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Sears pensioners hope to recoup their losses in $509M lawsuit

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A court decision has given Sears Canada retirees hope they can recoup some of the millions of dollars missing from the now-defunct retailer’s underfunded pension plan. 

An Ontario Superior Court judge on Monday granted approval for two lawsuits targeting U.S. billionaire businessman, Eddie Lampert and his hedge fund, ESL Investments, in connection with $509 million in dividends paid to Sears Canada shareholders in 2013.

The lawsuits — each initiated on behalf of Sears creditors including pensioners — centre on the same claim: that the $509 million payout was detrimental to the company and was orchestrated by Sears’ Canada’s largest shareholders — Lampert and ESL — for their own benefit.

Eddie Lampert is chair of Sears Holdings in the U.S. and ESL Investments. (Sears Holdings)

The plaintiffs also allege that Sears Canada’s board of directors at the time failed to do their “due diligence” before authorizing the dividend payment which “crippled the retailer’s ability to remain in business.”

Two former directors, William Harker and William Crowley, are also named in the suits. 

“It angers me because it has all the appearances of just taking the money without consideration for the company,” said Ken Eady, a pensioner and vice-president of the Sears Canada Retiree Group, a volunteer organization representing retirees.

At the time of the dividend payment, Sears had an operating loss of $187.8 million and the pension fund was short $133 million, according to court documents.

“If it had been a balanced approach, they would have said, ‘No, we shouldn’t have paid this dividend,'” said Eady.

Sears pensioner Ken Eady is vice-president of the Sears Canada Retiree Group, a volunteer organization representing retirees. (CBC)

In court documents, lawyers for the two former directors claim that “it is an illogical stretch to conclude that the 2013 dividend” in any way contributed to Sears’ insolvency which didn’t occur until June 2017. 

ESL takes a similar stance. 

“We believe there is no legal basis to reclaim those dividends and any attempt to do so would be without merit,” ESL spokesperson Michael Mittelman said in a statement.

He said that after the dividends were paid in 2013, Sears had “minimal debt” and $514 million in cash on its balance sheet.

Lampert is chair and CEO of ESL as well as chair of Sears Holdings in the U.S., which filed for bankruptcy protection last month with plans to restructure.

Payback

The goal of the lawsuits is to recoup money for Sears Canada creditors including 18,000 retirees who had their pensions cut by 20 per cent after the retailer folded and left behind an underfunded pension plan.

“I am so ecstatically happy,” said retiree, Gail McClelland upon news of the court action.

“We worked all our lives for that pension and to get that [money] back would be the happiest day of my life.”

According to court documents, retirees claim Sears owes them nearly $730 million which includes $260 million for the pension fund shortfall and $421 million for lost retiree health benefits. 

As a result of a tentative agreement in October with Sears Canada’s estate, pensioners stand to collect about $48 million of what they’re owed. 

Meanwhile, they’re living with reduced pensions, forcing some to return to work to make ends meet.

Sears retiree Gail McClelland worked in furniture sales in Calgary for most of her 33-year career with Sears. (Submitted by Gail McClelland)

McClelland starting looking for a job in September.

“At this age, who’s going to take me back?” said the 69-year-old widow who worked in furniture sales in Calgary for most of her 33-year career with Sears.

It’s total disappointment. I should be enjoying my life which I worked all my life for and now I have to go back to work because somebody compromised my pension.”

Long road ahead

McClelland hopes her situation will eventually improve, but she’ll have to wait for the verdict in what’s likely to be a long and costly court battle before finding out if retirees will reap any rewards. 

She suggests retirees could have avoided a legal battle if the federal government had created legislation that guaranteed workers’ pensions when corporations collapse. 

“If the laws were in favour of protecting pensioners and pensions, we would not have to be going through this.”

In Ontario, Sears retirees are currently faring better than their colleagues elsewhere because of a provincial law that guarantees the first $1,500 of monthly pensions for retirees in defined benefit plans.

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Real Estate

7 Tips For First-Time Home Buyers In Calgary

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Buying a house for the first time can be overwhelming to say the least. If you’re wondering what neighbourhood to go with, what you can afford, or even how to just get started on the process, let us take some stress off your hands! We’ve teamed up with Hopewell Residential to give you 7 tips to ensure the home you end up with is everything you dreamed of.

Hopewell Residential is a five-time Developer of the Year award winner, so their expertise is second-to-none in Calgary and beyond. Who better to learn home-buying tips from than the homebuilders themselves?

Create a checklist of needs & wants

This is a biggie. When you’re buying your very first home, you’ll want to weigh your needs vs. your wants. Ensuring you have what you love in your first home is a big, big deal.

What should you do? Easy. Set up a list of needs and a list of wants, but be pretty strict with yourself, and make sure you take your lifestyle into consideration. With the increase in remote work over the past year, it’s important to keep in mind that a home office or flex room might just be the key to maximizing at home happiness. Especially if you’re thinking you might be expanding your family later on, spare rooms and extra space is key (but more on that later!).

Or for instance, you might need a home in an area with a high walkability score, but you want to be close to certain amenities. Set yourself up with the right level of compromise and the number of homes that actually fit your ‘perfect’ idea will skyrocket.

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‘Don’t give up’: Ottawa Valley realtors share statistics, tips for homebuyers in ‘extreme’ sellers market

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The real estate market in the Ottawa Valley can be summed up this way: people from far and wide are in a buying frenzy, but there’s hardly anything to buy at the “store,” and the limited inventory is overpriced.

This “stampede” — as one realtor described it — will affect rural towns as residents grapple with finding affordable housing and agonize over their inability to purchase homes in their price range.

“We are seeing a lack of inventory in all price ranges,” said Laura Keller, a real estate agent from Carleton Place.

Helen Vincent, a Renfrew realtor, said she’s never seen a market like this in her 36 years of practice. “We postpone offers for four to five days in order to get all the buyers,” she said.

Multiple offers — between seven and 10 — became the norm, with cash offers and no conditions, as buyers faced bidding wars. “In Ottawa, they have up to 50 (offers),” she added.

“It’s very stressful. You’re going to get nine (people) ticked off, and one happy. So many people are disappointed,” Vincent said.

Terry Stavenow, an Arnprior realtor for 40 years, said that “the pent-up need took over with inventory going low. It made a stampede on everything that was available.“

“Brand new housing — it’s very much gone. Several building developers are rushing to get inventory. They usually don’t do construction in the winter months,” said Stavenow.

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Real Estate

10 Tips For First-Time Home Buyers

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Buying a home for the first time is exciting and a commitment to the future. It’s often challenging, too, and the process requires a lot of steps, many of which can be tricky to navigate as a first-time home buyer.

What are some things you should keep in mind as a first-time home buyer?

First-Time Home Buyer Tips

Here are 10 tips to keep in mind as you begin your journey toward homeownership.

1. Have Your Finances in Order

It’s wise to begin saving as early as possible once you’ve made the decision to purchase a house. You’ll need to consider the down payment, closing costs (which often range from 2% to 5% of the down payment), as well as move-in expenses.

You also need to understand the other costs of homeownership, such as mortgage insurance. property taxes, utilities, homeowner’s insurance, and more.

2. How Much Can You Afford?

Knowing how much you can realistically afford in a home is another important financial consideration. Look for the home of your dreams that fits your budget.

One way to avoid future financial stress is to set a price range for your home that fits your budget, and then staying within that range. Going through the preapproval process will help you understand what price range is realistic for your budget.

3. Make Sure Your Credit is Good

Another thing to keep in mind as a first-time home buyer is your credit score because it determines whether you qualify for a mortgage and affects the interest rate that lenders offer. 

You can check your credit score from the three credit bureaus – Experian, Equifax, and TransUnion.

This is another good reason for getting preapproved before you start your search. Learn more about the preapproval process and your credit score.

4. Choose The Right Real Estate Agent

A good real estate agent guides you through the process every step of the way. He or she will help you find a home that fits your needs, help you through the financial processes, and help ease any first-time buyer anxiety you may have.

Interview several agents and request references.

5. Research Mortgage Options

A variety of mortgages are available, including conventional mortgages – which are guaranteed by the government – FHA loans, USDA loans, and VA loans (for veterans).

You’ll also have options regarding the mortgage term. A 30-year fixed-rate mortgage is popular among many homebuyers and has an interest rate that doesn’t change over the course of the loan. A 15-year loan usually has a lower interest rate but monthly payments are larger.

6. Talk to Multiple Lenders

It’s worth your time to talk to several lenders and banks before you accept a mortgage offer. The more you shop around, the better deal you’re liable to get – and it may save you thousands of dollars.

7. Get Preapproved First

Getting a mortgage preapproval (in the form of a letter) before you begin hunting for homes is something else to put on your checklist. A lender’s preapproval letter states exactly how much loan money you can get.

Learn more about the preapproval process and how preapproval provides you with a significant competitive advantage in our article How Preapproval Gives You Home Buying Power.

8. Pick the Right House and Neighborhood

Make sure to weigh the pros and cons of the different types of homes based on your budget, lifestyle, etc. Would a condominium or townhome fit your needs better than a house? What type of neighborhood appeals to you?

9. List Your Needs and Must-Haves

The home you purchase should have as many of the features you prefer as possible. List your needs in order of priority; some things may be non-negotiable to you personally.

10. Hire an Inspector

Hiring an inspector is another crucial step in the home buying process. An inspector will tell you about existing or potential problems with the home, and also what’s in good order. You can learn more about home inspections and how to find a home inspector through the American Society of Home Inspectors website.

Buying a home for the first time is a challenge, but it’s one you can handle with the right planning and preparation.

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