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Nov 01, 1983

CPI Rental Increase Formula; Woodstoves; Vendor’s Continuing Liability to Mortgagees Following Sale #44

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By Gerry Neely
B.A. LL.B.

Column 41 discussed a matter raised by the Vancouver Island Real Estate Board concerning the potential uninsurability of a home whose owner failed to disclose to his insurer that a woodstove was a source of heat within the home. That drew a comment from an agent in the lower mainland, that in the agent's opinion, disclosure was only necessary in areas where there is no fire protection. The agent felt that this problem would not apply to a home in the Greater Vancouver area or in any area around a major urban centre. In case of doubt, check.

The same column referred to Column 6 written in June, 1981, which contained a formula for adjusting rentals based upon increases in the Vancouver Consumer Price Index. The formula became less meaningful as a result of the change this year by Statistics Canada in the base year from which increases in the Consumer Price Index are measured. That change converted the official base year from 1971=100 to 1981=100. We repeat below (courtesy of Statistics Canada) both the factors and the methods by which the CPI can be converted from a 1971 or 1981 base year to a 1978 base year.

To convert the CPI to a 1978 base using 1971=100, the factor for conversion is 100/177.4 or .56369; and using 1981=100, the factor is 100/74.3 or 1.34589. For example: year 1971=100 X factor = 1978=100; 1981=100 X factor = 1978=100.

1978177.4x .564= 10074.3x 1.346= 100
1979191.1= 107.780.0= 107.7
1980209.0= 117.887.5= 117.8
1981238.9= 134.7100.0= 134.6
1982264.0= 148.8110.5= 148.7
1983280.9 (July)= 158.3117.6= 158.3

The minor differences result from the rounding to one decimal place of the published indexes. For anyone wanting clarification or the factor for converting to a rental base year other than 1978, I would recommend calling Statistics Canada, the Enquiries Officers, 666-3691, Vancouver, B.C. (or toll free 112-800-663-1551).

The Real Estate Council is concerned that an owner of property which has decreased substantially in value and who has sold his property for little or nothing down to a purchaser who assumes a mortgage for which the owner is personally liable, may not be aware of his continuing liability. If the purchaser defaults in payments to the mortgagee, the vendor who signed the mortgage may be joined in the foreclosure action, and held to be liable for any amount the mortgagee is unable to recover from the sale of the mortgages premises. If that occurs, Section 20 of the Property Law Act implies a covenant on the part of a purchaser to pay the mortgage registered against title, and to indemnify the vendor against any payment or liability which the vendor incurred at the time the vendor signed the mortgage. However, that right of indemnification may be of little value if the purchaser lacks assets or income, and it is for that reason it is suggested that vendors should be made aware of their continuing liability.

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