Obtain legal description of the propertyHaving the municipal address will allow the Trustee to search the Land Titles Registry.
Register Trustee’s interest on title of the propertyThe Trustee should consider registering its interest against the title of the property. This may be done via Bankruptcy Caution or Application Trustee in Bankruptcy-Owner. The Caution will remain on title until it is withdrawn and in essence puts a stop against all dealings with the property title, while the Application will register the Trustee as one of the owners of the property. It is recommended that the Trustee registers on title of the property as soon as possible in order to safeguard and protect its interest. It is important to note that once the Trustee has registered its interest, it is vital to confirm that the property is sufficiently insured.
Review and identify all legal owners of the propertyOnce the Trustee obtains a copy of the Land Titles search, it is prudent to identify all the owners of the property in question. This information will be crucial in assessing if the bankrupt has any interest in the property as well as what percentage of equity belongs to the debtor (now the Trustee).
Land title registration vs. equitable (beneficial) interestIf the debtor is registered on title of a property, the Trustee will be in a position to deal with the property. Should the bankrupt hold the property in trust for another individual, the Trustee must ensure to obtain supporting documentation indicating this.
In some cases, third parties may hold the title to the property for and on behalf of the bankrupt. This may warrant a debtor to have an equitable interest in the property. In order to establish if such interest exist, the Trustee will need to assess the parties conduct with respect to the property in question. There may be written agreements between the parties stating that the property is in fact being held for the bankrupt. In addition, the parties involved may acknowledge that the property belongs to the bankrupt.
Identify all interests/mortgages registered on titleIn order to correctly calculate the equity in the property, the Trustee must take into account all mortgages, liens and registrations on the title of the property. Should there be a private mortgage registered on title, the Trustee will require that the lender provide proof of advance of funds. These materials will then need to be reviewed and cross-referenced with the date of registration in order eliminate any doubt that the mortgage may not be valid.
Secured proofs of claimThe Trustee must identify all secured parties and obtain proofs of security from each in order to confirm all outstanding mortgages on title.
Obtain an independent appraisal/letter of opinion on the propertyHaving an independent letter of value will allow the Trustee to properly evaluate the equity in the property. It is imperative that the Trustee not rely on a letter of opinion provided by the debtor and/or a creditor as the parties may have an interest in reducing the potential equity in the property. In addition, the appraisal of the property must be current as the values of the properties do change with time.
Calculate the equityThe Trustee is now able to calculate the value of the equity in the property. It is suggested that the value of the equity is determined by subtracting all legitimate mortgages from the Trustee’s independent letter of opinion. This value will be the Trustee’s initial position in negotiating with the debtor for the equity buyback.
Negotiate with the debtorThe bankrupt may not be willing to accept the Trustee’s calculation of the equity and may attempt to reduce it by deducting real estate commissions (if the property was sold), any mortgage penalties, any outstanding condominium maintenance fees and property taxes, legal fees. Though these expenses may be legit, (should the property be listed for sale), the Trustee must ensure that the reductions permitted are fair and reasonable to all parties involved.
Transfer of title
Once the debtor and the Trustee reach an agreement with respect to the value of the equity, arrangements will be made between the parties with respect to payment options. Upon completion of the equity repayment, the Trustee will withdraw its interest from the property title.
This article has been prepared for the general information of our clients. Please note that this publication should not be considered a substitute for personalized advice related to your situation.