Who’s on Title?
Two of our clients at RMLO Law LLP formed a typical Joint Venture (JV) to buy a property in Alberta with a brand new mortgage. One client was the “Investor” (the money-man). His JV partner was the “Finder”, (typically a person with real estate expertise and no money). In this case, the Finder had already purchased properties using every cent of his own money. He was out of borrowing capacity.
Part of their JV discussions was, “How should we take title?” Both clients understood that they had a few basic choices.
Options for Land Title Registration
in an Alberta Joint Venture
- both names on title now
- the Investor on title now with the Finder to go on title at a later date
- the Investor on title now with the Finder filing a caveat against the title.
In this situation, our clients’ preference was that they both be on title now. They understood that meant they would both have to apply for the new mortgage. Their concern was that, because our Finder client was out of credit, the bank would not like it if he were on the mortgage. Maybe the bank would refuse the loan because our Finder client had reached his borrowing capacity.
As always, the best advice is full disclosure to your lender. They told the lender that:
- this is a Joint Venture, so both Investor and Finder want to be on title; and
- the mortgage application is on the financial strength of the Investor only.
The lender agreed that because our Finder client did not have “bad” credit, but only “no more credit capacity,” our Finder client could come along for the ride. The Investor was financially strong and the mortgage was approved on the basis of the Investor only. Their objective of both being on title could be achieved.
The key point here is full disclosure to the lender.
Make sure the lender understands you know the various ways that title can be taken or an interest can be protected. Make sure your preference is clear. If lender policy does not immediately allow both Venturers on title, what about choices 2) and 3)? Full disclosure early in the process will usually bring results, one way or another!
Alberta Joint Venture real estate deals are one of my specialties. Get in touch with me if you’re thinking of doing one because an Investor Lawyer can make or break this kind of deal!
“3D Realty Handshake” image courtesy of Scott Maxwell. Used under Creative Commons Attribution-Sharealike 2.0.