May 13, 1998

 To:Corporate Services Committee

 From:Commissioner of Corporate Services

 Subject:Surplus Property within the ASpadina Corridor@ and

AScarborough Transportation Corridor@

 Purpose:

 To recommend a process for the disposition of the remaining ASpadina Corridor@ and AScarborough Transportation Corridor@ residential properties.

 Funding:

 Expenses incurred will be charged to the cost account established for the surplus properties, eventually to be paid from the sale proceeds.

 Recommendations:

 It is recommended that:

 (1)authorization be granted for the disposal of the properties declared surplus by the Council of (former) The Municipality of Metropolitan Toronto, along the former Spadina and Scarborough Expressway Corridors, in the manner detailed in the body of this report;

 (2)all negotiations with former owners and/or current tenants with respect to the purchase of these properties be conducted on the basis of the market value applicable at the time of current negotiations;

 (3)those tenants not wishing to purchase the property occupied by them be offered a financial incentive to provide vacant possession of the property, as detailed in the body of this report;

 (4)authority be granted to the City Solicitor to take the steps necessary to secure vacant possession of any properties in the circumstances referred to in the body of this Report including the execution of any Agreements to Terminate Tenancies;

 (5)costs associated with the valuation, financial incentives, and sale of the properties be deducted from the proceeds of the sale; and

 (6)the appropriate City officials be authorized and directed to give effect to the foregoing.

 Background/History:

 By its adoption as amended, of Clause No. 1 of Report No. 23 of the Corporate Administration Committee on December 4, 1996, the Council of (former) The Municipality of Metropolitan Toronto approved the principles as set out in such report of a settlement with the Province of Ontario relating to the disposition of the Spadina Corridor properties, and the sharing of the sale proceeds. The financial arrangement is that out-of-pocket expenses, together with direct staff costs (plus a 20% administration fee on staff costs) were to be deducted from the total sale proceeds and retained by the Municipality. Of the remaining sale proceeds, up to the 30 million dollar level, the Municipality was to receive two-thirds of the proceeds, with the remaining one-third going to the Province; and those sale revenues in excess of the 30 million dollars would be shared equally between the Municipality and the Province.

 By its adoption as amended, of Clause No. 1 of Report No. 3 of the Corporation Administration Committee, on February 12 and 13, 1997, the Council of the Municipality of Metropolitan Toronto authorized the following:

 (1) the properties listed in Schedules AA@ (AProperties to be declared surplus and sold@) and AB@ (AProperties identified for re-purchase entitlement@) contained in the Appendix to the Report, (Jan. 9,1997) from the Commissioner of Corporate and Human Resources, be declared surplus to the municipality=s requirements, subject to the reservation of any property rights that may need to be protected in respect of the Spadina Subway Line or existing facilities;

 (2) Council waived Metropolitan Toronto=s obligation pursuant to Section 42 of the Expropriations Act, R.S.O. 1990, c.E26, to offer the various properties back to the owners from whom they were expropriated; and that the appropriate Metropolitan Officials be available to answer enquiries from the public regarding financial and real estate offers which may come to their attention;

 (3) the properties listed in Schedule AB@ (as revised to move A48 Heathdale Road@ from Schedule AA@ to schedule AB@) to the aforementioned Report be offered to the former owner and the existing tenant, in that order, at market value;

 (4) where an existing tenant of a property listed in Schedule AA@ to the Report indicated a desire to purchase one of the homes, Metropolitan Toronto staff were to negotiate with the tenant in good faith, with a view to concluding an Agreement of Purchase and Sale with the tenant;

 (5) with respect to the existing tenants of the properties listed on Schedule AB@, where the former owners have elected to purchase residences, these tenants be offered an opportunity to purchase a vacant house at market value;

 (6) in the event that the tenants elect not to acquire one of the vacant houses, then these houses be offered for sale through the multiple listing service of the Toronto Real Estate Board;

 (7) when the actions referred to in Recommendations Nos.(3),(4) and (5) as noted above had been taken and no remaining acceptable offers were forthcoming, the Commissioner of Corporate and Human Resources and the General Manager, Housing Division, Community Services Department, were to submit a status report thereon to the Corporate Administration Committee and seek further instructions;

 (8) the General Manager, Metropolitan Toronto Housing Company Limited, be requested to assist in the re-location of existing tenants who may need to find alternative housing; and

 (9) all steps necessary for compliance with By-Law No. 56-95 be taken.

 At its meeting held on February 12 and 13, 1997, Council also had before it two Reports from the Metropolitan Solicitor in response to requests made by the Corporate Administration Committee at its meeting held on January 20, 1997 for those Reports to be submitted directly to Council. One of those reports addressed the issue of whether or not the approval of the Financial Advisory Board appointed pursuant to the City of Toronto Act, 1997 was required for the implementation of the proposed authority contained in the report before Council on February 12 and 13, 1997. In addition, the Metropolitan Solicitor also submitted a report, as requested, relating to the issue of the placement of Arestrictive covenants@ on the title to the subject properties.

 Council also had before it on that date a report (January 9,1997) from the Commissioner of Corporate and Human Resources entitled ASupplementary Report on the Disposition of the Former Spadina Expressway Properties@, reporting directly to Council, as requested by the Corporate Administration Committee, on the appropriateness of including in the appraisal of the subject properties, the cost of improvements made to same during the respective rental periods, i.e. with the view to reducing the appraised value by such amount; and (in light of the request made to the Metropolitan Solicitor to report on the question of placing restrictive covenants on the titles), on the appropriateness of reducing the price (i.e. upon any re-purchase based upon the operation of such restrictive covenant), the costs of improvements made during the period of ownership by those currently acquiring the properties.

 Comments and/or Discussion and/or Justification

 The steps outlined in Nos. (3), (4) and (5) noted above having been partially completed, the purpose of this Report is to submit a status report in accordance with Item (7) set out above, and to seek further instructions on the process for the disposition of these properties.

 Of the properties authorized to be sold in accordance with the foregoing, forty-seven (47) properties (37 of which were tenanted and 10 of which were vacant) became the subject matter of Agreements of Purchase and Sale, and have been successfully completed. One (1) property continues to be the subject matter of an Agreement of Purchase and Sale but has not yet closed. Staff will continue to implement step No. (3) outlined above. With respect to the remaining properties, there were either no responses to the communication to the tenants canvassing whether or not they were interested in purchasing the property, or, in those cases where an interest was expressed, no satisfactory Agreements of Purchase and Sale were concluded with the tenants.

 In sum, although the initial process resulted in considerable success where vacant properties were involved, tenanted properties pose different issues. First, while offering the tenants an opportunity to purchase the houses they live in at market value is considered appropriate and fair, some of the tenants appear to believe that the 1997 appraised values are open for acceptance by them at any time, despite the general increase in real estate values in the area since that time. Accordingly, it is recommended that Council specifically affirm that all negotiations are to be conducted on the basis of the market value applicable at the time of the current negotiations. Further, all negotiations with tenants should be conducted on the basis that there exists a limited Awindow of opportunity@ comprised of a fourteen calendar-day period from receipt of notice from the City of the appraised value of the property, during which the tenant may submit an acceptable Offer to Purchase at that appraised value. Staff are preparing standard form documents to remove many of the potential disagreements as to acceptable terms, and such documentation will provide that the transactions are conditional upon ultimate Council approval. This process is recommended as being fairest to all parties, including those tenants who paid market value for their properties last year.

 If any tenant declines to make an Offer at the appraised value, the City will then list the property for sale as soon as practicable thereafter. Any tenant who believes the appraised value was too high, may make an Offer to Purchase the property on the open market once it is listed. Once a property is to be listed, a determination must be made as to how the existence of a tenancy in the property is to be dealt with. Generally, the two approaches are to either sell the property as vacant, or, alternatively, sell it subject to the existing tenancy. As most potential purchasers are seeking to purchase homes to actually live in themselves, they are generally less interested in properties which may not immediately be available for that purpose. Accordingly, tenanted properties tend to sell at prices lower than comparable properties where vacant possession is available.

 In order for the City to covenant to a purchaser to provide vacant possession on closing, the City would have to be certain that it could fulfill that covenant. The law provides limited categories as to when a tenancy may be terminated, one of which is that the landlord requires possession of the rental premises, for the purpose of occupation by himself, his spouse or child or the parent of the landlord or the landlord=s spouse. The City is not in a position to terminate on that basis.

 One method available to secure vacant possession, under both the existing and proposed landlord and tenant legislation, is the termination of a tenancy by agreement. It permits the landlord and tenant to agree to terminate a tenancy on a specific date in the future. If a tenant fails to deliver up vacant possession on the specified date, the landlord may apply to obtain a writ of possession. The tenant has the right to set aside such a judgment if reasonable grounds for dispute are found to exist. If set aside, a hearing on merits would then result. Again, if the City proceeds on this basis, because of the potential delay and uncertainty of the proceedings, it would be preferable to obtain vacant possession of the property prior to entering into a binding Agreement of Purchase and Sale.

 In order to assist tenants who are unable or unwilling to purchase the properties they live in, and to increase the attractiveness of these houses on the market, it is recommended that a financial incentive be provided to those tenants who voluntarily provide vacant possession. This incentive is recommended to be the equivalent of two months rent (excluding utilities) for tenants who have been in place for at least three years, and one month=s rent (excluding utilities) for tenants of shorter tenure; such payment only to be made once vacant possession has actually been provided. However, since there is no actual guarantee that the tenant will physically leave as agreed, it would be unwise for the City to enter into binding Agreements of Purchase and Sale requiring the City to deliver vacant possession upon closing until such time as the facts allow the City to provide that covenant. Accordingly, in those circumstances where a tenant has agreed to vacate the property, the property may be listed for sale as vacant, but staff will not bring forward offers for Council=s consideration before first securing vacant possession, whether because the tenant has departed as agreed, or, if a tenant fails to depart as agreed, as a result of staff having taken the necessary steps to enforce the agreement to vacate.

 In those circumstances where the tenant declines to accept the financial incentive, such properties would be sold subject to the tenancies, in which circumstances it would be up to the purchaser to determine whether he wishes to use the premises for himself and if so, to take the necessary steps to secure vacant possession.

 Accordingly, the following process is recommended for the sale of houses in the ASpadina Corridor@ previously declared surplus by Metro Council:

 (1)staff will arrange for each property to be appraised by an outside appraisal consultant as well as by a local Realtor, staff to reconcile the value estimates and, if necessary, obtain a third opinion from another appraisal consultant;

 (2)the tenants will be provided with the option to purchase the property in a personally-delivered letter from the Commissioner of Corporate Services or her designate enclosing a notice of appraised value, and within fourteen days of receipt of the notice of appraised value from the City, the Tenant may deliver an Offer to Purchase the property at the current market value (as determined in accordance with step No. (1) above) acceptable in form to City staff, subject to Council approval;

 (3)properties not sold to tenants are to be listed for sale on the Toronto Real Estate Board=s Multiple Listing Service;

  (4)those tenants not purchasing pursuant to step No. (2)(a) above will be offered a financial incentive to provide vacant possession of the property, such incentive to be the equivalent of one month=s rent (excluding utilities) for tenants of less than three years and two months= rent (excluding utilities), and if the tenant provides notice that they are accepting the incentive and agreeing to vacate the property, an agreement to terminate the tenancy on a date acceptable to City staff will be executed, the payment as described above to be made upon the provision of vacant possession;

 (5)those properties where the tenant does not enter into an agreement to provide vacant possession, will be sold subject to the existing tenancy;

 (6)in any situation where the tenant has agreed to vacate the premises and fails to do so, all steps necessary to enforce the agreement to obtain vacant possession will be taken;

 (7)all costs associated with the valuation, marketing and disposal of the properties will be deducted from the sale proceeds; and

 (8)all satisfactory Offers to Purchase by the tenants at current market value and the best acceptable offer for each property having been listed will be presented to Council for consideration and approval.

 Conclusions:

 Proceeding in the manner described above enables the City to dispose of a number of surplus properties in a manner which is sensitive and recognizes relationships with existing tenants, some of whom have occupied these houses for many years. Further, the process makes efficient use of staff resources and external consultants, to provide the greatest net return to the City.

 Contact Name:

 R. Mayr, AACI, Director of Real Estate, Telephone (416) 396-4930, Fax (416) 396-4241

mayr@city.scarborough.on.ca

 Margaret Rodrigues

Commissioner, Corporate Services