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REAL ESTATE Powers of sale: F or some lucky people, a foreclosure is a buying opportunity. As layoffs, credit squeezes, and depressed mar- kets are forcing some property owners to give up their homes or close their busi- nesses, others are looking for great deals in power of sale purchases. Available in Ontario and some other jurisdictions, power of sale is the right of the mortgage lender to force the sale of a property with- out judicial proceeding. It's the easiest and most common way for mortgagees to turn delinquent loans into cash — and, even though power of sale transactions are required to refl ect market values, they can be good bargains for purchasers in a depressed market. But these deals come with a big caveat emptor warning. Setting aside any poten- tial karmic consequences of seeking to profit from others' misery, there are many legal complications in power of sale transactions that prospective purchasers and their lawyers need to watch out for. "It might be a great purchase price, but there's a lot more danger and the lawyer has to do a lot more work in particular on the contract and understanding it. It's potentially very difficult and problem- atic, and very different from your regular purchase," says Paul McCarten, a partner in the Toronto office of Borden Ladner Gervais LLP who practises commercial law with a focus on real estate. And the complications involved in power of sale transactions may come as a surprise to lawyers who have never previously been called upon to deal with them, says McCarten. "It's operating in a different world and it doesn't come along very often. Powers of sale are common in a recession and we haven't had one for a while, so it may be that there's a whole generation that has never done this." More onus is placed on a lawyer acting for the purchaser in a power of sale trans- action because the other party to the sale is not an owner willing to sell but a bank or other mortgage lender that may know nothing about the property other than its appraised value, notes Bernie Jankowski, a real estate lawyer in Barrie, Ont. "You get no representations from the lender," says Jankowski, who always strongly advises clients to pay for a good home inspection. "If we find a problem, often we have to solve it ourselves, otherwise the bank just says, 'Too bad.'" Stephen Nadler, a real estate and com- mercial litigator at Minden Gross LLP good deals, bad karma, hard work for the lawyer BY KEVIN MARRON who acts for institutional lenders, says agreements of purchase and sale that his firm prepares for power of sale transac- tions typically have "an out clause that if prior to closing the borrower has come up with money necessary to pay out the loan in full, then at the sole discre- tion of the lender, it could abort the sale and allow the mortgagor to redeem the mortgage." "While a mortgage lender might under- stand this is a safe way to proceed, for a buyer it's terrible," says McCarten, who adds the purchaser could have already sold her house and hired a moving van by the Editor-in-Chief Harvey M. Haber, Q.C., LSM and numerous leading experts as contributors Covers commercial leasing issues with specific emphasis on shopping centre leases in one text Shopping Centre Leases has been considered the definitive text on the subject since its inception in 1976. Revised and updated, by leading commercial leasing practitioners from across Canada, this Second Edition includes a vast collection of articles and precedents on various topics of current interest. For example: • Technology and Telecommunications Concerns • Pandemic Preparedness for Building Owners and Managers • Insurance for Shopping Centres • Leasing Aspects of the Franchise Relationship • Transfers of Lease, Assigning, Subletting and Change of Control • Operating Costs and other Additional Rents in a Commercial Lease from a Landlord's and Tenant's Perspective • Agreements to Lease, Letters of Intent and Term Sheets Carefully prepared this resource includes a number of precedent documents, a table of cases and relevant articles under each of these sections: • The Lease • Financial Considerations • Statutory Considerations • Rent and Expense of Operation • Operation of Business • Maintenance and Operation of Centre • Default • Precedents Order your copy today! Hardbound • 1,108 pp. December 2008 • $185 P/C 0279010002 • ISBN 978-0-88804-477-8 For a 30-day, no-risk evaluation call: 1 800 263 2037 or 1 800 263 3269 www.canadalawbook.ca Canada Law Book is A Division of The Cartwright Group Ltd. • Prices subject to change without notice, to applicable taxes and shipping & handling. CL0409 www. C ANADIAN Law ye rmag.com M AY 2009 19 Haber_shopping centre(CL 1-3sq).indd 1 4/2/09 2:56:50 PM