Financing turned down, Status for a POTL?


If you haven’t moved in the last few decades, you may be surprised by current financing procedures.

Dear David,

My house is paid for. I have a large sum of money in investments and no debt. I purchased a home in which I plan to retire and thought that bridge financing would be a slam dunk. Now my bank has turned me down, what do I do? – RICH MAN, POOR CASHFLOW

DEAR RICH: Call your Realtor if you haven’t already. Even though your primary bank may have denied your request for bridge financing, it sounds like you may be a good candidate for a short-term solution from a different institution.

If you haven’t moved in the last few decades, you may be surprised by current financing procedures. What was once accomplished with a phone call to your bank manager is now an extensive process, and one over which your bank manager has precious little control. That said, different banks have different programs and lending criteria. Some may offer an equity-based or high net worth program that would weigh your assets more heavily than your income, taking the larger financial picture into account.

PRO TIP: While the major banks keep a pretty close eye on each other’s rates, we find that some seem amenable to specific niches in the mortgage world (serving clients who are self-employed, new to Canada, or of high net worth, for example). It’s best to have your financing figured out in advance, but if you have solid equity and happen to hit a roadblock, lending solutions may be available – even if they’re not as straightforward as a rubber stamp from your own bank.

Dear David,

I’m buying a townhouse in a condominium complex that has a $110 monthly fee. I’ve heard that I don’t really need a status certificate, is it OK to not order one? – KEEPING IT SIMPLE

DEAR KEEPING: Based on the monthly fee, I suspect you’re buying a townhouse tied to common elements within a condo complex, also known as a “Parcel of Tied Land”, or a POTL. This is different than a regular condominium or a freehold property. When it comes to townhouses, it’s easy to be confused by the classifications, since they all look similar from the street – but the type of ownership is what separates them. With a freehold unit, you own the building and the land it sits on. With a POTL, you own the building, but not the land (the land is a common element). With a regular condo, it’s pretty typical to own everything “from the paint in”, meaning the building exterior and the grounds are often the purview of the condo corporation.

Each type of townhouse requires a specific Agreement of Purchase and Sale. For a POTL, the agreement contains pre-printed clauses to cover things that a status certificate would typically address. Among other things, it tells the buyer that there are no special assessments being contemplated by the corporation, no legal actions pending, no significant additions to common areas of the property, and no substantial changes to assets and liabilities within the condo corporation. Because there are seller representations built into the pre-printed agreement, the status certificate is less critical, but still necessary…and reviewing it is an important part of your due diligence as a buyer.

PRO TIP: When looking at condo listings, you can generally tell the type of ownership from the legal description. If you’re unsure, ask your agent for a clear explanation. #AskDavid #Advice