Credit Bids and CRA Landmines: Getting the Adjusted Cost Base Right

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When a secured lender “credit bids” and takes title to collateral through a CCAA vesting order, two tax questions matter immediately:

  1. What is the lender’s adjusted cost base (ACB) of the real property it now owns?
  2. How is the remaining unpaid debt (the deficiency) treated for tax purposes?

The short answer

  • ACB = the amount of the credit bid applied to extinguish the debt, not the full face amount of the mortgage. This flows from the creditor-seizure rules in ITA s. 79.1, which deem the creditor’s cost of seized property to equal the amount determined under s. 79.1(6), and is reflected in CRA technical interpretations on creditor seizures.
  • The balance of the mortgage not covered by the credit bid is not added to ACB. It is dealt with separately: lenders in a lending business generally use bad-debt deductions; non-lending investors generally use a s. 50(1) election to crystallize a capital loss (and sometimes an ABIL if the debtor is an SBC).

In the Balboa CCAA, for example, the court approved credit-bid vesting orders on multiple properties — the archetypal fact pattern for this tax treatment.

Why the ACB is the credit-bid amount (not the whole mortgage)

The creditor-seizure code in ITA s. 79.1

Section 79.1 governs what happens when a creditor seizes property “in respect of a debt.” It deems the creditor to dispose of the debt and to acquire the seized property with a deemed cost computed under s. 79.1(6). In plain terms, the creditor’s cost of the property is tied to the amount of debt applied in the seizure — i.e., the credit-bid consideration — not the entire outstanding mortgage.

CRA’s administrative view

CRA technical interpretations confirm this point: where a creditor seizes property in satisfaction of a debt, s. 79.1(6) deems the creditor’s cost of the property by formula, aligning with the amount of debt applied.

Does a CCAA vesting order count as a “seizure”?

Although a CCAA credit-bid + vesting order is court-supervised rather than a traditional foreclosure, tax commentators and CRA have long treated these transactions as economically equivalent to a creditor seizure, and the credit bid as the purchase price for ACB purposes.

Bottom line: When lenders take title via credit bid, use the credit-bid amount (plus acquisition costs like land transfer tax and legal fees) as ACB.

How lenders claim the “rest of the loss” (the unpaid deficiency)

Once title is acquired, any remaining mortgage balance is a separate asset (the deficiency claim) — it does not inflate ACB. Tax treatment depends on who the lender is and the nature of the debt.

1) Lenders in the ordinary business of lending

  • Bad-debt deduction – s. 20(1)(p)(ii): allows a write-off for the uncollectible portion of a loan held in the course of a lending business.
  • Doubtful-debt reserve – s. 20(1)(l): allows a reserve for doubtful accounts/loans, added back to income the following year under s. 12(1)(d).

2) Non-lending investors (debt on capital account)

  • Use the s. 50(1)(a) election to deem a disposition at nil when the debt becomes bad, generating a capital loss (or a business investment loss (ABIL) if the debtor is an SBC).

Does it matter if the lender is incorporated or not?

Yes — the ACB rule (credit bid only) applies equally, but the tax treatment of the deficiency differs depending on whether the lender is a corporation or an individual.

  • Corporate money-lenders: ordinary deductions under s. 20(1)(p)(ii) or reserves under s. 20(1)(l).
  • Corporate non-lenders: capital loss or ABIL.
  • Individual lenders in business: same as corporations in lending — ordinary deductions.
  • Individual investors: capital loss or ABIL through a s. 50(1) election.

Worked example

  • Mortgage face amount: $10,000,000
  • Credit bid at vesting: $7,500,000 → ACB = $7,500,000 (plus closing costs).
  • Balance ($2,500,000) remains as a deficiency claim.
    • Business lenders (corporate or individual): deductible as bad debt under 20(1)(p)(ii).
    • Non-business lenders (corporate or individual): crystallize loss under s. 50(1); may be an ABIL if borrower is an SBC.

When the lender later sells the property, the capital gain/loss is simply:
Sale Proceeds – ACB (credit bid) – selling costs.

How Rabideau Law Can Help

If you’ve acquired property through a credit bid in a CCAA or foreclosure process, the tax consequences can be as important as the court order itself. The rules in ITA s. 79.1, s. 20, and s. 50 can change your recovery depending on whether you are incorporated, acting as an investor, or operating as a professional lender.

At Rabideau Law, we:

  • Confirm the proper ACB for property acquired by credit bid.
  • Structure deficiency claims so you get the best possible tax treatment (ordinary deduction vs. capital loss vs. ABIL).
  • Work with your accountants to ensure reporting is audit-proof.
  • Guide you through property dispositions so your gain/loss is reported correctly and supported with documentation.

If you are a lender or investor dealing with distressed mortgages, Rabideau Law can help you turn a complex process into a clear and defensible tax outcome.

Contact us today to review your credit bid or deficiency claim and protect your position both legally and financially.

Director Resignation, Shareholder Deadlock, and Corporate Paralysis in Ontario: What You Need to Know

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Running a corporation in Ontario comes with important obligations under the Ontario Business Corporations Act (OBCA). While most business owners focus on sales, contracts, and operations, the governance structure — directors and officers — is what allows a company to legally function.

But what happens if a director resigns, leaving the corporation without leadership? And what if there are only two equal shareholders who cannot agree on appointing a replacement? This situation, known as shareholder deadlock, can create serious legal and practical consequences.

Director Resignation in Ontario

  • Under the OBCA, s. 121, a director may resign by giving a written notice of resignation to the corporation.
  • The resignation takes effect at the time specified in the notice, or when it is received by the corporation.
  • An email is legally sufficient to constitute a written resignation, provided it clearly communicates the director’s intent.

Once effective, the resignation must be recorded in the corporation’s minute book and reported to the Ontario Business Registry by filing a Form 1 – Notice of Change within 15 days.

Email Resignations Are Binding

Under Ontario law, a director’s resignation is valid if it is in writing and delivered to the corporation:

  • OBCA, s. 121(2) provides: “A resignation of a director becomes effective at the time a written resignation is received by the corporation or at the time specified in the resignation, whichever is later.”
  • There is no requirement for a “wet ink” signature — a clear email stating the intent to resign satisfies the “in writing” requirement.
  • The Ontario Evidence Act, ss. 34.1–34.7 confirms that electronic documents, including emails, are admissible and have the same legal effect as paper documents, provided authenticity can be established.

Once delivered, the resignation is final:

  • OBCA, s. 121(3) makes clear that a resignation is effective upon receipt. The Act does not provide any mechanism to revoke it unilaterally.
  • If a director later sends a second email attempting to withdraw the resignation, that communication has no legal effect. The only way the individual can return as a director is by being formally re-elected or reappointed under OBCA, s. 119(4).

Key takeaway: Once a resignation email is received, it is binding and cannot be undone simply by sending another email.

The Problem: No Director Appointed

Ontario law requires that a corporation have at least one director at all times (OBCA, s. 115(2)). If the last remaining director resigns and no new director is appointed, the corporation becomes headless:

  • No authority to act: Without directors, the company cannot legally enter into contracts, appoint officers, or make binding decisions.
  • Regulatory risk: Annual returns, filings, and tax obligations may be missed, leading to penalties or administrative dissolution.
  • Operational paralysis: Employees, banks, and counterparties may refuse to deal with a corporation that has no valid board in place.

Shareholder Deadlock: The 50/50 Stalemate

The situation is particularly problematic where there are two shareholders with equal ownership (50/50). In such cases:

  • Neither shareholder can unilaterally elect directors.
  • Any meeting to elect directors will result in a tie vote.
  • The corporation is stuck in a legal and practical deadlock.

This stalemate can quickly escalate into disputes over control, financial management, and whether the business can continue operating.

Legal Remedies

If shareholders cannot agree on how to move forward, Ontario law provides several remedies:

  1. Shareholder Meeting (OBCA s. 105(3))
    • Where there are no directors, any voting shareholder can call a meeting to elect new directors.
    • However, in a 50/50 ownership structure, this may not resolve the deadlock.
  2. Court-Appointed Directors (OBCA s. 117)
    • The Ontario Superior Court of Justice may appoint one or more directors to break the deadlock and allow the company to function.
  3. Oppression Remedy (OBCA s. 248)
    • If the deadlock unfairly prejudices or disregards the rights of one shareholder, they can apply to the court for relief.
    • Courts have broad powers, including ordering a buyout or imposing governance changes.
  4. Winding-Up / Dissolution (OBCA s. 207)
    • As a last resort, a court may order the corporation dissolved if it is “just and equitable,” which includes situations of total deadlock.

Practical Best Steps

To avoid ending up in a corporate stalemate, business owners should consider the following steps:

  • Implement a Shareholders’ Agreement: Include deadlock-breaking mechanisms such as a “shotgun” buy-sell clause, arbitration/mediation provisions, or granting a casting vote to an independent director.
  • Document Resignations Properly: Always acknowledge resignations in writing through a board resolution and file the necessary changes with the Ontario Business Registry.
  • Act Quickly: If a resignation leaves no directors in place, shareholders should immediately convene to elect replacements.
  • Seek Legal Advice Early: If shareholders are deadlocked, legal counsel can help explore negotiated solutions before resorting to costly litigation.

Conclusion

A director resignation may seem straightforward, but when coupled with a 50/50 shareholder deadlock and no replacement director, it can paralyze a corporation. Ontario law provides mechanisms to resolve these issues, but the best course is always prevention through planning.

At Rabideau Law, we help businesses draft strong shareholders’ agreements, manage corporate governance, and navigate disputes before they escalate. If your corporation is facing a director resignation or shareholder stalemate, contact us to discuss your options.

What Happens if a Mortgage Has No Maturity Date in Ontario?

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When reviewing a mortgage or charge registered on title in Ontario, one of the most important terms is the maturity date—the date on which the full principal becomes due. But what happens if the lender’s charge does not set out a maturity date? Can the lender still enforce the mortgage if the borrower defaults?

At Rabideau Law, we are often asked about this situation, particularly in the context of private mortgages where a maturity date may have been left blank, omitted by mistake, or intentionally left open. Here’s what Ontario law says.

The Legal Framework

Mortgages registered in Ontario are governed primarily by the Mortgages Act, R.S.O. 1990, c. M.40 and the Land Titles Act, R.S.O. 1990, c. L.5.

  • A mortgage with a stated maturity date clearly sets the point in time when the principal is repayable.
  • If no maturity date appears, Ontario law generally treats the mortgage as a demand mortgage.

A demand mortgage means the lender can call the loan due at any time by making a written demand for repayment.

This principle is confirmed by the Supreme Court of Canada in Royal Bank of Canada v. W. Got & Associates Electric Ltd., [1999] 3 S.C.R. 408, which held that demand loans are payable immediately once demand is made. Ontario courts apply the same reasoning to mortgages registered on title.

Default and Power of Sale

In Ontario, a lender can only exercise power of sale after a borrower is in default. For a mortgage with no maturity date:

  • Written Demand Required – The lender must first make a clear written demand for repayment of the entire outstanding balance.
  • 15-Day Waiting Period – Under s. 24 of the Mortgages Act, the borrower must be in default for at least 15 days before the lender can serve a Notice of Sale.
  • Notice of Sale – The lender then serves a Notice of Sale Under Mortgage (Form 1), giving:
    • 35 days’ notice if mailed to the borrower,
    • 40 days’ notice if mailed to subsequent encumbrancers or the sheriff.

Only after these statutory timeframes expire may the lender proceed to sell the property under power of sale.

Practical Impact

The absence of a maturity date does not make the mortgage unenforceable. Instead, it shifts the mortgage into the category of demand debt. The main practical difference is procedural:

  • The lender must take the extra step of issuing a demand letter before alleging default.
  • The borrower may sometimes argue “no default” until such demand is made.
  • To protect against disputes, lenders should serve a written demand in clear terms and keep evidence of service.

Key Takeaways

  • A charge with no maturity date is legally valid in Ontario and it is treated as a demand mortgage.
  • The lender must issue a written demand and allow the statutory 15-day default period before serving a Notice of Sale.
  • Purchasers or investors acquiring such mortgages should be aware that the enforcement timeline starts only once demand is made.

How Rabideau Law Can Help

ortgage enforcement is a technical process, and small oversights can create major delays. At Rabideau Law, our team regularly assists lenders, private investors, and borrowers with mortgage enforcement and power of sale proceedings across Ontario.

Whether you are a lender seeking to enforce your rights or a borrower defending against proceedings, we can provide the clarity and strategy you need.

Contact us today to schedule a consultation and discuss your mortgage enforcement options.

Can a Newly Married Spouse Still Claim Ontario’s First-Time Homebuyer Land Transfer Tax Rebate?

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It’s a common scenario: a newly married couple is purchasing their first home together. The wife has never owned a home, but the husband already owns a rental property. They wonder: Can she still claim the Ontario Land Transfer Tax (LTT) refund for first-time homebuyers if they put 99% of the home in her name?

The answer involves understanding how Ontario’s Land Transfer Tax rules define a ‘first-time homebuyer.’

How the Law Defines “First-Time Homebuyer”

Under the Ontario Land Transfer Tax Act, a person qualifies for the first-time homebuyer refund if:

  • They are at least 18 years old.
  • They have never owned a home or an interest in a home anywhere in the world.
  • Their spouse has not owned a home or an interest in a home anywhere in the world while being their spouse.
  • They intend to occupy the home as their principal residence within 9 months of closing.
  • They apply within 18 months of the transfer date.

Key Point: Once you’re married (or in a common-law relationship), your spouse’s property ownership history counts as yours for this purpose—even if you are not on title for that property.

What If the Husband Already Owns a Rental Property?

If the husband owned a property before the marriage, and he still owns it at the time of the new purchase:

  • The wife cannot claim the first-time homebuyer rebate, even if she is the sole purchaser or owns 99% of the property.
  • The Ministry of Finance considers the couple as one unit for eligibility purposes once they are legally spouses.

If, however: the husband sold his property before the marriage and the wife has never owned a home, she would remain eligible as a first-time homebuyer.

Can You Put 99% in the Wife’s Name?

No.
Allocating 99% (or even 100%) of the title to the first-time buyer does not bypass the rule:

  • The rebate is denied if either spouse has owned a home while they were married/common-law.
  • It is not based on title percentage—it is based on combined spousal ownership status.

Example

Scenario:

  • John owns a rental condo purchased before marrying Sarah.
  • After marriage, they buy a house together and put 99% in Sarah’s name.
  • Because John owned a property while married to Sarah, Sarah does not qualify for the first-time buyer rebate.

Why This Matters for Clients

  • Financial Planning: Couples sometimes count on this rebate to reduce closing costs—only to be surprised at closing when they don’t qualify.
  • Title Structuring: Even creative title allocations (99/1 splits) will not change eligibility if one spouse is ineligible.
  • Legal Advice: As their lawyer, you can ensure clients are properly advised before signing an Agreement of Purchase and Sale.

Takeaways for Buyers and Real Estate Professionals

  • Check both spouses’ ownership history before assuming eligibility.
  • Consider timing: If a spouse sells a property before the relationship becomes legal (marriage/common-law), the other spouse’s eligibility may remain intact.
  • Consult a lawyer early: Rabideau Law can review the specific facts and ensure clients know their true closing costs.

Have questions about Ontario’s Land Transfer Tax and first-time buyer rebates?
Contact Rabideau Law—our team can guide you through eligibility, structure your transaction properly, and ensure there are no costly surprises at closing.

When a loved one dies with Ontario real estate but probate was completed in the U.S.

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When a loved one passes away owning property in Ontario, but their Will is probated in a U.S. state such as Florida, you might assume that the U.S. probate documents will be enough to handle the sale or transfer of the Ontario property. Unfortunately, that’s not the case.

Ontario law requires a separate Ontario court grant before you can deal with Ontario real estate. Without it, the Ontario Land Titles Office and the buyer’s real estate lawyer will not accept your authority to sell the property.

In this post, we explain why U.S. probate isn’t enough, what Ontario requires, how this differs from “resealing,” what probate tax (Estate Administration Tax) you’ll pay, and how to avoid common mistakes—complete with a real-world example.

Resealing vs. Ancillary Probate in Ontario

Ontario recognizes two different paths for foreign probate grants:

1. Resealing

  • Used when the original grant is from another Canadian province/territory, the U.K., or another Commonwealth jurisdiction.
  • Ontario simply “reseals” the foreign grant so it is effective here—no need to repeat the probate process.

2. Ancillary Appointment (With Will)

  • Required for non-Commonwealth grants, such as those from U.S. courts.
  • Ontario issues a Certificate of Ancillary Appointment of Estate Trustee With a Will (Form 74.29).
  • The application relies on court-certified copies of the foreign probate grant and the Will, along with Ontario-specific requirements like probate tax and estate asset disclosure.

If you’re dealing with a U.S. probate, you’ll almost always need an Ancillary Appointment before taking any steps to sell or transfer Ontario property.

What You Must File in Ontario

To obtain an Ontario Certificate of Ancillary Appointment, you must file:

  • Application for Certificate of Ancillary Appointment (With Will) under Rule 74.
  • Court-certified copies of the U.S. grant and the Will.
  • Certified proof of death (e.g., death certificate).
  • Ontario estate value statement and payment of Estate Administration Tax (EAT).

Note on bonds: If the executor is non-resident, the court may require an administration bond unless you apply to have it dispensed with. This is best addressed early to avoid delays.

Ontario’s Estate Administration Tax (“Probate Tax”)

Ontario charges Estate Administration Tax (EAT) based on the value of Ontario assets:

  • $0 on the first $50,000 of estate value.
  • $15 per $1,000 (1.5%) on the value over $50,000.

When filing an ancillary application, EAT is calculated only on Ontario-based assets (you do not pay Ontario tax on non-Ontario assets).

Real-World Example: Florida Probate → Ontario Property

Scenario: Janet probated her mother’s Will in Florida. Her mother owned a cottage in Ontario. Janet asked whether the Florida grant could be used to sell the Ontario property.

Answer: Ontario does not accept U.S. probate orders. Janet must apply for an Ontario Certificate of Ancillary Appointment (With Will). She will need:

  1. Court-certified copies of the Florida grant and Will.
  2. Certified death certificate.
  3. Ontario property details (legal description, PIN, municipal address, and value for EAT).
  4. Bond considerations if she, as executor, is non-resident.

Outcome: With the Ontario ancillary certificate, Janet can confidently list and sell the Ontario property. The Land Titles Office and the purchaser’s real estate lawyer, as well as her real estate lawyer will recognize her authority to sell the property. 

Common Pitfalls (and How to Avoid Them)

  • Sending the original Will out of the U.S. court file: Ontario accepts court-certified copies—never risk losing the original.
  • Using the wrong process: U.S. grants require ancillary probate, not resealing.
  • Ignoring Ontario probate tax: Budget and pay EAT upfront to avoid delays.
  • Bond surprises: If you are a non-resident executor, identify the bond requirement early and, if appropriate, have your lawyer apply to dispense with it.

How Rabideau Law Can Help

At Rabideau Law, we regularly assist U.S. executors with Ontario estates. Our services include:

  • Strategic guidance on the right process (reseal vs. ancillary).
  • Preparation and filing of all Ontario court documents.
  • Bond relief applications to save you the cost and hassle of security.
  • Virtual real estate closings, so you can sell the property without ever travelling to Canada.
  • End-to-end management, from probate to closing, ensuring you meet Ontario’s legal requirements quickly and efficiently.

If you’re a U.S. executor facing Ontario property issues, contact Rabideau Law today—we make cross-border estate administration seamless.

Tarion Warranty coverage after you close

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This is an overview of warranty coverage after closing for Freehold, Contract and Condo Units 

A note for Common Elements coverage

For most condominiums, the common elements have the below warranty coverage.
The condominium corporation is entitled to submit warranty claims for defects in work or materials in the common elements. There is no warranty coverage for the common elements of either a common elements condominium or vacant land condominium. Common elements warranty coverage begins on the date the condominium corporation is registered.

One-Year Warranty

Now that the purchaser has taken possession of their newly constructed freehold home or condominium unit, they are eligible for year one warranty coverage. This coverage begins on the date of possession and lasts one year from that date and includes items such as defects in work and material and unauthorized substitutions. See below for what the year one warranty covers.

Coverage for Freehold, Contract & Condo Units

  • Requires a home is constructed in a workman-like manner and free from defects in material
  • Protects against Ontario Building Code violations
  • Applies for one year, beginning on the date of the home’s possession even if the home is sold.
  • Protects against unauthorized substitutions
  • Requires the home to be fit for habitation

Two-Year Warranty

The new home warranty continues to provide coverage into year two and include items such as water penetration, heating and electrical. This coverage begins on the home’s date of possession even if the home is sold. See below for what the year two warranty covers.

What is covered for Freehold, Contract & Condo Units

  • Protects against water penetration through the basement or foundation walls
  • Protects against defects in work and materials that results in water penetration into the building envelope
  • Covers defects in work or materials that result in the detachment, displacement or deterioration of exterior cladding (such as brickwork, aluminum or vinyl siding)
  • Covers defects in work or materials in the electrical, plumbing and heating delivery and distribution systems
  • Applies for two years, beginning on the home’s date of possession
  • Protects against violations of the Ontario Building Code that affect health and safety

Seven-Year Major Structural Defect Warranty

The seven-year warranty covers major structural defects (MSD) and begins on the date that the purchaser takes possession of the home and ends on the seventh anniversary of that date. 

 A major structural defect is a defect in work or materials that: 

  • results in failure of a structural load-bearing element of the building;
  • materially and adversely affects the ability of a structural load-bearing element of the building to carry, bear and resist applicable structural loads for the usual and ordinary service life of the element of the building; 
  • materially and adversely affects the use of a significant portion of the building for usual and ordinary purposes of a residential dwelling.

What is covered

The seven year MSD warranty includes significant damage due to: 

  • Soil movement* & major cracks in basement walls
  • Chemical failure of materials & environmentally harmful substances or hazards. (i.e., Excessive radon levels)
  • Collapse or serious distortion of joints, or roof structure

What is not covered

The seven-year MSD Warranty specifically excludes the following:

  • Damage to drains or services
  • Dampness not arising from failure of a load-bearing portion of the building.
  • Damages to finishes

Source: https://www.tarion.com/builders-guide-coverage-homes

Transfer of Real Estate Between Trustees in Ontario

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When real estate is held in trust, there may come a time when the trustee needs to be changed—due to resignation, incapacity, death, or a planned transition. In Ontario, transferring real property from one trustee to another involves specific legal procedures to ensure title remains properly held in trust and the Land Titles records stay accurate.

When Does a Trustee Transfer Occur?

Trustee-to-trustee real estate transfers typically arise in the following situations:

  • A trustee resigns or is removed.
  • A successor trustee is appointed under the terms of a trust deed or court order.
  • The trust is being restructured.
  • The current trustee has passed away.

Regardless of the reason, the key principle is that the land must continue to be held in trust—just by a new legal owner.

What’s Required for the Transfer?

The process for transferring Ontario real estate from one trustee to another depends on how title was registered.

If the property is registered under the Land Titles system, the following are usually required:

  1. Transfer Document (Form 1 – Land Transfer Tax Act): This must be registered electronically via Teraview, showing the transfer from the outgoing trustee to the incoming one, and including the relevant trust language in the statements of trust.
  2. No Land Transfer Tax Payable: Trustee-to-trustee transfers are typically exempt from land transfer tax, as there is no beneficial ownership change. The exemption must be properly claimed by selecting the appropriate statements under the Land Transfer Tax Act and including explanatory language.
  3. Supporting Documents: These may include:
    • The trust deed or declaration of trust.
    • Resignation or death certificate of the outgoing trustee.
    • Trustee appointment documentation or court order (if applicable).
    • Solicitor’s statement or affidavit confirming the trust relationship and that beneficial ownership is unchanged.
  4. Registration by Lawyer or Authorized Agent: Only authorized Teraview users—typically lawyers or law clerks—can complete this process.

Practical Considerations

  • The name of the trust itself typically does not appear on title; rather, the individual trustee(s) hold title “in trust for” the named trust or beneficiaries.
  • If more than one trustee is involved, the new title must reflect all current trustees.
  • Any inconsistencies between the trust documents and title records can delay or complicate the transfer.

How Rabideau Law Can Help

At Rabideau Law, we regularly assist clients with real estate held in trust, including seamless trustee transitions. Whether it’s part of estate planning, corporate restructuring, or ongoing trust administration, our real estate and trust law experience ensures your transfer is completed efficiently, correctly, and with the necessary legal protections.


Example:
If John Smith, trustee of the “Smith Family Trust,” resigns and Jane Doe is appointed in his place, we prepare and register a Transfer from “John Smith, in trust” to “Jane Doe, in trust,” along with supporting documents confirming the change in trusteeship.

Thinking of transferring property between trustees?
Contact Rabideau Law to make sure your trust assets are properly protected and registered.

Can Ontario Seniors Claim Property Taxes Paid on a Life Lease?

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At Rabideau Law, we regularly receive questions from seniors and their families about the tax treatment of life leases in Ontario. One common question is:
“If I’m a senior living in a life lease, can I claim the property taxes I pay?”


The short answer:
✅ Yes — but not as a deduction on your tax return.
Instead, Ontario offers two specific tax relief programs that allow eligible seniors to benefit from the property taxes paid on their life lease residence.

Understanding Life Leases

A life lease is a unique form of residential occupancy where an individual pre-pays for the right to occupy a unit for life (or for a set term), but without actually owning the real estate. While you may not hold title, many life lease agreements include a responsibility to pay a portion of the property taxes for the development.

Thankfully, Ontario recognizes this when determining eligibility for certain tax relief programs.

1. Ontario Senior Homeowners’ Property Tax Grant (OSHPTG)

The OSHPTG is designed to provide direct financial support to seniors who pay property taxes on their principal residence.

Eligibility Criteria:

  • You were at least 64 years old on December 31 of the tax year.
  • You lived in Ontario at the end of the year.
  • You occupied a principal residence (including a life lease of 10+ years) and paid property taxes.
  • Your income falls below the program’s maximum thresholds.

How Much Can You Receive?

  • The maximum annual grant is $500.

How to Apply:

  • File your Ontario personal income tax return.
  • Complete Form ON-BEN.
  • Report your property tax amount in the relevant section of the return.

2. Ontario Energy and Property Tax Credit (OEPTC)

The OEPTC provides additional relief for both energy costs and property taxes paid, including those paid by life lease residents.

Eligibility:

  • You were a resident of Ontario on December 31.
  • You paid property taxes or occupied a qualifying residence (including life leases).
  • Income thresholds apply.

Credit Amounts:

  • Seniors may receive up to $1,144 annually based on their specific circumstances.

Application:

  • The OEPTC is also claimed on Form ON-BEN filed with your personal tax return.

Important Note: This Is Not a Deduction

Neither the OSHPTG nor the OEPTC are “tax deductions” that reduce your taxable income. Instead, they are non-taxable credits and grants paid directly to you after filing your return.

You cannot claim property taxes paid on a life lease as an expense or deduction like you might for business or rental purposes. These are personal credits for principal residence occupancy only.

How Rabideau Law Can Help

Navigating life leases and understanding eligibility for various government programs can be complex. At Rabideau Law, we regularly assist seniors, retirees, and families with:

  • Reviewing life lease agreements to clarify financial obligations.
  • Advising on eligibility for government grants and credits.
  • Estate and succession planning involving life leases.
  • Real estate transactions when entering or exiting life lease arrangements.

If you or a loved one is considering a life lease or seeking advice on Ontario’s property tax credits, contact Rabideau Law today for professional, clear, and personalized legal guidance.

519-957-1001
rabideaulaw.ca

Mortgage Defaults and Enforcement in Ontario: What You Need to Know About Power of Sale, Foreclosure, and Credit Impact

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The Early Signs: Late or Skipped Payments

Missing a mortgage payment doesn’t automatically trigger enforcement, but it does start a chain of potential consequences:

  • Late Payment: Usually within a 15-day grace period. If not cured, a late fee is charged.
  • Skipped Payment: More serious—when not made up before the next due date, it creates a rolling default where each future payment is considered late.

Impact on Credit: The first missed payment can drop a borrower’s credit score by 80–100 points. These notations (e.g., M2 or R2) remain on a borrower’s credit report for six years.

Default & Demand

When defaults continue, lenders will issue a Demand Letter, often citing additional defaults such as:

  • Failure to pay property taxes
  • Lack of property insurance
  • Deterioration of the property
  • Illegal use of the property

Power of Sale vs. Foreclosure: What’s the Difference?

Power of Sale: Lender sells the property, Former owner may get surplus proceeds, Typical duration: 6 months, Preferred where equity exists.
Foreclosure: Lender takes title to the property, Owner loses all equity, Can take over a year, Courts reluctant unless no equity.
Most lenders opt for Power of Sale, as it’s quicker and allows the borrower a chance to redeem the mortgage.

Step-by-Step: The Power of Sale Process

  1. Due Diligence: Who’s on title? Is it a matrimonial home? Are there tenants or liens?
  2. Notice of Sale: Can be issued 15 days after default. Must give at least 35 days before sale.
  3. Redemption Period: Borrower can cure the default or refinance. Brokers and realtors—this is your window to save the deal.
  4. Statement of Claim: If default continues, the lender files a claim for possession and judgment.
  5. Writ of Possession: Issued after default judgment. Sheriff’s office schedules eviction.

Credit Consequences of Enforcement

A court judgment will impact the borrower’s credit for:

  • 6 years on Equifax
  • 7 years on TransUnion

If a lender suffers a shortfall after the sale, they may pursue deficiency enforcement against other borrower assets (e.g., bank accounts).

Distributing Sale Proceeds

Funds are applied in this order:

1. Property tax and condo arrears
2. Sale and legal costs
3. Outstanding mortgage balance
4. Other creditors
5. Borrower (if anything remains)

Don’t forget about super priorities like HST and source deductions—they can trump secured creditors.

Buying Under Power of Sale: Know the Risks

Buyers often assume these sales are “bargain deals”—they aren’t.

  • Lenders typically get multiple appraisals and list higher than appraised value.
  • Sales are strictly “as is”, with no warranties on zoning, work orders, structural integrity, title issues, and chattels.
  • There are no post-sale adjustments—buyers must do full due diligence.

Liens & Tenancies: What Buyers and Brokers Must Know

  • Construction liens and condo arrears may survive the transfer.
  • Tenants under the Residential Tenancies Act (RTA) are not automatically removed—purchasers may inherit them.
  • A purchaser can evict a tenant for personal use, but must follow LTB procedures.
  • Month-to-month tenants may be evicted for non-cooperation with appraisals or showings.

Commercial Tenancies: A registered lease may bind the mortgagee. If not registered, the mortgagee usually has priority.

Borrower Redemption: It’s Not Over Until Closing

Even if an Agreement of Purchase and Sale is signed, borrowers retain a right to redeem the mortgage until the day before closing, per the Hornstein v. Gardena Properties Inc. ruling. Lenders typically include clauses allowing them to cancel the sale if the borrower pays out.

Final Note: Fixed-Fee Enforcement Matters

At Rabideau Law, we’ve handled thousands of real estate closings and enforcement matters. We offer fixed-fee pricing, evening/weekend signings, and proactive support for brokers, lenders, and borrowers. Unlike most firms, we don’t charge hidden disbursements—just transparent, reliable service.

Have Questions About Enforcement?

Whether you’re a borrower under pressure, a broker trying to salvage a deal, or a lender facing default, our experienced team is here to help.

Visit: www.rabideaulaw.ca
Contact: info@rabideaulaw.ca
Call: 519-957-1001

Mutual Fund Trusts: A Powerful Tool for Tax-Efficient Investing in Canada

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Private equity investors and fund managers alike are increasingly turning to Mutual Fund Trusts (MFTs) as part of their investment structuring strategy — and for good reason. These trusts offer a unique blend of flexibility, tax efficiency, and investor appeal, making them an ideal tool to pool capital while minimizing tax drag.

What Is a Mutual Fund Trust?

A Mutual Fund Trust is a flow-through investment vehicle recognized under the Income Tax Act (Canada). Unlike a corporation, an MFT does not pay income tax at the trust level if it distributes all of its income to unitholders annually. Instead, the tax burden flows through to the individual investors, enabling deferral or efficient treatment of gains depending on their own tax profile.

Why Use an MFT in Private Equity?

  • Tax-Deferred Growth: Canadian investors can benefit from the capital gains treatment and other flow-through advantages.
  • Ease of Pooling Capital: MFTs allow for multiple investors to pool funds in a legally recognized trust governed by a trustee and trust declaration.
  • Professional Management: A trustee or manager oversees the trust’s investment strategy, ensuring operational and fiduciary oversight.
  • Attractive to Institutions: MFTs are familiar to many institutional investors and RIAs, making fundraising easier.
  • Eligible for RRSP/TFSA Investment (if qualified): Certain MFTs can be structured to qualify as “registered plan eligible” — a huge bonus for retail investors.


Typical Use Cases

  • Dual-structure deals where the MFT holds LP interests
  • Real estate funds
  • Private lending vehicles
  • Alternative asset strategies (e.g., private credit, venture capital)


Regulatory Considerations

To qualify as a Mutual Fund Trust under the ITA, certain conditions must be met:

  • The trust must have 150+ unitholders within 12 months of its first year-end.
  • It must be widely held and publicly distributed, subject to specific structuring techniques to achieve compliance.
  • It must restrict investments to qualified securities unless exemptions are met.

At Rabideau Law, we regularly advise clients on how to structure their investment vehicles using MFTs, whether as standalone products or paired with Limited Partnerships for added flexibility.


Want to set up a Mutual Fund Trust or learn how it can fit within your investment structure?

Contact Rabideau Law to get started with a custom legal strategy that meets your fundraising goals while staying tax-smart.