Buying The Bank Sale: The Seemingly Impossible Journey (Pt2)

What bothered you more about Monday’s post:

a) The fact that the listing agent for the property was deferring to another real estate agent behind the scenes, who was passing himself off as a lawyer?

b) The fact that only after we were ready to execute an Agreement did the listing agent disclose that the previous owner of the bank-owned condo was deceased?

Probably the latter.  It has more shock value.  But I promise, the shock value doesn’t end there…

To avoid the risk of making this a three-part blog series, Monday’s post was quite lengthy, but I assure you those were the abbreviated notes!

I mean, you can’t imagine what I made of all this “Jimmy” nonsense, as I honestly thought for a while that there was fraud happening.

It’s none of my business how a bank elects to handle the sale of a property under power of sale, although maybe my two-part, six-thousand-word opinion piece on the matter makes me a hypocrite.  What I mean is that it’s not for me to decide who is involved in the process and how.  Having said that, we would soon learn just how many cooks were in the kitchen…

After Ron told me, “The previous owner is deceased,” he added one more nugget of information that might have seemed prudent at the onset:

“The deceased previous owner is also a non-resident of Canada.”

See what I mean about shock value?

It was bad enough that we were negotiating the sale of a tenanted property where there were no representations and warranties, where the appliances, parking, and locker were merely assumed to be included, where the bank was going to give notice to the existing tenants to vacate before closing, but wouldn’t put that in writing, and where the listing agent seemed to be deferring to a different real estate agent behind the scenes.

Now we were being told that the borrower in default who set the power of sale in motion was a deceased non-resident of Canada?

Get out your pliers, folks, because we’re about to open a huge can of worms!

But before we even went down that road, I needed to take a step back, get my bearings, and get some answers as to who was actually working on this sale.

I called the head office at XYZ Legal Firm Canada and said that I needed to speak to the lawyer working on this file.

I was told, “We have hundreds of lawyers and thousands of files,” but eventually, the trail of bread crumbs led me to a very nice law clerk.

You know the type?

She seemed like she was in her 60’s, probably had her first desk job at fifteen, and sat at a rotary-dial phone with a “dart” hanging out of her mouth.  Picture the cliché movie version of the small-town diner waitress in a Midwest American town – she would be the spitting image.

I explained a little bit about what I had experienced, and told her that I didn’t understand why a real estate agent was passing himself off as a lawyer with the firm, and she said, “Nothing surprises me anymore.”

She described every bank sale as “an organized chaos, just with a bit less organization than you’d want.”

I asked her who the lawyer on file was and, amazingly, she gave me his name.

“But he’s on vacation,” she said.  “And he has about fifty other files right now.”

What I was able to ascertain about “Jimmy” was that he was a licensed real estate agent with a brokerage in Niagara Falls (as I noted in Monday’s blog), and that he was essentially hired on a “freelance” basis (according to the old bird law clerk) to consult on the respective power of sales.

Ron, who was the listing agent for the property, was merely a face and a name.

As time went on, Ron started to say things like, “You know I’m just a middleman,” and “I can’t say ‘yes,’ I can’t say ‘no,’ all I can do is pass this on,” clearly demonstrating that his involvement in the transaction was minimal.

But now that we knew the previous owner was a deceased non-resident of Canada, we had to get waist-deep into the Federal Income Tax Act.

After consulting with lawyers and accountants, we determined that it was possible that multiple taxes could be levied on the estate of the deceased.  There was an outside shot that HST would be applicable, depending on the history of the condo, but we determined this was less than a 1% chance.  As a non-resident of Canada, however, there undoubtedly would be tax payable.

Are you familiar with Section 116 of the Income Tax Act?

I consider myself an expert now!

This section of the Act deals with the sale of non-resident Canadian property, whereby taxes are payable to Revenue Canada.

While it is the seller’s obligation to notify the government of any tax owing, the CRA can come after the buyer in the event that taxes are owing and the seller didn’t pay.

In cases like this one, the buyer or the buyer’s lawyer would want to secure a “clearance certificate” to prove that the taxes are paid before closing; otherwise, the buyer has exposure.

In this case, since the seller was deceased and the property was being sold under power of sale, we didn’t think that anything had been, or would be done on the seller’s end.

When we inquired, Ron said, “Oh, no, the bank isn’t going to do anything like that.”

I know, I know, the property was being sold “with no representations or warranties,” so this should come as no surprise.

But here’s the crazy thing:

Under the Income Tax Act, without a clearance certificate, the buyer would be required to withhold 25% of the sale price and submit it to the CRA.

Ummm….Eric?

This is the condo you want to purchase for your son?  This is the route you want to go?

Eric said, “No problem,” and spoke to his lawyer about drafting a clause that we could use.

At this point, we were finally in touch with the actual lawyer working for XYX Legal Firm Canada, who we’ll call “Benjamin.”

I saw the correspondence between our lawyer and Benjamin, and I can say that Benjamin was certainly a man of few words.  I knew that he was working on a ton of files, but it didn’t feel like he was, at any point, working in a collaborative manner.

The vibe we got from Benjamin was essentially, “We don’t care about anything.”  It was just a lot of “Go ahead, suit yourself.”

This was, by the way, the law firm representing the fictitious “Bank of Toronto,” which is one of the Big-5.

The whole process was just shocking to me, but in any event, we forged ahead.

To limit our exposure, however, we decided to ask for a 50% holdback of the sale proceeds, so we could submit the entire amount to the CRA, after which any amount over what was owed would be refunded.

This is where “Benjamin” started to get into a pissing contest with Eric’s lawyer.

Eric’s lawyer was of the opinion that, since the CRA guidelines specify 25% “or more,” and since neither Bank of Toronto, Ron, Jimmy, Benjamin, or XYZ Legal Firm Canada knew anything about the property, the seller, or the taxes owed, and since they were providing zero representations, then our insistence on holding back 50% was justified.

Benjamin’s emails were short and sweet, to the effect of, “We do not agree.”

They offered zero opportunity for further discussion, and at times, it felt like Benjamin was trying to sabotage the deal.

Eventually, we decided to simply draft the Amendment, including the 50% holdback, have Eric sign it, and send it to Benjamin at XYZ Legal Firm Canada.

But here’s where the unthinkable happened:

Benjamin sent it to Jimmy for approval.

This was insane.

The lawyer – the real lawyer, who was working on the file- sent the Amendment to the Niagara Falls real estate agent, pretending to be a lawyer, who was freelancing for XYZ Legal Firm Canada.

It made no sense.

Again, it’s not for me to tell a multi-billion dollar bank how to do business, nor am I familiar with the ins and outs of power of sale, but this seemed so backward to me.

Eric ultimately decided that he would not move forward with the purchase unless there was a 50% holdback, and eventually Jimmy agreed.

Jimmy agreed in an email that was sent to Ron (the listing agent), and then sent to me.

We drafted the Amendment, sent it to Benjamin (the actual lawyer), and waited for it to be signed.

But it wasn’t signed.

We sent it on a Friday morning, and it wasn’t until Tuesday evening that Benjamin (the actual lawyer), forwarded us an email from Jimmy (the pretend lawyer) that contained our Amendment signed back to us.

They changed the closing date.

For the love of God, they changed the closing date.

It almost felt as though Jimmy was getting paid by the hour and was doing everything he could to drag this deal on.

By this point, we had been working on the purchase for three weeks!

We were scheduled to close on September 1st, with the tenants vacating on August 31st.

Jimmy changed the closing date to October 1st.

In his email to James, he said, “We don’t have sufficient time to give the tenants notice.”

Nonsense.

It was June 25th.

They had until June 30th to give legal notice to the tenants to vacate by the end of August.

60 days’ notice, per the law, given before the beginning of the month.

For Jimmy to suggest that six days wasn’t sufficient time to give notice to the tenants was either lazy, naive, or something in between.  Maybe it was an attempt at sabotage?

I don’t know.

I tried to put the shoe on the other foot and think, “What kind of notice are they giving?”

Do they require a notary?  Do they need to have a video of somebody serving the tenant?

I spoke to Ron, who was always willing to open his mouth, and he said, “No, the bank usually just sends the N12 to the tenant by email.  Nothing special.”

So maybe I was right.  Maybe it was sabotage, or laziness, or naivety, or all of the above.

I told Ron, “This is over.  We’re done.”

Ron freaked out.

Then he dropped a bombshell:

“I have nine other properties belonging to the deceased that I have to sell after this one.  We have to get this deal done.”

In fairness, Ron really wasn’t the one doing the selling.  He was merely listing the property on MLS and playing go-between in an extremely ineffective, unnecessary, and unhelpful manner.

I told Ron, “My client’s son is starting at the University of Toronto in September.  He’s not closing in October.”

Ron said, “I understand, it makes perfect sense.”

I told him, “Ron, we’ve jumped through hoop after hoop.  We’re taking the property in as-is condition with no representations or warranties; we’re working with an Agreement of Purchase & Sale that looks like a 5-year-old scribbled all over it with a marker.  We’re personally holding 50% of the sale proceeds so that WE can submit the non-resident taxes owing to the Canadian Revenue Agency.  And you’re telling me that the bank can’t give notice to the tenants in the next six days?”

I was shouting.

I’ll admit it.

But the whole thing was absurd.

So I told Ron I was going to take one last shot at this.

I took the Amendment, which had been signed back by Jimmy, with an October 1st closing date, I changed it back to September 1st, and I had Eric sign it.

Then I emailed it to Ron, Jimmy, Benjamin, and Benjamin’s assistant and law clerk, copying Eric’s lawyer, and Bosley’s in-house legal counsel, just to act as the “partridge on the pear tree.”

Despite working on this deal for over three weeks, I still didn’t know who had the final say for the bank.

You would think it was Benjamin (the real lawyer), but we did see him refer to Jimmy (the pretend lawyer) at one point.  I also felt that the old-bird law clerk had a good handle on this, and I prayed that, eventually, Ron (listing agent) would man-up and get involved.

But above all, I just thought that with the massive audience of people on the email, somebody included would have felt embarrassed to blow this deal up.

And it worked.

The next day, we received a signed/accepted copy of the Amendment, and we had a firm deal.

It was a freaking miracle, and yet it never should have come to that.

I know that several readers are going to comment on today’s blog, many from experience with power of sale, and tell me how complicated they need to be.

I get that.  I know this isn’t a straightforward resale transaction.

But every step of the way, from beginning to end, there was poor communication, poor decisions, ineffective counsel, and frankly “too many cooks in the kitchen.”

The other side wanted to dance, but nobody could agree on who was leading.

The idea of the bank not making representations or warranties isn’t new to me, but the way that they went about it was confusing and disorganized, and they went back on their word in the end.

And I have to wonder if there’s any other buyer out there, save for Eric, who is an experienced real estate investor, who would have taken on this tax liability.

Can you imagine some 26-year-old, first-time buyer, deciding that he or she would file taxes on behalf of a deceased non-resident of Canada?

Eric was the only buyer for this condo, and it speaks volumes about how banks handle properties under power of sale.  I’m sure that every bank has its own process, but in this instance, there might be a handful of other people who would have even entertained the purchase.

But this bank made over $2 Billion in profit in 2025, so who the hell am I to offer an opinion, right?

Have a great week, folks!