rocker”. I had just told them that they were giving the government a quarter of their money. Now I was telling them to give away even more? This sounded a lot like taking money away from their sons, Marc and John.I described the plan I had in mind, which was for them to leave a big gift to their favourite charity in their will. Simply put, they would leave about $500,000 to charity in their will. This would result in a tax receipt that would lower their taxes by hundreds of thousands of dollars. What happened? They gave a chunk of their estate to a couple of charities here in Ottawa (in their Will), which lowered their income tax when the last of them dies. They feel good about it and their sons actually get more.Yes, the Canada Revenue Agency always gets part of your wealth when you die (but at least they can get less if you properly plan). If you could choose between giving to charity and paying taxes, which would you choose? The kicker is that if you give to charities at your death; it may increase the amount going back to your beneficiaries.Contact us to get started with your Estate Planning or to discuss these types of strategies and the importance of including them in your planning. This is situation specific but can be beneficial if you have a sizeable estate. </div>
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The post <a href="https://ottawa.law/charitable-giving-in-your-will/">Charitable giving in your Will</a> appeared first on <a href="https://ottawa.law"></a>.
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<title>What can I do if my storage unit tenant stops paying rent?</title>
<link>https://ottawa.law/elementor-2756/</link>
<dc:creator><![CDATA[Jade Renaud]]></dc:creator>
<pubDate>Mon, 27 Mar 2023 18:53:04 +0000</pubDate>
<category><![CDATA[Business]]></category>
<guid isPermaLink="false">https://ottawa.law/?p=2756</guid>
<description><![CDATA[Over the last few years, with the demand for more affordable housing and the rise in smaller living spaces, Ontario has seen an explosion in the number of self-storage unit rentals. In Ontario, storage unit rentals are governed by the Repair and Storage Liens Act (“RSLA”), not the Commercial Tenancies Act (“CTA”). As a result, […]
The post <a href="https://ottawa.law/elementor-2756/">What can I do if my storage unit tenant stops paying rent?</a> appeared first on <a href="https://ottawa.law"></a>.
]]></description>
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<img fetchpriority="high" decoding="async" width="600" height="374" src="https://ottawa.law/wp-content/uploads/2023/03/depositphotos_112399414-stock-photo-open-self-storage-unit-full.webp" class="attachment-large size-large wp-image-2760" alt="storage" srcset="https://ottawa.law/wp-content/uploads/2023/03/depositphotos_112399414-stock-photo-open-self-storage-unit-full.webp 600w, https://ottawa.law/wp-content/uploads/2023/03/depositphotos_112399414-stock-photo-open-self-storage-unit-full-300x187.webp 300w" sizes="(max-width: 600px) 100vw, 600px" /> </div>
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Over the last few years, with the demand for more affordable housing and the rise in smaller living spaces, Ontario has seen an explosion in the number of self-storage unit rentals. In Ontario, storage unit rentals are governed by the <a href="https://www.ontario.ca/laws/statute/90r25">Repair and Storage Liens Act (“RSLA”)</a>, not the Commercial Tenancies Act (“CTA”). As a result, the rights of storage unit owners and their tenants are often misunderstood. This blog addresses the rights of storage unit owners when a tenant defaults under a storage rental contract. What happens when my tenant does not pay rent? Under the RSLA, when your tenant misses a rental payment, you may terminate your contract and re-enter the storage unit immediately. What if my tenant breaches a non-monetary term under the contract? Unless your contract states otherwise, when your tenant breaches a non-monetary term, you may terminate the contract and re-enter the unit immediately. However, in this case, it is best to first give your tenant a written Notice of Default and a reasonable opportunity to fix the issue, especially if they have never been in default before. If your tenant has diligently begun to fix the default but cannot reasonably do so within the timeframe you have given to them in your Notice of Default, consider extending the timeframe. If the tenant does not fix the default within the extended timeframe, it is best to deliver a written Notice of Termination, which can be effective immediately, unless your Notice of Default was already clear about how and when you would terminate the contract. What if my tenant leaves their belongings in the unit after termination? 1. Termination because of unpaid rent From the moment a tenant stores property in your storage unit, you have what is called a “possessory lien”, or legal claim, against that property for the amount of the unpaid rent and any other amounts the tenant owes you under your contract or under the RSLA. As long as the property stays in your possession, your lien/claim will have priority over anyone else’s interest in that same property. You are entitled to keep the property in your possession until the tenant pays the entire amount owing to you. When you terminate a storage rental contract for unpaid rent and your tenant leaves property in your storage unit, you have the option (in accordance with the procedures in the RSLA) to: (a) sell the property; (b) keep the property; or (c) donate the property to a registered charity. a. Sell the property Before you can sell the property, you must (a) wait 60 days from the day the rental payment is missed and (b) give 15 days’ notice of your intention to sell the property to:·<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> the tenant;·<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> if there is a vehicle in the unit, to the registered owner of the vehicle;·<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> if there is property other than a vehicle, to the person you believe is the owner of that property; and·<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> after running a search in the Personal Property Security Registry, to everyone who comes up as having a registered security interest in the property or a non-possessory lien against the property. Your notice to these people must contain certain information, as set out in the RSLA. b. Keep the property Before you decide to keep the property, you must (a) wait 60 days from the day the rental payment is missed and (b) send a written proposal to keep the property to the same people listed in the “Sell the property” section above. Once a person receives your proposal, they will have 30 days to object to it in writing. If they object, you can either (a) sell the property by taking the steps in the “Sell the property” section above, or (b) you can apply to the Superior Court (with notice to the person who objected) to ask the Court to deem the objection “ineffective”. The Court may deem an objection ineffective if: ·<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> the objection was made for a purpose other than to protect that person’s interest in the property; or·<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> the fair market value of the property is less than what the tenant owes you. If the Court finds the objection to be effective, you cannot keep the property and must sell it by taking the steps in the “Sell the property” section above. If no one objects to your proposal, you must keep the property in full satisfaction of the debt. If the value of the property is less than what the tenant owes you, you cannot bring a claim against the tenant for any additional amounts. c. Donate the property Before you can donate the property, you must (a) wait 60 days from the day a rental payment is missed and (b) then you must hold onto the property for an additional 12 months. After this timeframe has lapsed, you can donate the property to a <a href="https://apps.cra-arc.gc.ca/ebci/hacc/srch/pub/dsplyBscSrch?request_locale=en">registered charity</a> if: ·<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> the property has a fair market value of less than what the tenant owes you; and·<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> you have not already given notice or a proposal to anyone of your intention to sell or keep the property. You must also maintain a record for 6 years of the property that you donated and the registered charity. Return the property to your tenant or the property owner Keep in mind that at any time before you sell, keep, or donate property left in your unit, your tenant (or any person listed in the “Sell the property” section above) may pay you the full amount your tenant owes you and take the property back. Reasonable care in storing property You must use “reasonable care” when you store and preserve property left in a unit unless a higher standard of care is imposed by law. Also, unless you and the tenant have otherwise agreed, while storing property: ·<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> you must ensure that you always know which property was left behind by which tenant;·<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> you may register a security interest against the property in the Personal Property Security Registry; and·<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-variant-alternates: normal; font-kerning: auto; font-optical-sizing: auto; font-feature-settings: normal; font-variation-settings: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: 'Times New Roman';"> you are entitled to recover from the tenant your “commercially reasonable” expenses incurred in storing, preserving, and preparing the property for sale, if applicable. 2. Termination because of a non-monetary default or contract expiry The RSLA does not address a unit owner’s right to property left behind when a storage contract is terminated for a non-monetary default or when the contract simply expires at the end of the term. In the commercial leasing context, judges have held that property left behind by a tenant remains the property of the tenant unless the landlord can prove that the tenant abandoned the property. As mentioned above, storage rental contracts are treated differently from commercial leases under the law, but because the RSLA does not address this issue, and to avoid disputes, your storage contract should state that all property left in the unit under these circumstances will be deemed “abandoned” and that you have the right to dispose of the property as you see fit. Before disposing of any abandoned items, you should check the Personal Property Security Registry to confirm whether anyone else has a security interest in the property, and you should examine the property for any indication that it may be leased or owned by someone other than the tenant. If you think that terminating the contract and trying to re-rent the unit might be too costly for you, consider including a provision in your storage rental contract that will allow you to fix your tenant’s non-monetary defaults yourself and then recover your expenses from the tenant in the form of rent. Conclusion Storage unit rentals are unique tenancies, governed by a unique piece of legislation. To avoid unnecessary and costly disputes, it is important to follow the rules in the RSLA and to have a lawyer prepare and periodically update your storage contract to ensure that your rights are clear and that the terms address the gaps in the RSLA. </div>
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