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ING covers legal fees after turning down senior’s mortgage: Roseman


Donald Potter, 81, lives in a condo unit at the Terraces at Heritage Square housing project for people over 65 in Barrie, Ont.

He got a mortgage from a family member when he moved in 10 years ago. But he worried about what could happen when his 89-year-old in-law died and the mortgage ended up in his estate.

So, he applied for an $ 80,000 mortgage at ING Direct, where he was already a client. It approved the loan on Aug. 14 and promised to advance the money on Sept. 12.

Though retired, Potter had lots of equity in his 850-square-foot condo unit, which is now worth about $ 225,000.

Unfortunately, ING failed to spot an issue with his ownership until the deal was set to close. It then denied him a mortgage, leaving him on the hook for almost $ 800 in legal fees.

Potter has a life lease arrangement, which means he has the right to occupy the unit for the rest of his life. But the Independent Order of Foresters, which developed the housing project, retains ownership of the land.

Life leases have characteristics in common with both condo ownership and rental housing. Sponsors are usually not-for-profit or charitable groups that try to meet the needs of a seniorscommunity.

“Many residents may not fully understand what they are purchasing when entering into a life lease agreement,” says a 2007 report by the Ontario ministry of municipal affairs and housing.

There’s a need to improve consumer protection for life lease housing, which is not covered by Ontario’s Condominium Act or Residential Tenancies Act.

Purchasers often choose their units based on location, price, amenities and sense of community — not the form of tenure.

They pay full market value for the right to occupy their life lease unit. Later, they can sell their interest for whatever the market value is at the time or bequeath it to others in their estate.

In many projects, there is little or no opportunity for residents to be involved in decision-making.

“We need legislation to protect owners, since we have no say whatsoever,” Potter tells me.

“In our building, they just eliminated the pets-free floor. But some people bought into this project for that very reason.”

There is no requirement, as with condos, to set up elected boards and hold annual meetings with owners to discuss the corporation’s financial position.

Some life lease projects allow residents to register their agreement on title. Some do not.

Without the ability to be registered on title, purchasers may have less access to mortgage financing and less security if the housing project is sold to another owner or goes into bankruptcy and foreclosure.

Potter went to ING Direct on his own (without a mortgage broker), working by email and fax to complete the application form and send the documents as instructed.

He heard from his account manager on Sept. 11, saying the $ 80,000 deposit would arrive the next day. But he got a call the following morning, saying the mortgage was turned down since he was on a “land lease property.”

Both terms — land lease and life lease — seem to be used interchangeably to describe an arrangement where you own the home and not the land.

This form of tenure makes lenders nervous. But it’s not common enough to be included on a standard mortgage application form.

His lawyer had done $ 790 worth of work when he got the shocking news. He couldn’t afford the money, especially if he had to apply for a mortgage all over again.

He’d tried and failed to reach the bank’s ombudsman when he contacted me. I forwarded his email to ING’s head office in Toronto.

After a thorough investigation, “we have taken care of the legal fees the client paid and credited the amount into his account. Thanks again for bringing it to our attention,” said Buket Oktem, an ING spokeswoman.

The story shows you can recover costs when a bank turns down a mortgage. It also shows the need to disclose all relevant facts on an application, even if you don’t see a specific question.

Ellen Roseman writes about personal finance and consumer issues. You can reach her at eroseman@thestar.ca or www.ellenroseman.com

thestar.com – Opinion

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