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Posting about legal issues affecting British Columbians.

Posted by Craig Taylor and Trisha Taylor on May 18, 2018

Legal due diligence in commercial real estate

There are many considerations to make when purchasing commercial real estate, whether the intended use is for development or simply to keep using the property as-is. While price and location often dominate the conversation, numerous legal issues can affect the viability of a commercial real estate deal in BC.

In this article, we explore some of the early-stage aspects of legal due diligence in a commercial real estate deal in BC, and a basic idea of what it means when a lawyer mentions “due diligence” in context of purchasing commercial real estate in BC.

Land Title Searches

A land title office search can identify essential information such as who the registered owners are, what encumbrances are registered against title, and the legal description of the lands. It is essential for a prospective buyer of commercial real estate to know who the vendor is to ensure they are dealing with the correct party.

Encumbrances on title can vary widely. Some common non-financial encumbrances that can affect property use are easements, statutory rights of way, building schemes, phased development agreements and restrictive covenants. Notably, a title search only shows the existence of the encumbrance and who registered it, not the details of the encumbrance itself. Details about the encumbrance can only be found by separately searching for and obtaining the encumbrance. Fortunately, many non-financial encumbrances are filed with land titles and can usually be obtained quickly and for nominal cost.

It is common for expired encumbrances to remain on title. Often the only way to determine if an encumbrance has expired is by obtaining the underlying document from land titles and reviewing it.

Sometimes it may be desirable to search neighboring properties, as restrictions on adjacent properties may impede future expansion, if that is contemplated. In other cases, purchasers of commercial real estate may require encroachment agreements with neighboring owners, for example, for underpinning or other encroachments.

Municipal Searches

Zoning and/or ability to rezone a prospective property can make or break a commercial real estate deal and should be identified as early as possible. It is common for the purchaser to make these investigations themselves, or hire a consultant to do so. A lawyer may be required if issues are encountered during investigations. As well, municipal bylaws may impact development and future use or proposed use of a target property, and should be reviewed early on in the process.

Provincial and Federal Searches and Environmental Searches

There are a wide variety of provincial and federal searches that can be relevant to a commercial real estate deal. Some of the most common searches are those related to the environment, including environmental searches through the Ministry of Environment (provincially in BC) and Environment Canada (federally). Depending on the results of an initial environmental search, it may be prudent to hire an environmental consultant to determine whether further environmental investigations are necessary.

Other searches include those to determine whether lands are in the agricultural land reserve, or whether the target lands have historical or archeological significance.

Leases

Since commercial property is usually leased, a purchaser should have full knowledge of the status of any leases of the property. Copies of all leases should be reviewed, giving particular attention to clauses like lease term, renewal terms, termination clauses, landlord covenants, rent, and restrictions on assignment and/or subletting.

It will usually be prudent for a purchaser to obtain estoppel certificates from some or all of the tenants in a commercial building as a condition of completing the sale. An estoppel certificate can confirm things from the tenant like: the current rent, the lease term, that all rent has been paid, and that there are no disputes under the lease.

Plans and Surveys

It is important to review a copy of the plan of the property, which can be obtained from the land title office. The plan shows the location and approximate dimensions of the property, and should be reviewed early on. Since plans filed at the land title office are not guaranteed to be accurate, a prudent purchaser will consider ordering a survey of the property to verify the location of things like improvements, easements and rights of way on the property.

Summary

The scope of legal due diligence relevant to a commercial real estate deal is much broader than the basic steps discussed in this article. However, this article should provide a basic understanding of some of the early stage due diligence steps a prudent purchaser may take. As always, it is advisable to speak with a professional before entering into a contract to purchase or sell commercial real estate. A legal professional can help you determine a due diligence plan that works for you.

 

Schedule a consultation with a lawyer at Taylor & Taylor Law.

604-398-3988

info@ttlaw.ca

 

Posted by Craig Taylor and Trisha Taylor on May 4, 2018

Transitioning to the new Societies Act of BC

As most societies are now aware, every pre-existing society in British Columbia must file a transition application under the Societies Act by November 28, 2018. In other words, societies have until November 28, 2018 to file an electronic transition application by using the Government of British Columbia’s Societies Online web service.

Which societies must file a transition application?

Every society that was incorporated, amalgamated, continued or converted under B.C.’s old Society Act or any of its predecessor acts.

When must the transition application be filed?

A transition application must be filed electronically using the Societies Online system by November 28, 2018.

What if a society misses the deadline?

A society does not file a transition application by November 28, 2018 could be dissolved by the Registrar.

What can/cannot be changed during transition?

It is helpful to set out a few ground rules for the transition process:

    1. A society may not change its purposes or any unalterable provisions during the transition process. The purposes and unalterable provisions must remain “word-for-word” throughout the transition.
    2. A society may change its bylaws (other than unalterable provisions) during the transition process, but only after obtaining the approval of its members by special resolution.
    3. A society is free to change its bylaws and constitution, including its purposes or its previously unalterable provisions any time after transitioning. Changes to a society’s bylaws or constitution require prior member approval by special resolution.

What are a society’s options?

Many societies are now taking the opportunity to review their bylaws and constitution as they go through the transition process. This is a good thing, as clauses in the old bylaws that conflict with the new act are invalid to the extent of the conflict. After reviewing their constitution and bylaws (in some cases after no review in years or decades) many societies are choosing to make changes to these important documents.

A society is permitted to change its bylaws on transition, so long as previously unalterable provisions are left unchanged. In practice, it may be difficult or impracticable to obtain member approval to change the bylaws before filing a transition application.

In this circumstance, a society may choose to file its transition application using its existing bylaws (note, the existing bylaws and all changes to them must be consolidated into a single, integrated electronic document for filing with the transition application). The society may then make changes to the bylaws after the transition process is complete, for example by seeking member approval for changes at the society’s next general meeting.

Importantly, any change to a society’s bylaws or constitution requires approval by special resolution of the society’s members. Under the new Societies Act, unless a society’s existing bylaws mandate a higher threshold, the society must have support of at least 2/3 of its members at a general meeting to make changes to its bylaws or constitution.

Will transitioning affect a society’s charitable status?

The transition process will not normally affect a society’s charitable status, because changes to the society’s purposes are not possible during transition.

However, societies that are registered charities must file certified copies of their post-transition constitution and bylaws with the Charities Directorate. For more information, see the Government of Canada’s publication on making the transition to the new Societies Act.

Notably, a society who does not file a transition application before the November 28, 2018 deadline could be dissolved. Once dissolved, the society would cease to have legal existence. As a result, the dissolved society could have its charitable status revoked.

Further Information

For further information, there is a lot of helpful material on the Government of British Columbia’s website regarding the transition process. You may wish to speak with a lawyer about the transition options available to your society.

 

Schedule a consultation with a lawyer at Taylor & Taylor Law.

604-398-3988

info@ttlaw.ca

 

Posted by Craig Taylor and Trisha Taylor on April 13, 2018

Taxes for the deceased and the estate: information for Executors

When a taxpayer dies in Canada, a number of tax obligations can arise, including preparing and filing personal tax returns for the deceased and estate tax returns for the deceased’s estate. These obligations often become the responsibility of the deceased’s legal representative, the executor or administrator of their estate. Taking care of the taxes is one of the most important roles of an executor or administrator, however it is often one of the most misunderstood obligations.

This blog identifies some of the main tax obligations that executors and administrators need to turn their mind to when they agree to take on their role. These obligations should be discussed with your estate lawyer at the start of the probate or administration process, and with a tax accountant, so that the tax filings are well underway and the risk of delaying any distribution of the estate is minimized.

While this blog contains a general overview of taxes upon death, this should not be relied upon as a complete analysis of tax issues. Instead, executors and administrators should seek the advice of a tax accountant, and refer to guidance from Canada Revenue Agency, and the Income Tax Act, 1985, c 1.

Executor and Administrator liability

When taking on the role of executor or administrator, this role comes with many important duties and obligations, one being ensuring the taxes of the deceased are appropriately filed and remitted to the CRA.

When income taxes are not filed, interest, penalties and fines may accrue, thus increasing the debts of the estate. The executor or administrator of a deceased’s estate have a legal duty to act in the best interest of the estate and its beneficiaries. One aspect of this duty is making sure that the estate’s debts are paid, including that taxes and all other debts are paid. Executors and administrators must also try to minimize unnecessary expenses to the estate (for example, interest, penalties and fines on late taxes). In many cases, a prudent executor or administrator can easily avoid unnecessary interest, penalties and fines on unpaid taxes.

General tax obligations for a deceased person

Typically, the first income tax return that will become due is the terminal T1 (General) income tax return for the deceased. This return generally must be filed by the later of six months from the date of death of the deceased, or April 30 (the personal tax filing deadline) of the following year. In some circumstances, where the deceased was behind on filing and paying their taxes in previous years, there may be several tax returns required to cover any missed previous years, in order to catch up on the deceased’s taxes owing.

If the deceased owned or was a director or officer of a company, you may also need to ensure that the corporation’s tax obligations are being addressed as well. These obligations could include corporate taxes owing, as well as other remittances which can include GST, PST and employee remittances such as EI and CPP. If you are uncertain as to whether or not the deceased had an ownership interest in, or was a director or officer of a company, you should contact a corporate lawyer as soon as possible.

General tax obligations for the deceased’s estate

As well, the executor or administrator is responsible for filing tax return(s) for the estate itself. A T3 (Trust) tax return must be filed within 90 days of each fiscal period of the estate (which begins on the date of death and must end no later than 365 after the date of death). Depending on how long it takes to wrap up the estate, the estate may have several income taxes to file. As this is a different type of tax return than a personal return, many executors find it beneficial to engage a tax accountant who can assist you in preparing and filing these tax returns properly, and within the appropriate time-frames.

Depending on the nature of the deceased’s income, the estate may be allowed to file other income tax returns, and it may be advantageous to do so. This is something to discuss with a tax accountant.

Clearance certificate

The executor or administrator should obtain a clearance certificate from the CRA before distributing any property to the beneficiaries or heirs. Generally speaking, a Clearance Certificate is available after the requisite returns have been filed and after amounts owing by the deceased to the CRA have been paid. If the executor or administrator distributes any part of the estate before obtaining a Clearance Certificate, they may be held personally liable for any taxes owing under section 159(2) and (3) of the Income Tax Act (Canada). It can take significant time to obtain a Clearance Certificate, therefore the process should be initiated as soon as possible with a tax accountant so that the distribution of the estate can occur in a timely fashion.

Other considerations

There are several exceptions to the filing deadlines mentioned above, as well as differing strategies with respect to filing these income tax returns to maximize tax credits and deductions. As such, it is important to speak to a tax accountant as soon as possible after the death of the deceased, so that the tax preparation can get underway, and various strategies can be discussed and employed to minimize the taxes payable to the estate.

If you are an executor or administrator of an estate and are uncertain about whether or not taxes are being addressed properly, you should immediately contact a tax lawyer.

 

Schedule a consultation with a lawyer at Taylor & Taylor Law.

604-398-3988

info@ttlaw.ca

 

Posted by Craig Taylor and Trisha Taylor on January 29, 2018

Deciding whether to act as Executor or Personal Representative of an Estate

Personal Representative vs. Executor

A “personal representative” is simply the legal term in BC for a person who has been appointed as executor and trustee in someone’s last will and testament. Historically, personal representatives were referred to as executors. The legal terminology formally changed to “personal representative” in 2014 when the Wills, Estates and Succession Act came into force. Since the historical term is still commonly used in BC, we will use the term “executor” to refer to personal representatives throughout the article.

Generally speaking, an executor manages the assets, debts and taxes of the deceased and their estate. They are also responsible for distributing the deceased’s assets in accordance with the deceased’s will. In many cases, the executor must also apply to the Supreme Court of British Columbia for probate of the deceased’s will.

Sometimes, a person’s last will appoints more than one executor. The co-executors are typically called on to carry out their duties as executors jointly. In most cases, the will-maker will also appoint one or more alternative executors, who are authorized to act when the will-maker’s first choice is unable or unwilling to act.

In some circumstances, the deceased may die without a will. This is called dying intestate. In these circumstances, the individual seeking to act as executor must apply to the court to be appointed to administer the estate. This is known as obtaining a grant of administration.

Duties of the Executor

The duties of an executor can be time consuming and burdensome. There are general duties imposed by law, and additional or modified duties may be expressed in the will. Thus an executor’s specific duties will vary from estate to estate. The general duties that apply to executors typically include: safeguarding the deceased’s assets, paying the deceased’s debts and making provisions for preparing tax returns for the deceased and the estate, searching for assets and creditors, notifying beneficiaries, managing the deceased’s investments and insurance, continuing or initiating legal actions on behalf of the estate, and keeping proper accounting of all of the money that comes in and out of the estate.

The executor may also be required to obtain probate for the estate. Essentially, a grant of probate validates the will and provides third parties (such as banks, insurance companies or land registries) evidence of the executor’s legal authority to deal with the deceased’s property. In practice, many third parties will refuse to deal with a executor until a grant of probate has been obtained.

If you are uncertain as to whether or not the estate you are administering requires probate, you may wish to speak with an Estates Lawyer.

Deciding to take on the Role of Executor

The fact that a person appointed you to be their executor does not legally require you to take on the role. An executor who does not wish to act, or is unable to do so, may be able to legally renounce the appointment, allowing a remaining co-executor(s) or alternate executor(s) the opportunity to take on the role. However, you can be deemed to have accepted the role of executor (and the corresponding personal liability) merely by acting in a manner that shows intention to assume that role. Conversely, if you are not appointed as an executor and you would like to take on this duty, you may be able to challenge the appointment of another person as executor.

If you have been appointed as executor in a deceased individual’s will, and are uncertain as to whether or not you wish to take on the role, you may wish to seek legal advice prior to commencing.

Executor Liability

Executors take on personal liability, including liability for breach of trust in connection with administering the estate, and for errors or omissions in managing the assets and liabilities of the deceased. Complications in estate administration often arise if the will includes ongoing trusts which must be administered and in situations where the deceased has a complex investment or asset portfolio, where the executor is not familiar with the deceased’s financial affairs, or where there are disputes among estate beneficiaries or the executor.

Depending on the estate, there may also be estate variation and litigation considerations that arise as part of the estate administration. Very generally, the Wills, Estates and Succession Act permits spouses and children to make an application in court to vary a will that does not, in the court’s opinion, make adequate provision for their proper maintenance and support. The potential for wills variation claims often prompts executors to engage a lawyer to assist even at the earliest stages of the estate administration process. A lawyer will be able to discuss in greater detail the duties involved in acting as executor, and assist you in limiting your personal liability throughout the process.

Summary

Before taking on the role of executor, it is important to consider the duties, time, effort and potential for person liability involved in accepting the role, and to understand that in some cases, renouncing the role may be a preferable option.

 

Schedule a consultation with a lawyer at Taylor & Taylor Law.

604-398-3988

info@ttlaw.ca

 

Posted by Craig Taylor and Trisha Taylor on January 22, 2018

Incorporation: Provincial or Federal Corporation?

After you make the decision to incorporate, one decision you may be facing is whether to set up your company as a provincial or federal corporation.

In British Columbia, provincial corporations are subject to the Business Corporations Act. This provincial legislation governs the incorporation of, and regulation of companies in British Columbia. On the other hand, federal corporations are governed by the Canada Business Corporations Act, which is a federal statute of Canada.

There are many factors to consider when determining whether to incorporate as a provincial or federal corporation. Below, we discuss a couple of the considerations for choosing one form of incorporation over the other.

1. Where my company will do business after incorporation

A starting point is typically to consider where your company is currently doing business, or will do business. Will your business be primarily in British Columbia, or will it carry on business across Canada or even outside Canada?

One benefit of federal companies is that they may more easily carry on business through Canada under the same corporate name. With a federal corporation, once your name has been approved and granted by the registrar, you do not need to request approval of your name for use in each province. This is often attractive to business owners who are doing business in several provinces, as the corporation can operate with the same name in each jurisdiction. However, it is not necessary to incorporate a federal corporation to protect your name. That may be done very effectively through the use of trademark law.

When a business is incorporated provincially, the name is approved for use within British Columbia only. Therefore, if the business decides to do business in another province at a later date, and there is another company in that jurisdiction operating with a similar name, your business may have to change its corporate name for that province.

In this sense, federal incorporation can often be attractive to business owners who do business across Canada and want to ensure naming consistency across the provinces (noting that alternate protections under trademark law are also available).

If you are concerned with name protection for your corporation, you may wish to speak with an incorporation lawyer about other intellectual property protection options (such as trademark) that can be done in conjunction with incorporation.

2. What laws will apply to my company after incorporation

Companies are subject to the laws of each province where they do business. Thus, if a corporation is carrying on business in a province or territory, then it will be required to register as an extra-provincial or extra-territorial corporation in that jurisdiction. In other words, if a corporation incorporated under the BC Business Corporations Act conducts business in Alberta, it would be required under Alberta corporate law to extra-provincially register and identify an address for service in Alberta. Trade agreements between the provinces may facilitate the process. If your business if operating outside of British Columbia, you may wish to speak with an incorporation lawyer to ensure that you properly register your business in the appropriate jurisdictions.

There are usually additional costs to register a company extra-provincially, as well as additional costs on an annual basis (such as extra-provincial annual reporting) to accommodate government, accounting and legal obligations. One of the unique aspects of a federal corporation is that it must extra-provincially register in every province or territory in which it operates. Therefore, incorporating a federal corporation can sometimes be more expensive and complex than incorporating a provincial company.

These are only a few of the factors to consider when deciding if a federal or provincial incorporation is right for your business. If you are planning on incorporating a company that will do business both inside and outside of British Columbia, or you think a federal company would be right for your business, it would be prudent to speak with an incorporation lawyer prior to moving forward.

 

Schedule a consultation with a lawyer at Taylor & Taylor Law.

604-398-3988

info@ttlaw.ca

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