Professional Documents
Culture Documents
TotE back on. In addition, a party who insists on strict performance of the
contract, and then defaults if barred from turning TotE back on (Kwan v
Cooper).
6. Was V able to provide Good and Marketable Title? Ontario has
implemented a Title System, which essentially means for every property
registered in Land Title, the government guarantees good title to P. This
system operates on 3 principles: 1) the government was erected a
curtain around the title which P is not obligated to look behind, the title
search mirrors the real title, and should the title turn out to be deficient,
the government has insured the title meaning P will be compensated.
Section 10 (p. 351) of the standard Agreement of P&S is a title clause
which states that P will take title provided that title to the property is
good and free from all registered restrictions and, charged, lien and
encumbrances. In order for character of the title to meet the
requirements laid out in the section, it must be marketable, meaning of
the quality the courts would forced upon an unwilling purchaser who is
not compelled to take a title which would expose him to litigation or
hazard (Clement vs. Wyatt). The title clause has been interpreted as a
Big Promise, meaning that if V fails to provide good title, P can elect to
accept the imperfect title and sue for damages, or they can walk away
form the contract. However, there are some encumbrances on title which
are not thought to impact a finding of good title such as: registered
restrictions and covenants that run with the lands which have been
complied with, registered municipal agreements if complied or security
(Stefanovska vs. Kok), minor easements supply of services to property
or adjoining, and easements for serviced which do not materially affect
present use. Conversely, title defects which P will not be forced to
take include potential heritage designations (Goldstein vs. Davidson),
demolition orders (Kolan v. Solicitor), In addition, if the court finds that
P bargained for title with a wart, then P can be forced to take title subject
to that wart (Tonys Broadloom). The court in Tabatta vs. Williams
held that new construction requires a occupancy certificate in order to
constitute good title.
Where a defect in title is found that affects the marketability, such
as a lease which cannot be disclosed (11 Suntract Holdings Ltd), P
must act in good faith when exercising their right to repudiate the
agreement (Green v. Kaufman). For instance, If the title defect is
immaterial, P has no right to repudiate (LeMeusier v. Andrus), the
defect in title must satisfy the de minimus principle (Toll vs.
Marjanovic). In the case of an open contract with no Title Clause,
Yandle vs. Sutton complicated the issue by finding a patent defect on
title, which could lead Vs to argue that the title defect objected to by P is
patent, so P is stuck with it. However, the title clause affirms the
standard of marketable title in contractual relationships. The issue was
clarified in Steiglitz vs.Prestolite where Justice Laskin affirmed that the
appropriate test was not whether the defect was patent or latent (as
applied in Yandle & Sons v. Sutton), but whether the purchaser was
faced w/ acceptance of property which would be materially different
from that for which he bargainedIf the undisclosed easement materially
affects the land in question, then the objection to the easement is a valid
one.
Simple Objections to Title must be requisitioned by the date
listed in the Agreement of P&S; if P fails to submit requisitions respecting
objections to title w/in the required time, they will be deemed to have
accepted the vendors title (Majak Propertyies Ltd. v. Bloomberg).
Requisition of Conveyance (wholly within the control of V) can be
requisitioned at any time before closing. Toth v. Ho established at
Requisitions going to the Root of Title may also be requisitioned after the
requisition date (i.e. extraordinary situation where P would receive
nothing).
If P requisitions a defect on title, the Rescission Clause in the
agreement of P&S allows V to rescind the contract provided that P made
1) a valid objection to title which is 2) made in writing, 3) which vendor is
unable or unwilling to remove remedy or satisfy or obtain insurance and,
4) purchaser will not waive it, then, the agreement is at an end. This
is a vendor driven remedy system imported from Bain v. Fothergill to
allow vendors who are bona fida, once they discover their title is bad, to
can call off the deal. Courts dont like this provision (they want purchaser
to be able to take property and sue for abatement), so they have put
limits on the exercise of this clause. For instance, a reckless vendor is
not entitle to rescission (11 Suntract Holdings Ltd).
Liabilities of Specific Parties
Determining the Liability of the Purchaser Post-Breach
1. Determine who the Purchaser is: The Privity of Contract rule
establishes that an injured party can only obtain damages from the
individuals they dealt with in the course of the contract, except in the
case of an agency relationship, where the agent is not liable for the
contractual obligations of their principle, unless the contract is under
seal. Where a trustee is party to the contract, the trustee is liable for any
damages resulting from the breach. However, Trident established that a
bare trust, where the trustee has no operations discretion and acts as an
arm of the principles, creates an agency rather than trust relationship. In
regards to a contract under sela, Friedmann Equity Developments
Inc. v. Final Note LTD established that the beneficial owner is not liable
for breach of a sealed contract, and that the law will enforce a contract
under seal even without consideration. Furthermore, the court held that a
corporate seal equivalent to signature, and ,ortgages automatically
sealed contract. In situations were an individual signs for a company that
is to be incorporated before the completion of the contract, 1394918
Ontario Ltd. v. 1310210 Ontario Ltd stipulates that while the CL
requires two parties to be liable under the contract at all times, the
Business Corporation Act protects persons signing for unincorporated
companies that fail to become incorporated by stating that they are not
liable for the contract (leaving only the other party contractually
obligated).
Realty Ltd established that Vs agent may have a limited Duty to Advise
if P relied on them for market and pricing information
2. What Duties does the Agent Owe (contractual/fiduciary)? All real
estate agents owe the FDs of confidentiality, candour, and loyalty to
their clients (Hodgkinson vs. Simms). Hodgkinson also sets out
several indicia to assist in recognizing the existence of fiduciary
relationships established in Knoch Estates: (1) scope for the exercise of
some discretion or power; (2) that power or discretion can be exercised
unilaterally so as to effect the beneficiary's legal or practical interests;
and, (3) a peculiar vulnerability to the exercise of that discretion or
power. However, these criteria are discretionary as it is possible for a
fiduciary relationship to be found although not all of these characteristics
are present, nor will the presence of these ingredients invariably identify
the existence of a fiduciary relationship. The law has also developed to
obligate and agent to act as a reasonably competent agent on their
clients behalf, and depending on the case, there may be additional
contractual obligations imposed on the agent. The Duty of Loyalty
was breached by the agent in Soulos v. Korkontzilas; here the court
imposed a constructive trust as a result of a breach which met the
following 4 criteria: 1) The defendant must have been under an equitable
obligation 2) The assets in the hands of the defendant must be shown to
have resulted from deemed or actual agency activities of the defendant
in breach of his equitable obligation to the plaintiff 3) The plaintiff must
show a legitimate reason for seeking a proprietary remedy 4) There must
be no factors which would render imposition of a constructive trust unjust
in all the circumstances of the case. Phillips v. R.D. Realty Ltd
stresses the fact that parties seeking recovery after a breach must be
able to prove damages. Finally, the Duty of Candor was litigate in
Ocean City Realty Ltd. v. A & M Holdings Ltd where the court
developed an objective test in order to determine the extent of the duty
by asking by what a reasonable man in the position of the agent would
consider, in the circumstances, would be likely to influence the conduct of
his principal? Knoch Estates v. Picken further clarified that Ps agent
has no duty of candor to V, but they cannot make misrepresentations.
3. Did the Agent Act Negligently? The standard of care for negligence in
an agency relationship is that of a prudent agent. Case law has
established certain principles that help clarify what constitutes
negligence on the part of a real estate agent: an agent who represents
themselves as a specialist or expert has a higher duty of care (Olsen
v. Poirier), an agent who does not inform themselves regarding market
conditions falls below the standard of care of the prudent agent (Wong
v 407527 Ont. Ltd), and an agent can be found negligent for
contractual deficiencies such as not securing a rental guarantee where
the rental income was relied upon (Wong v 407527 Ont. Ltd), or
recommending their clients rely on inadequate warranty statements,
especially while simultaneously failing to disclose material facts (Vokey
v. Edwards). There are several possible consequence of an agents
negligence: an negligent agent will be disentitled to commission (11
10
defects, the court has attempted to alleviate this burden the court in
Winnipeg Condominium Corp v. Bird Construction, based on the facts of
the case, held that a purchaser who takes reasonable steps to Inspect is not
liable for defects due to contractors negligence. In the broader picture, in
order to determine is something constitutes a defect in the land at all, the
use of the land must be taken into account (Tonys Broadloom & Floor
Covering Ltd. v. NMC Canada Inc).
Should the Party seek Specific Performance?
Specific Performance is a remedy whereby an injured party can enforce
the terms of the contract, possibly with abatement. Under the old law, SP was
almost automatically available to both P and V (Bashir v. Koper [1983]
OCA). However, under the current system, in order to be allowed to exercise
SP, P must demonstrate that there is no suitable alternative (uniqueness),
and as such, damages are an inadequate remedy. When evaluating whether a
suitable alternative is available, the court will look at availability at the time
of the breach (John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd). The
party who is claiming the property is unique has the burden of proof (904060
Ontario Ltd, 11 Suntract Holdings Ltd). Because of this requirement, if P
desires a property exclusively for profit, the remedy of SP is not available to
them bc a property purchased for profit cannot be unique (Domowicz vs.
Orsa, Semelhago).
Once it is determined that a party is entitle to SP, the court needs to
decide from what date the damages flow the date of breach, mitigation date
(the date by which the injured party should have or did mitigate their
damages), or the date of the judgment. However, only in extreme situations
will the court evaluate damages at the time of judgment, so it is in the best
interest of the injured party to mitigate their damages (Annsdell v.
Crowther); however, there are situations where the damages will be
assessed later (Wroth and Another v. Tyler). A party who is entitled to SP
also has the right to elect to damages in lieu of SP (Semelhago). Were a
party seeks SP w/ and abaitment, the court considers the request on the
standard of the reasonable purchaser, and attempts to discern the intention
of the parties from an agreement which did not contemplate what actually
transpired (11 Suntract). In very rare cases, V may be able to enforce SP
with an abatement where they are able to convey substantially what P
bargained for (LeMessurier v. Andrus).
There are equitable defenses that may be raised by the offending party
when the injured party seeks remedies such as SP these include: the
defenses of laches (Grauer Estate v. Canada), clean hands (Hong Kong
Bank of Canada v. Wheeler Holdings), hardship (Stewart v. Ambrosina
et al, 11110049 v. Exclusive Diamonds), and unfairness (McCorkell v.
McFarlane).
Did Fraud affect the validity of Title?
Once a party is defrauded out of their claim in land, the first thing that
must be discerned is their place in the chain of transactions relative to a
forger or fraudster. Under the immediate indefeasibility system, an innocent
party on title is automatically given good title. However, this is not the
current law (although it was applied to an extent in CIBC Mortgages Inc. v.
11
12
Bowser vs. Prager [1999] OJ no. 1438 (SC): Established the test for
Incapacity: A party seeking to avoid a transaction on the grounds of mental
incapacity must est. that 1) they were mentally incompetent at the time, and
2) that the other party had actual constructive knowledge of this. There is
also authority for the proposition that where the party does not know of the
incompetence but takes unfair advantage the agreement should not be
enforce.
(Waddams Law of Contracts)
Holding: Agreement enforced he was not so incapacitated that he did not
understand. No one knew of his illness, and the price was fair. However, the
court does not enforce specific performance on the basis that it would inflict
undue hardship on Prager
(SP is an equitable remedy). Awards damages in lieu.
1110049 Ontario Ltd. v Exclusive Diamonds Inc.: It is appropriate for the
court to refuse specific performance if the result would be an undue
hardship to the defendant (equitable remedy).
***Look at hardship at the time the contract was enforced.
McMullen v McMullen (2006): Improvident Decisions do not equate to
Mental Incompetence: Evidence of improvident decisions is not enough
to establish mental incompetence. Law allows ppl to make bad choices,
provided they are capable and their decisions do not harm others.
Banton v. Banton: Duty of Lawyer at Incapacity: Predatory MarriageAn
attorney for a donor who has mental capacity to deal with property is merely
an agent andthe attorneys primary responsibility in such a case is to carry
out the instructions of the donor as principal. As an agent, such an attorney
owes fiduciary duties to the donor but these are pale in comparison with
those of an attorney holding a continuing power when the donor has lost
capacity to manage property.
Stubbs v Erickson: Onus on party who knowingly deals w/
incompetent person: Damages for loss of bargain are not recoverable
where a court exercises its discretion not to award SP in an unconscionable
bargain (Author). Found that the purchasers, who lived next to seller for a
year, must have been aware of her alcoholism. However, the court believed
the purchasers had acted in good faith and did not exert undue influence.
What distinguishes this case from authorities is that seller had legal advice.
The law must place on persons who knowingly deal with mentally
incompetent persons the onus to show that they gained no undue advantage
as a consequence or, at the very least, they did not knowingly gain such an
advantage.
Statue of Frauds
The purpose of the Statue of Frauds is to prevent the possibility of a
nonexistent agreement between two parties being "proved" by perjury
or Fraud. This objective is accomplished by prescribing that contracts not
be enforced unless a written note or memorandum of agreement
exists that is signed by the persons bound by the contract's terms or
13
14
15
Beer v Townsgate I Ltd [1995] (Gen. Div.) & CA: Criteria for declaring
a Contract Void for Illegality: If parties enter into a illegal K with no
intention of complying with the law, its unenforceable. If there is a legal
problem at the time the contract is signed, but the party can demonstrate
their intention to rectify the problem before closing, the contract is
enforceable. Illegality as to factual information must be distinguished from
illegality as to the performance of the contract - public policy favours that
contracts should not be rendered unenforceable merely because of technical
deficiencies.
Duty of the Lawyer
Law Society of Upper Canada: The general rule is that a lawyer should not
act for more than one side in a real estate transaction. However, there are
times when a lawyer will decide to make an exception to the rule, for any
number of reasons. When he or she does so, it is imperative that each party
involved in the deal is informed in writing.
Wong v 407527 Ont. Ltd: Responsibility to the Lawyer for
Contractual Deficiencies: If the parties and the agents sign the contract
and deliver it to the lawyer after it is signed, the lawyer is not responsible for
the flaws in the contract. If the clients wish to extricate themselves from the
deal, then it is the lawyers duty to point out the flaws in the contract.
Identity and Liability of the Purchaser
***Normally, only the parties to the agreement may be the sole persons or
entities that can be sued for breach of contract.
Trust: The trustee is liable should a law suite result, not the beneficiary.
Bare Trust: A bare trust acted as the trustee when an individual or group
wanted to buy property but be protected. Unlike a real trust, the bare trust
did not exercise discretion, but acted as an arm of the beneficial purchaser.
Bc of Trident, Bare Trusts are no longer considered an agency.
Agency Contract: Undisclosed principle is liable unless K is under seal, and
if it is a registered contract you get the benefit of a seal. When you buy a
property as a principles agent, the principle is on the hook.
Privity of Contract: You only get to sue the ppl you deal with; agency is an
exception (many say a stupid one).
Contract Under Seal: A contract under seal does not need consideration,
has a limitation of 20 years, and gets around the undisclosed principle rule
(only the agent can be sued). Gets around the undisclosed principle rule that
applies to trusts where parties not engaged in the contract directly can be
liable. For more on seals see text p. 61.
Business Corporations Act: Outlines the rules regarding contracts entered
into prior to incorporation (see text p. 27), and outlined who can be held
responsible for breach of contract where a corporation is involved (See text p.
30).
16
17
18
19
Toll vs Marjanovic: Agent is a stakeholder holding for both parties if the agent absconds, they cannot go after each other: Vendors agent
absconded with purchasers deposit. Purchasers tried to sue vendor to
recover, but court held that the vendor was not vicariously libel for the
actions of the agent. Whether a RE agent or broker becomes a dual
agent by implication appears to be a question of facts. On the facts of
this case, court concluded that the broker acted as a dual agent for both the
vendor and the purchaser. When the agency receives the money, they
become a stakeholder for both parties
Who do Agents Represent?
Pre-Knoch and Post-Knoch: Pre-Knoch, both agents technically paid by the
Vendor, meaning both agents owed a fiduciary duty to the vendor. This put
the pur at a bargaining disadvantage, and the vendor at an economic
disadvantage. After Knoch, you have to figure out who they have a contract
with, whether oral or written, to determine who they have a duty to.
Knoch Estates v. Picken: Purchasers Agent does not typically owe a
Fiduciary Duties to Vendor An agent cannot serve two principals where
their interests are in such basic conflict as that of purchaser and agent in a
real estate transaction. The purchasers agent may create a situation where
the vendor reposes trust and confidence in the agent to such an extent as to
put the agent in the position of a fiduciary, but hose circumstances were not
present here. If the selling agent does not have any direct dealings with the
vendor, there is no duty
Griffiths: Purchasers agent owes a limited duty to vendor to present offers
and not directly mislead them this limited duty does not give rise to broader
fiduciary duties.
Finlayson: The payment mechanism does not create an agency relationship,
nor does the presenting of the offer create, nor does the MLS agreement.
20
21
22
23
24
will fail. In my view the appellants have suffered no damage from the alleged
breach of contract and the alleged conspiracy and their claims based on
these causes of action were property dismissed.
Duty of Candor
The agent is under an obligation of candour to his principal and he is bound
to disclose all facts to his principal.
Duties to Third Parties
In the past the concept of duties to third parties has primarily meant duties
to purchasers. The field is now complicated by the fact that certain
purchasers may, in fact be principals. Generally, because the duties to
principals are more extensive, the range of responsibilities to third parties
has been expanding. The Hedley Byren principle has been used to fix liability
on listing agents who misdescribed or misrepresented the property, the title,
or zoning.
Ocean City Realty Ltd. v. A & M Holdings Ltd. (1987): Test for
Disclosure/Candor: A real estate agent's duty to his principal is to be
construed strictly. The onus is on the agent to show that he disclosed
everything known to him respecting the subject-matter of the contract which
would be likely to influence the conduct of his principal. The onus is not
confined to those instances where the agent has gained an advantage in the
transaction or where the information might affect the value of the property,
or where the agent is in a conflict of interest with his principal. The test is
an objective one to be determined by what a reasonable man in the
position of the agent would consider, in the circumstances, would be
likely to influence the conduct of his principal. The agent cannot
arbitrarily decide what would likely influence the conduct of his principal. Any
doubt that the agent may have can be readily resolved by disclosure. Given
that the agent failed to satisfy the onus on her to justify her failure to fully
disclose the vendor was not required to give evidence of the effect such nondisclosure might have upon it. The agent breached her fiduciary duty and as
a consequence was not entitled to the commission claimed.
Knoch Estates v. Picken: Purchasers Agent has no Duty of Candor to
Vendor, but cannot make Misrepresentations ***See Page 9
Conditions in the Agreement of Purchase and Sale
Remedies: The court attaches certain remedies automatically, but a welldrafted agreement can overwrite these remedies and substitute their own.
Conditions, Representations, and Warranties
Rescission v. Repudiation
25
26
27
28
these criteria, then until the event occurs, there is no right to performance on
either side because no contract exists until the condition is fulfilled. A true
condition precedent cannot be waived, even though it is in favour of one
party only and the fulfillment of the condition is completely w/in the control of
that one party.
Note: The court has found a condition precedent where no third party was
involved. The scope of the holding in is uncertain, as later cases have sought
to limit its impact bc in some situations, it is bound to produce absurd results.
Beauchamp v Beauchamp: Fulfilling a Condition Precedent: A
condition precedent doesnt need to be strictly fulfilled, as long as party for
whos benefit the condition exists is satisfied that it has been fulfilled. Case is
unclear regarding whether this was not a true condition precedent, or
whether the purchaser had fulfilled the condition.
Barnett v Harrison: Court Affirms Turney v. Zilka: Raised the
question as to whether a contracting party may waive a condition of
the k on the ground it is intended only for his benefit, and then bring
an action for specific performance. Applied Turney v. Zilka, and upheld it
on the grounds that: 1) if the court allows a party to waive true conditions
precedents (which should void the contract), then the court is basically rewriting the contract 2) Removing the rule would allow ppl to speculate on real
estate 3) Application of the rule in Turney v. Zhilka may avoid
determination of two questions which can give rise to difficulty (i) whether
the condition precedent is for the benefit of the purchaser alone or for the
joint benefit and (ii) whether the conditions precedent are severable from the
balance of the agreement 4) The rule in Turney v. Zhilka has been in effect
since 1959, and has been applied many times. In the interests of certainty
and predictability in the law, the rule should endure unless compelling reason
for change be shown.
Parties can contract out of Turney v. Zhilka: This case gave the SCCs
seal of approval to a simple and practical way of getting around the
difficulties of the Turney v. Zhilka situation. A party can contractually provide
that a condition is inserted for the partys sole benefit and that the party
reserves either expressly or by necessary implication the right to waive the
condition that was inserted in the partys favour. The courts have regularly
given effect to such provisions.
29
acted, but did this purchaser act reasonably in light of their expert
consultant. Mrs. Savage acted in goof faith to discharge her obligation.
Chan v. Hayward: Reasonable Efforts: It is the "subject to financing"
clause that causes all the problems in this instance. While the word "waiver"
is used in the agreement, the doctrine of waiver is not strictly
applicable because neither party is giving up a right to insist on the
performance of the contract according to its original tenor. Instead, each
covenanted with the other to allow the plaintiffs the right to "elect" whether
they would complete if the plaintiffs got suitable financing. The parties orally
agreed to change the terms of the written agreement by allowing the
purchasers an additional period to acquire the money. Because no fixed date
was set, the purchasers had up to the completion date. At some point, the
purchasers did tell the vendors they could not get suitable financing and so
the sale came to an end. Having made reasonable efforts to acquire the
money, the law required them to do no more. Since they did not
default under the terms of the contract, they are entitled to return
of their deposits.
Duty to Satisfy Self
Flack v Sutherland: Reasonable Person Test for Satisfaction: The
correct test in asking whether the financing sought to be obtained was
satisfactory to a reasonable person with all the subjective but reasonable
standards of the respondent. Agreement conditional on purchaser obtaining
75% financing. The respondent had made his best effort to obtain financing
and had acted in good faith. There was no obligation on the part of the
respondent to accept the vendor's offer of financing. This would have
constituted a new agreement to which the respondent was not bound.
Marshall v Bernard Place: Contractual Discretion & Good Faith:
Contract applied the standard of sole discretion, but at the very least you
have to act honestly and in good faith even if it is completely subjective. No
contractual discretion is absolute you cannot arbitrarily exercise discretion.
Test for Discretion: Discretion has to be exercised on the basis of the event
supporting the condition. Once the issue you are upset about falls within
those criteria, then you can be as subjective as you want to be. First
objective analysis, then subjective analysis based on the language of the
contract.
What is being Bought and Sold in a Real Estate Transaction?
Fixtures and Chattels
Futures are real property, chattels are personal property
Chattels can become property if attached to the real property
Chattels can remain chattels if they are attached to the property
Fixtures can become chattels if detached from real estate, so long as it
does not affect third parties.
You can find cases going both ways very little guidance from the law
30
31
What you saw is what you get important for urban properties, are
you getting what you bargained for?
If you are buying a property based on quantity, then the court has the
option to enforce a price abatement
Pur can take what the vendor has with an abatement (the vendor does not
have the right to force the pur, unless the vendor can give substantially what
was bargained for like LeMesurier)
Dynamic Transport: Where the Property is Badly Described, the
Court can look at the Intention of the Parties: Description of the portion
of the land being bought was so badly described the court could not
determine what was being purchased. Court decides to look at the parties
intention and the surrounding circumstances. The lot was shaped so that
there was a discernable 4 acre portion, but it dissected the barn. As such,
they used the more or less language to move the boundary slightly to keep
the barn intact.
Turney v. Zhilka: A Contract which does not Communicate the
Intention of the Parties is not Enforceable: vendor offered 60 acres, but
intended to retain 5 acres where their house was situated. When a new
survey was conducted, they could only sell 62.75 acres. Purchaser claimed a
breach of big promise and sued for specific performance. Referred the deal
to a master to try and figure out what the parties agreed to, and could not.
Referred back to the judge, who allowed the vendor to retain ten acres at
the time, if the vendor kept ten acres you did not need consent for a
severance. The pur was now getting 52 acres for the price of 60, but was
happy with the judgment because the value of the land had gone up. The
vendor appealed the decision bc he wanted to make more money on the
land, and was successful the court could not figure out what the deal was,
and therefor no one was bound by the contract.
Murphy v. Horn: More or Less does not cover Misrepresentations or
Substantial Difference: general principle: where a misrepresentation is
made by V to a matter within his knowledge, and even though it may be
founded on honest belief in the truth of the representation, and P has been
misled by such misrepresentation, P is entitled to SP, so far as the vendor is
able to do so, and to have compensation for the deficiency. In sale of land
when quantity is stated and the price is stated in a lump sum the
presumption is that the price was fixed with reference to the quantity. In the
absence in the case now before the Court of any description by metes and
bounds from which the purchaser could have checked up the quantity for
himself, I think the words more or less are not to be construed as the
equivalent of as estimated, or as supposed, but are construed to mean,
about the specified number of acres, and as designed to cover small errors
as sometimes occur in surveys. The deficiency in the present case amounts
to substantially the difference between acres and arpents, or 16.5 per cent of
the quantity of land. Entitled to an abatement of the purchase-price on that
basis, that is to say 16.5 per cent of $16,000
32
33
34
for the payment of money. It is not a contract which runs with the land. If you
want to get the benefit of a contract you need to get an assignment. V got
the insurance proceeds. The court didnt think he should get the proceeds;
the insurance company sued V to get back the proceeds and won.
Mortgage law
Equity transfers the legal title to the lender and the borrower holds the
equitable title. The lender has a charge obligated to deliver possession/title
back to the borrower. When V gets purchase price they are obligated to give
the title. The vendor has a charge on the property for the unpaid purchaser
price.
The Contract Provision
Wile v. Cook: Utility of the Contract Provision in reversing Equitable
Conversion: Significantly alleviates the harshness of the common law. Under
that provision, the buildings and equipment remain at the risk of V until
closing. All the clause provides for is that if P elects to go through with the
purchase he is entitled to whatever insurance proceeds may be owing. It does
not give P any guarantee that the insurance is necessarily collectible. The
SCC implied a term of contract that the closing date will be extended for a
reasonable time to find out what the insurance is and also said that they
need to tell P what the insurance is. The case is perfectly reasonable.
Vendors Duty
Abel v. McDonald: Deceit and fraud can create an A-Typical liability
for V: unanimously conclude the evidence and the record in the absence of
any explanation from V, is sufficiently compelling, not only to support but to
warrant a finding of fraud through the active non-disclosure on the part of V.
There was also a specific clause stating that the property was at the risk of V.
appeal is allowed with costs. V is not responsible for the damage, if damage
is substantial they have normal election of options. Deceit prevented P
from exercising their rights under contract. They could have cancelled
the deal and may not have closed. In this case they had to pay P after closing
the cost of repair. Even if it was a small problem, V would have had to pay.
But if they hadnt been deceitful they would have had no liability.
Lichtenberg v. Johnstone et. Al.: Discretion of the Courts/V liable for
leaving property Vacant: Action arises out of an agreement of purchase
and sale of a home. V moved out 3 weeks before closing, house left vacant.
Floor tiles in the rec room lifted. Contract provided that all buildings on the
property and all other things being purchased shall be and remain until
completion at the risk of V. Having abandoned the property, V placed
himself in a position of not being able to use reasonable care for the
preservation of property. The case was argued on substantial damage. The
case is there to show how ridiculous the courts can be when attempting to
get around equitable conversion and imputing a duty on V. Using tools to hold
V liable.
35
36
This rule is not designed to shield sellers who engage in Fraud or bad
faith dealing by making false or misleading representations about the
quality or condition of a particular product. It merely summarizes the
concept that a purchaser must examine, judge, and test a product
considered for purchase himself or herself.
The modern trend in laws protecting consumers, however, has minimized
the importance of this rule. Although the buyer is still required to make a
reasonable inspection of goods upon purchase, increased responsibilities
have been placed upon the seller, and the doctrine of caveat
venditor (Latin for "let the seller beware") has become more prevalent.
Generally, there is a legal presumption that a seller makes certain
warranties unless the buyer and the seller agree otherwise. One
such Warranty is the Implied Warranty of merchantability. If a person buys
soap, for example, there is an implied warranty that it will clean.
If both the buyer and the seller are negotiating from equal bargaining
positions, however, the doctrine of caveat emptor would apply.
Laskin Quote (McGrath vs. McLean)
Caveat Emptor: Absent fraud or misrepresentation, you take the property as
you find it. You can also meet your duty or contract out of your duty to
disclose latent defect in the contract.
Duty to disclose and duty to warn.
So often with the duty to disclose, parties will allege that silence amounts
to fraud or misrepresentation.
PROFESSOR: Duty to disclose is a contractual duty, currently sort of a tort
duty of fraud/misrepresentation as proposed by Laskin.
There is conflict between whether this duty to disclose is based in tort or
contracts.
Exceptions to Caveat Emptor
1) Contractual Warranties
2) Common law implied warranties: In certain circumstances purchaser has
guarantees about the quality of the property implied into your K
3) Statutory warranties: apply only to new homes.
4) Misrepresentations: Misrepresentation is a tort claim. Doesnt matter if
defect is latent or patent if you have a misrepresentation.
5) Active concealment: Theory here is that vendor has converted a patent
defect into a latent defect. Akin to fraud worst thing vendor can do. If
you find a defect has been concealed it doesnt matter if its latent or
patent its fraud
6) Silence amounting to misrepresentation: Patay v. Hutchings: Ps agent
knew this person was buying this house b/c this house was clean and
health. So knowing purchaser had particular proclivity, silence can be
misrepresentation if you dont correct misunderstanding. That is a hard
test.
7) Error Insubstantialis: Substantial error or mistake such that purchaser is
not getting what she bargained for.
8) Latent vs. Patent Defect
Latent vs. Patent Defects
37
38
39
Tonys Broadloom & Floor Covering Ltd. v. NMC Canada Inc.: If there
is an Indication of a Patent Defect, P has a Duty to Investigate: To
make a determination as to whether something is a defect in the quality of
land, the intended use of the land must be taken into account. They got what
they bargained for and industrial property. If it was a defect, then it was a
patent one in the circumstances. Note: Use this case to say there is an
indication of patent defect if there is some indication of a problem, you are
under a duty to investigate. However, this might be more stringently applied
to a professional developer. Also, argument that this is not a defect when
the property can still be used the way it has been used. This, again, may be
special to industrial type properties.
Contract Provisions
When you are dealing with a real estate question the first place you look at
what the agreement of purchase and sale said. Usually ct will honour those
rules.
Patent and Latent defects: Ct says, if you could see it, you are stuck with
it; if you couldnt see it, maybe you will be stuck with it, maybe you wont.
Clause is meant to say you did inspect it, and you are stuck with all patent
defects. But if you dont inspect it you are still stuck with the patent defects.
By giving the purchaser the right to inspect you are shifting more things out
of the latent box into the patent box.
Fraser-Reid v. Droumtsekas: Intention may be read into a
Contractual Clause and can Override Technical Language: Court
interpret the following clause: providing that the Vendor has disclosed to the
Purchaser all outstanding infractions and orders requiring work to be done on
the premises issued by any Municipal or Provincial or Federal Authority in
respect to the premises referred to herein: The words providing that
ordinarily signify or denote a limitation upon something preceding, or a
condition on the performance or non-performance of which the validity of the
instrument may depend. That is not invariably so. It may also affirm that a
proposition of fact is true and take effect as a warranty. The mere use of a
technical word should not obscure its true nature. A warranty is a term
in a k which does not go to the root of the agreement b/w the parties but
simply expresses some lesser obligation, the failure to perform which can
give rise to an action for damages, but never to the right to rescind or
repudiate the contract. An affirmation at the time of sale is a warranty
provided it appears on the evidence to have been so intended. No special
form of words is necessary
Implied Warranties
In certain circumstances you get some guarantees about the property. They
are implied into your contract. These warranties only apply to a home that is
not complete. These contractual warranties are: Fit for habitation, Good
workmanship, Good materials, etc.
Fraser-Reid v. Droumtsekas: Houses under construction have Implied
Warranties: See above.
40
Justice Dickson: A breach was created in the doctrine that the buyer must
beware, with recognition by an English court of an implied warranty of fitness
for habitation in the sale of an uncompleted house. There is no implied
warranty of fitness for human habitation upon the purchase of a house
already completed at the time of sale. A purchaser must fend for himself,
seeking protection by express warranty or by independent examination of the
premises.
Jaremko v. Shipp Corp: Quiet Enjoyment: The vendor breached the
covenant of quiet enjoyment, which is implied when you give a deed.
However, quite enjoyment in law means no one else has the right to live in
the unit. Remember there are different rules about condos and disclosure.
Prof thinks this was wrongly decided: Possible Developer argument: it
was a patent defect because she knows it was the driveway. Caveat Emptor
they disclosed it was the moving room. No evidence of fraud or
misrepresentation, no error in substantialias. And, P was a real estate agent
with specialized knowledge.
Statutory warranties
Applies to new homes: Ontario New Home Warranty Program. Makes
developer fix the properties or prevents the builders from building in Ontario.
Doesnt matter if it is latent or patent defect, if it falls under the warranty it
gets fixed. P of a new home has to assure that the builder is registered with
ONHWP and pay a fee. At closing, P will complete the certificate of
completion and possession (CCP) provided by the builder/vendor and receives
a warranty certificate at that time. ONHWP acts as an impartial referee,
objectively hearing both sides before advising the parties or making a formal
ruling, usually after making an on-site inspection.
Grudzinski v. Ontario New Home Warranty Program: Claim under the
Ontario New Home Warranty Program: I disagree with the Programs
position that the homeowner to rely on this aspect of the definition, must
show the home i.e the entire home, is virtually uninhabitable, uncomfortable
beyond reason, unsafe or in a state of imminent collapse. The functional
deprivation of the use of one third of a residence, whether the 1/3 area was
intended for use as storage, as recreation room, as studio or office, is of such
magnitude that it can only be described as material and adverse. Material
means significant, of much consequence, important, pertinent, germane or
essential. What is significant is that they were precluded from using and
enjoying their basement, 1/3 of their home, for any reasonable purpose.
Fraud
Abel v. McDonald: Deceit and fraud can create a Liability that
Circumvents Caveat Emptor: Basement floor sank, V concealed. Deceit
and fraud can create a liability that you may not have normally had. In this
case they had to pay P after closing the cost of repair. Even if it was a small
problem, V would have had to pay. But if they hadnt been deceitful they
would have had no liability.
41
Misrepresentations
Can be both a promise and a misrepresentation. Different remedies
depending if it is a tort or contract claim. Courts use this as a way of getting
around Caveat Emptor. When dealing with a fact situation, you have to
ask yourself if there is a misrepresentation before you look at
whether it is latent or patent.
Thiel vs. Milmine: Negligent Misrepresentation Circumvent Caveat
Emptor: At the very least, the defendant made a representation to the
plaintiffs that the basement was a dry basement with reckless disregard as to
whether it was true or false. Liability was found.
Heightington: A party must be proven to have knowledge in order to
make a Misrepresentation: The land was subject to radioactive
contamination, but the action against Ontario Housing Corporation, the
vendor, was dismissed at trial because apparently it did not know of the
contamination and the trial judge found "[n]o representation was made here,
and on the evidence, it cannot, in my opinion, be shown that Ontario Housing
Corporation was 'guilty of concealment' when the land was leased or sold."
The province was found negligent for not upholding the Public Health Act and
liable for damages to the property caused by that negligence.
Patay v. Hutchings: Where Agent does not perform Due Diligence
their failure to inform client can amount to Misrepresentation: Farm
across the street is a secondary site for the garbage dump. Found that the
purchasers agent did not know about the potential site, but she had a basic
responsibility to make reasonable enquiries because she knew about the P
poor health. Agent was liable.
Note: Is this a latent defect or a misrepresentation case? You can use this
case to argue does the defect have to exist today, or can it be a potential
defect?
Goldstein vs. Davidson: Must disclose potential Heritage
Designations: Found both the vendor and the agent liable in damages to
the plaintiffs for the negligent misrepresentation of the agent in failing to
disclose a potential heritage designation.
Silence Amounting to a Misrepresentation
Sevidal vs. Chopra: Vendor has a duty to disclose the neighbourhood
Danger: The court also says they liable for fraudulently concealing the
contaminated soil they found out about days before closing. So, if you
discover a latent defect that you didnt know about, you must disclose it to
the purchaser even if you discover it after you sign the agreement.
Note: Theory of duty to disclose the latent defect can be used to protect the
Savidals where equitable conversion fails. Vendors have a duty to disclose
the radioactive soil because it is dangerous etc., except they had no
knowledge of it when the deal was signed. However, they had a duty to
disclose neighborhood defects that go to health and safety. However, the
42
vendor argued that the govt told them not to worry about it, but the court
doesnt buy that argument
Active Concealments
Vendor converts a patent into a latent defect so the purchaser cant find it. If
there is a defect being concealed it doesnt matter if it is patent or latent b/c
it is Fraud and the courts hate this kind of thing.
Jung v. Ip: V who actively conceals a Latent Defect is Liable: The
vendor had knowledge of the defect, and this was a latent defect (termites).
Court looked at Laskin, and held that a vendor who is aware of the defect
must disclose a latent defect. The fact that they were ignorant of the
law (as they had been duped) did not excuse them of their
responsibility. Caveat Emptor does not apply when there is fraud. Court
said that silence amounted to concealment (prof disagrees, think it should be
misrepresentation). The cost consequences of fraud are much different.
Agents were also found liable because they should have known this was a
termite neighbourhood and they should have put clauses for termite
investigation.
Abel v. McDonald: V who actively conceals a Latent Defect is Liable:
Deceit and fraud can create a liability that you may not have normally had. In
this case they had to pay P after closing the cost of repair. Even if it was a
small problem, V would have had to pay. But if they hadnt been deceitful
they would have had no liability.
Latent Defect in Property
Not all latent defects are the vendors responsibility ones that affect, health,
safety, use are the vendors responsibility. Ones that affect only the value are
the purchasers responsibility.
Ceolaro v. York Humber: P must prove Latent Defects go to
Habitability, Health, etc: Court agreed there was dangerous methane next
door, and it was not something in theory that the pur could have discovered,
and it was not disclosed. Court, however, held that there was no danger bc
there had been no evidence of any methane leakage, and they had complied
with all the govt regulations and the govt felt that it was safe.
Note: In a condo, there are different statutory obligations to disclose, so it is
unclear how this would apply to a different type of residential property. Does
this set up a fourth head under the duty to disclose latent defects material
to a purchaser making their buying decision? Prof does not think this is fair to
broaden this to non-condo circumstances. This case is also used as an
authority to say that is the danger is so remote, and they have done
everything possible to alleviate the danger and the govt has said it
is not a danger, this can guide the court.
***Distinguished from Sividal due to concealment and seriousness of health
risk.
Swayze vs. Robertson: Unfit for Habitation: A latent defect that
requires disclosure by the vendor must be one that renders the premises
43
uninhabitable. The term "premises unfit for habitation" does not mean that
the defect must be such that the entire residence must be rendered
uninhabitable. Application of the principle can and must mean something
more qualified. Any decisions regarding habitability of the premises
must be made on a common sense and reasoned approach based on
the facts of each case. The correct approach must be to consider it in the
context of whether the latent defect has caused any loss of use, occupation
and enjoyment of any meaningful or material portion of the premises or
residence that results in the loss of enjoyment of the premises or residence
as a whole. That, I find has been established in the case at bar. The latent
defect should have been disclosed (Basement was prone to flooding).
Tonys Broadloom & Floor Covering Ltd. v. NMC Canada Inc.: To make
a determination of whether something is a defect in the quality of
land, the intended use of the land must be taken into account ***See
p. 25.
Latent Defects in Neighbourhood
Sevidal vs. Chopra: Where the vendors acquire knowledge of
potentially dangerous latent defect in property at any time before
closing, they are required to disclose the defect to the purchasers
***See Above.
Godin v. Jenovac: P must Prove Latent Defects in Neighbourhood
Affect Health etc: The proximity of landfill sites was held to be immaterial
b/c they were considered not to pose a health standard
Marathon Realty v. Ginsberg: P has Duty to Become Knowledgeable
and Consult Public Record: Property had been down-zoned and the pur
bought it to develop it into a subdivision. The vendor had no duty to draw
attention to the published zoning change, which is deemed public knowledge.
Vendor made no representations. Good case for Caveat Emptor you have
a duty to become knowledgeable as a purchaser, and protect yourself by
contract.
Title Defects
Principles of the Title System:
Curtin: No one has to look behind the title bc it is guaranteed by the govt
Mirror: the title on the search mirrors the real title
Insurance: If there was an error on the title document provided by the
government, the government would have insurance in place to resolve the
issue
***Subject to Easements, government claims (taxes), breaches of the
planning act, fraud, notice
Converting Ontario to Land Titles: Get a lawyer to do a search, tell the
govt it is good, submit this to the govt, send a notice to adjoining
landowners. Govt mandated that every new sub-division/condo was
44
registered in land titles, and the govt moved everything else into land titles
itself. When you have absolute title, your neighbours have no claim, where
as in LT qualified (the govt registered the title without consent), your
neighbours may have a claim. If an adverse possession existed before the
property moved into LT it would be protected.
Guaranteeing Title: Solicitors opinion system. Lawyer reviews title and
tells pur they will have good and marketable title. If there is a fraud on the
title, the solicitor is not responsible. The standard is one of a prudent
solicitor.
Title insurance: Instead of lawyer giving opinion that the title is good, the
title insurance guarantees the title is good. Clients do not have to prove that
someone made a mistake if the risk is covered you get paid. Purchasers
lawyer now gives their opinion to the title insurance company, and the title
insurers will not sue lawyers unless there is fraud unless gross negligence.
Title Clause
Section 10 (p. 351): Provided that title to the property is good and free
from all registered restrictions and, charged, lien and encumbrances. Tests:
Title has to be marketable, If the court would force title on P then it is
marketable.
1) P can take less than marketable title and sue for an abatement
2) V cant force title that is less than good on a P
3) If you can compensate with damages you cant get SP
4) If defect it trivial or immaterial the title will be marketable
5) If title has to be litigated to prove it, it isnt good and marketable.
Remedies: Title Clause is considered a Big Promise (Promissory
Condition) an event that has to occur before parties promises are
enforceable against them. Language read: provided that. Title clause uses
this language, so it appears to be a condition precedent, which would mean
that the purchaser would be allowed to walk from the deal, or elect to
proceed. However, this is actually considered a big promise, so the vendor
may be responsible for damages P can accept crappy title and sue for
damages, or they can walk.
Qualifications of Title
Covenants: negative covenants are also called restrictive covenants these
restrict the use you can make of the property. Neg covs run with the land.
Positive covs are where you promise to pay money (i.e. shared road). These
do not run with the land they are personal. You have to close the deal
with a restrictive covs even if you didnt know about it. You can
amend the agreement and take the clause out saying you will accept
registered restrictions, or you can title search before you sign the agreement.
Municipal Encumbrances: i.e. developer agrees to put in sewers. Positive
covenants by the municipal govt do run with the land, or provide a
charge if it has to go do the work the pur agreed to. These are
45
encumbrances on the land you would be bound by. Lawyers write to the
municipality to ensure that the developer obligations have been met.
You must accept these minor easements to the property that
supplies services to the property or adjoining property; anything else
you put in the agreement that qualifies title.
Quality of Title: Good and free of all encumbrances except for(a few back
downs) is the quality of the title the purchaser is guaranteed to get in the
agreement of P&S.
Good Title Test: Arose out of the remedy system of specific performance.
What kind of title would the court force the pur to accept = good
title (bad definition, but thats what it is). You can force a
possessory title on a pur, but you cannot force title the pur would
have to litigate to prove. Where there is clearly no title, it would be bad
faith to elect to accept the repudiation. In Le Messurier, they were forced to
take it with an abaitment. Where there is an issue whether the title is good,
the courts may say that is the kind of title we can force on the pur. Are they
entitle to damages?
Note: For you to find that there was a patent defect you have to find that
there was title subject to a wart. Court can say that the parties agreed to take
it, not creating a legal concept outside of the agreement, the contract itself
says to take that issue. If we force them to take this defect, is P getting what
he bargained for. If P bargained for title with a wart, then you can force P to
take it.
Back Downs from good title
1. Registered restrictions and covenants that run with the lands provided
complied with
2. Registered municipal agreements if complied or security
3. Minor easements supply of services to property or adjoining
4. Easements for serviced which do not materially affect present use
5. Save as set out in agreement
Marketable Title
Clement vs. Wyatt : Test for Marketable Title: A vendor must show a
good title. This means a merchantable or, a marketable title: one which at all
times and under all circumstances can be forced upon an unwilling purchaser
who is not compelled to take a title which would expose him to litigation or
hazard. One which is free from litigation, palpable defects and grave doubts
and couples a certainty of peaceful possession with a certainty that no flaw
will appear to disturb its market value. (Planning Act case: Found the lawyer
was responsible; recovered damages against the lawyer)
Note: Clements concerns the definition of "marketable titles". Where the
purchaser is a builder buying for immediate resale, the title, to be
marketable, must be not only be one that the purchaser's lawyers believe to
be satisfactory, but also one that can be forced upon an unwilling purchaser
without any reasonable questions being asked about the title. This view casts
substantial doubt upon titles that rest upon technical evasions of The
Planning Act. Any purchaser of real estate, even if he does not intend to
46
47
dont have open contracts. The concept of patent title defect applies to case
w/ no title clause so this case in here dealing w/ this old technical concept,
could apply in open K case, but this is not how RE is bought and sold now.
Carter: The problem is you have these open K cases out there that the
litigation lawyers will turn to and use as another tool to help client recover,
and courts read them and they are unclear as to what the law is struggle as
to whether this is appropriate or not. SO VENDOR IN YOUR FACT SITUATION
CAN ARGUE PATENT DEFECT BASED ON YANDLE but recall given Yandle
even in an open K it would be hard to come up w/ a set of facts where patent
defect in title would apply implies you have to have understood significance
of what you saw (well-worn path = public right-of-way)
11 Suntract Holdings Ltd. v. Chassis Service & Hydraulics Ltd.: A
Lease which is requisitioned and cannot be discharged Constitutes a
Title Defect: This was title requisition and since vendor could not
discharge, title was defective; purchaser received specific performance with
abatement. The vendor was reckless and thus could not rely on the rescission
clause - If you knew or should have known that your title was encumbered, it
is your duty to deal with that as part of your contract; V was reckless in giving
a promise that you could not fulfill.
2 categories of requisitions: 1) Title (mortgage, tax, lease) 2) Contract
and conveyancing (fixtures, chattels, towers, eviction of tenants)
Conveyance is an encumbrance which the vendor can deal with by virtue of
his own interest or power over the property or by the occurrence of a party
which the vendor can compel. The policy of the court ought to be in favour of
enforcement of honest bargains. To rely on clause, vendor must act
reasonably and in good faith. If lease occurred before vendor purchased
property, possible to forget and get out of contract.
Steiglitz vs.Prestolite: Test for Good Title: Laskin: The appropriate test
was not whether the defect was patent or latent (Yandle & Sons v. Sutton),
but whether the purchaser was faced w/ acceptance of property which would
be materially different from that for which he bargainedIf the undisclosed
easement materially affects the land in question, then the objection to the
easement is a valid one. The same criterion would apply to encroachments.
Land is essentially open to contingent future claims. The purchasers,
therefore, can rescind the agreement where the issue is not minor. Facts:
There is a parcel of land where 6 of the property had been sold to city for the
subway. The city had also gotten an easement over some of the land to
maintain a retaining wall. At the time the city did these conveyances, the
building on the land was on the 6 and the easement. For whatever reason,
the vendor was not aware of the situation. The purchaser thought they were
buying all of the land without a major easement (not a permitted
encumbrance). Purchaser did their search and said you dont won part of the
property, so the purchaser requisitioned it. The vendor had another survey
done, and said yes your were right. The vendor went to the city, and the city
would have given and encroachment agreement saying you dont have to
take your building off our land, but they may in the future. P won.
48
Tonys Broadloom & Floor Covering Ltd. v. NMC Canada Inc: Patent
Defect Creates Wart on Title: For you to find that there was a patent
defect you have to find that there was title subject to a wart. Court can say
that the parties agreed to take it, not creating a legal concept outside of the
agreement, the contract itself says to take that issue. If we force them to take
this defect, is P getting what he bargained for. If P bargained for title with a
wart, then you can force P to take it. ***See p. 25.
49
APS enshrines rule of Bain v. Fothergill not open for purchaser to sue for
sp w/ an abatement
where there is 1) a valid objection to title which is 2) made in writing, 3)
which vendor is unable or unwilling to remove remedy or satisfy or obtain
insurance and, 4) purchaser will not waive it, then, 5) the agreement is at an
end. So, there is a system to allow vendors who are bona fida, once
they discover their title is bad, can call off the deal. Courts dont like
this provision they want purchaser to be able to take property and sue for
abatement. So they have put limits on the exercise of this clause.
11 Suntract Holdings Ltd. v. Chassis Service & Hydraulics Ltd:
Reckless V is not entitled to Rescission: AP&S provides for a title free of
encumbrances, vacant possession on closing, and ownership of all fixtures. It
makes no reference to the Cantel tower, shed, lease, or easement. V
terminated the agreement, taking the position that P objected to its title and
that it could not satisfy the objection. P tendered, but V refused to close. If
you knew or should have known that your title was encumbered, it is your
duty to deal with that as part of your contract (were you reckless in giving a
promise that you could not fulfill?)
Requisitions
Requisitions: The law makes a distinction as to three kinds of requisitions:
(1) Ordinary objections to title.
(2) Paragraph 10 makes reference to objection going to the root of
the title. An example of this is where the vendor has no title to give, that
being the foundation of the agreement. It is unlikely that courts will rule that
a requisition goes to the root of title except in the most extreme situations
(3) Requisition of conveyance: The theory is that, while an encumbrance
(or flaw) may affect title, to the extent that it is wholly w/in the power of the
vendor to remove, it becomes a mere matter of conveyance and not a true
requisition on title. Examples are: obtaining the discharge of an open
mortgage, obtaining an affidavit of execution on a mortgage discharge, lifting
a writ of execution against the vendor, obtaining an estate tax release,
producing a mortgage statement where the vendor has undertaken to
produce it, obtaining estate or succession duty releases, obtaining a survey,
and obtaining a discharge of a construction lien.
***The primary importance as to what kind of requisition is made is w/
respect to timing. Requisitions as to title must be made by the
requisition date, whereas the other two kinds may be made up to
closing.
Majak Propertyies Ltd. v. Bloomberg: Objections to Title must be
Requisitioned by the Requisition Date: If P fails to submit requisitions
respecting objections to title w/in the required time which will result in the
purchaser being deemed to have accepted the vendors title. Matters of
conveyance may be said to be those by which V alone or with others persons
whose concurrence he can require is in a position to convey the title to the
property. If V is not entitled as of right to obtain a discharge of an
encumbrance then it is an objection to title. The result in this case is that
50
none of the objections went to the root of title. They were thus merely
objections to title. By failing to make them within the allotted period,
purchaser is deemed to have accepted the title, as far as they were
concerned, as it stood.
Toth v. Ho: Objections to Title must be Requisitioned by the
Requisition Date: Matters of conveyance are those by which the vendor
alone or with the other persons whose concurrence he can require is in a
position to convey the title to the property.
Where there is a closed mortgage, then the discharge of the closed mortgage
would be a matter of title (not conveyance). Thus, where there is a closed
mortgage, the discharge of the closed mortgage must be requested before
the requisition date. Had they requisitioned in time, crt could have said you
have to close this deal and find a way to prepay mrtg, but bc the problem
going to the root of title was not requisitioned in time, V could not enforce SP
(which would have meant conveying title to P free of all encumbrances).
Objections going to the Root of Title: Are there any objections to title
which are so serious that the purchaser can still make them even though they
were not submitted w/in the prescribed time for making objections? The
answer is that objections which to the root of title can still be raised by the
purchaser. If there is a total failure of consideration and the purchaser would
receive nothing at all, not even the possession of the property, an objection
to title on such grounds would go to the root of titleApart from the situation
where the vendor has no power to sell, it is difficult to define accurately what
objections go to the root of title. If the vendor does not have the power to
give the purchaser what it is intended y the K he shall have, then the
objection may go to the root of title.
Replying to Requisitions and Methods of Satisfying or Dealing with
Them: Courts will not require V to search his own title and resolve any
problems that might be discovered. Requisition that is only meant to
preserve rights and not a serious concern that might trigger the rescission
clause and lose the deal for the client.
The Land Titles Act: Where a serious technical defect is involved but there
is little practical risk of the assertion of an adverse claim, it may be possible
to apply to have the property registered under the Land Titles Act.
Time Provisions and Tender
Time of the Essence
A triggering device, not a promise, representation, or a condition. In real
estate, courts of equity has pretty much said that time is of the essence. The
reason for that is that in RE the market goes up and down, such that closing
on a certain date could be fundamental to what you are buying. But it doesnt
have to be that way if facts and circumstances lead the court of equity to say
that in these circumstances parties could not have meant time to be of the
essence.
It is an on/off system if it is on and there is a breach of a big promise, the
injured party can accept repudiation or enforce specific performance. If they
accept repudiation, they are relieved of their duties. If TotE is off, the
51
52
53
2. Flip the promises around, say there is a common intention like the
court did here fool around w/ the K in order to get the result you want
Landbank Minerals Ltd v. Mesgeo Enterprises generally, time
extension is substitution and does not affect time being of the essence.
King vs. Urban County: Appropriate Notice must be given to turn
TofE Back On (Letter): Neither party was ready to close on the closing
date. It has been uniformly held in this province that that does not put an end
to the k. A time is of the essence provision, and non-compliance w/ it by a
P, can be set up as a defence only by a party who was himself ready, willing,
and able to close on the agreed dateNormally, in this situation, when both
parties let the time go by, and one of the parties wishes to reinstate time as
of the essence, it is necessary to serve a notice upon the other party, fixing a
new date for closing, which must be reasonable, and stating that time is to be
of the essence w/ respect to the new date. they did not do this, but court
found that since is was obvious you wanted to close (to V). And, it wasnt
that V couldnt close, it was that he didnt want to.
*** Also est. principal that if the deal closes on a weekend, it closes on the
Monday after.
Kwan v Cooper: A Party who Insists on Strict Performance of the
Contract and then defaults if barred from turning TotE back on:
Similar facts to King v Irvine County neither party was ready to close.
Vendor sued purchase. Makes distinction day before closing vendor sent a
letter saying they would stand on the strict terms of the contract and require
closing on the date. However, on their date they couldnt close either. Held
vendor precluded himself from relying on King when he tried to
enforce the strict contract when he could not close on the date he
terminated the contract letter precluded them from the on/off system.
Carter: This makes no sense with King. If you say right before closing that
you are ready and then you are not, then you deprive yourself of king. Prof
thinks this case is just wrong.
Ridiculous b/c every vendor wants the deal to close every time there is a
double default one party thinks they have not defaulted
Kwon v. Cooper says deal is over thats the difference opposite rules
good news is a litigator can argue Kwon v. Cooper
Domicile v McTavish: Upheld King and Added: If a Mutually
Defaulting Party makes in impossible to close the deal, they cannot
turn TotE back on: Both parties were unable to close on closing date.
Looks at King v Urban County and elaborates, a party who is not ready to
close, and who subsequently terminates the deal and makes it impossible to
ever close has repudiated the deal. Both parties were in default K
continues time not of essence Domicile goes and sells to someone else
so court found that Domicile was fundamentally in default and liable in
damages:a party who is not ready to close on the agreed date and
who subsequently terminates the transaction w/out having set a new
closing date and w/out having reinstated time of the essence will
itself breach or repudiate the agreement.
54
Carter: Thinks this is unfair bc McTavish is the one who could not close. The
only rational argument is that Domiciles breach was so catastrophic to the
deal selling the property to someone else that that is the breach that in
effect ends MacTavishs obligation its like an anticipatory breach. Lawyers
were hoping they would say Kwan v Copper was decided incorrectly, but
instead Laskin sort of ignores it.
Remedies
Anticipatory Breach: Has to be absolutely clear that purchaser has no
intention of completing the K. Unclear whether innocent party is expected to
mitigate damages at time of anticipatory breach or when the deal fails to
close.
Purchasers Remedies (where the vendor defaults and the purchaser
is not in default):
Specific performance w/out an abatement: If the vendor says Im not
closing, there is nothing wrong but I just dont want to close, then purchaser
can sue for specific performance.
Specific performance w/ an abatement: Purchaser can take what vendor
has and sues for whatever the deficiency is, where applicable. If the
purchaser sues for specific performance, any time before trial specific
performance can be converted into a damage action. In addition, you can sue
for specific performance and alternatively ask for damages in your claim.
How can P make sure property is still available to on closing?` Have
to somehow put notice on title that you are claiming interest in property:
Register APS APS is a conveyance of equitable title to the purchaser
registry offices will allow you to register notice of the agreement to recognize
your equitable interest in the property can do this at any time before
closing. Can do it after closing has not occurred. Register a certificate of
pending litigation brings into question ownership of property. Note that
in neither of these two situations is the vendor precluded from
selling to a third party, just that if you are ultimately successful the third
party will be bound by court order or you will have prior interest in the
property.
***If the vendor already has a mortgage on title and then you register your
certificate this does not bind the mortgagee he still stands in priority.
Complete Transaction & Seek Damages: where (i) breach of a condition
(gives P election); (ii) breach of a warranty (only option); (iii) negligent or
fraudulent (not innocent) misrepresentation or (P has elections to rescind or
close and sue)(iv) negligence of vendor as equitable trutee. This is your
safest option where applicable. Innocent representation the only option is to
rescind.
Carter: A lot of Ps refuse to close w/ the defect and instead sue for specific
performance + abatement. This is not smart better off closing and suing for
damages. If you refuse to close and you are wrong then you will be liable for
damages. And if you are right but you are not entitled to specific performance
because damages are adequate then your damages will be limited by the
55
56
57
to counteract this by punishing you for suing for SP if you are not
entitle to it. However, There is a risk you will not get SP, so it is
better to mitigate. Incentive not to go for SP if you lose, you may not get
the same mitigation you would have gotten if you sued for damages. In a
declining market, where the vendor defaults the purchaser should accept
repudiation and find a substitute property. If you force SP, you would get the
house for much less than it is worth at the point of the trial judgment.
Specific Performance (Vendor)
Mutuality: under the old, almost automatic system, SP was routinely
available to V, on the basis of the doctrine of mutuality (i.e. if P is entitled to
it so to should be V)
Substantially Bargained: V, in using SP, must deliver to P substantially
what P bargained for.
Suitable P: if you cannot find a P for your property at any price, then you, as
a V, will be entitled to SP because no suitable alternative. See Dick.
Specific Performance (Purchaser)
If you do get SP now, the date of trial is not date from which damages in lieu
of SP are calculated. It is only calculated from the day of close. You have to be
put back in the same position you would have been in from the day of close.
So if the property goes up $100,000 at the day of trial and $50,000 from the
day of close, you get $50,000. Not only do you have to make the decision at
the time of close whether you want to use SP, you have to keep reassessing
whether you should continue with it because now the court will tell you not to
be continuing with you action.
Equitable Damages in Lieu of Specific Performance: If you are not in
same position you were upon closing the court can award equitable damages
(i.e. if on date of closing mortgage rates were at 5% now they are at 10% on
date of specific performance). Have to look at if its something that would not
have arisen if youd closed on closing date
Current Tests for Specific Performance
Investment Purposes: if P is buying the property for investment purposes,
he may not be entitled to SP even if the property is unique because P is really
just looking for money so damages likely will suffice. But, in a Soulis type
situation, SP is still necessary despite the investment property aspect.
Real and Substantial Justification: court ask P to prove that there is a real
and substantial reason for receiving this exceptional remedy. This can be
done by showing that damages are inadequate (i.e. property is unique).
Damages Inadequate: in order to obtain SP today, a P must demonstrate
that common law damages do not provide an adequate remedy. The
uniqueness of the property is often at the heart of this issue.
Suitable Alternative: to obtain an order for SP demonstrate that there is no
suitable alternative.
***Mitigation date is not a fixed date: its whats reasonable in the
circumstances, so its hard for court to pick a date. Dates court can choose
from are closing date, mitigation date, and date of trial, however date that
court will often calculate damages from is date of closing or reasonable
58
period of time after closing (date that party should have reasonably mitigated
its loss)
Bashir v. Koper [1983] OCA: Old Law: Where necessary conditions are
satisfied, court will almost invariably decree SP of a contract regarding land...
Further, as the court will not interfere in favour of one party and not of the
other, V can maintain an action for SP as well as P.
Domowicz vs. Orsa (1993): A Property Purchased for Profit cannot be
Unique: When you breach a contract, there are some damages you dont
have to pay (too remote, could not have anticipated, ect.). Subject to the
inadequacy of money damages, SP may be appropriate, but a suitable
substitute is the standard, not identical. Applied theory of efficient breach
where damages can compensate the injured party, they are preferred,
because then they will engage a third party and increase a market economy.
Criticism of previous judgments RE: SP - It has been assumed in RE that
inadequacy of damage is presumed, however this is not the standard test - Is
there some fair, real, and substantial justification for SP (Justice Adams). The
court also found that the purchasers should have mitigated their losses by
purchasing another apartment when it became apparent that the transaction
would not close in the reasonably foreseeable future
Semelhago: SCC Affirmed Domowicz: Potential for P to make a lot of
money on the vendors default. At trial, the purchaser asks for damages in
lieu of SP. SCC would not have awarded SP, so the damages would have
been in relation to what it was worth on the day of closing (incentive to
mitigate damages post-closing). However, everyone argued the case as if
you would have gotten SP, so that is what the court awarder, but obiter
essentially, made it clear that judges do not automatically give SP in
Real Estate anymore.
904060 Ontario Ltd: Proving Uniqueness: Whoever has the burden of
proof will loose because they did not discharge their burden. In my view the
presumption of uniqueness has not (yet) been replaced by a presumption of
replaceability, and that what the SCC did in Semelhago was to open the door
to a critical inquiry as to the nature and function of the property in relation
the prospective purchaser
Carter: This case arose b/c law was in state of flux, and they didnt want to
punish the purchaser who didnt bring any evidence of uniqueness not clear
that this case would be decided same way today.
11 Suntract Holdings Ltd. v. Chassis Service & Hydraulics Ltd.: The
party bringing the application has the Duty to prove uniqueness:
Came down to whether there was a suitable alternative to this property. Test
has always been would CL damages be insufficient bc the uniqueness of the
property. Ordered SP bc they needed this property to complete the
development. The Semelhago test is that absent evidence that the property
is unique to the extent that its substitute would not be readily available,
specific performance should not be granted as a matter of course. Although
not dealt w/ explicitly in Semelhago, it seems to be implicit in the
59
60
very minor, and was not sufficient to justify the repudiation of the contract by
purchaser. V had amended to action for damages before judgment.
11 Suntract: SP w/ Abatement contemplated on basis of Reasonable
Purchaser: The power to order SP with compensation involved the court in
the difficult task of attempting to discern the intention of the parties from an
agreement which did not contemplate what actually transpired. P is at once
asking the court to enforce the bargain that was made and to re-write the
bargain that was made. Reasonable P would have bought the land either as a
retail development site or for industrial use. P buying land for a retail purpose
would have paid $750,000 with their knowledge of the tower, lease and
easement, so SP with an abatement of the Purchase price to this amount.
Equitable Defenses
Grauer Estate v. Canada: The defense of Laches: A P in equity is bound
to prosecute his claim with out undue delay. This is in pursuance of the
principle which as underlain the Statutes of limitations. A court of equity
refuses its aid to stale demands, where P has slept upon his right and
acquiesced for a great length of time. He is then said to be barred by his
laches. The equitable doctrine of laches refers to the Ps failure to bring her
action in a reasonable amount of time. In this case there is no deterioration in
the Ds position, so the defence of laches fails.
Hong Kong Bank of Canada v. Wheeler Holdings : Clean Hands:
respondents should be denied relief they seek b/c they are guilty of
misconduct. Equity will not apply the principle about clean hands unless the
depravity, the dirt in question on the hand, has an immediate and necessary
relation to the equity sued for. Entire transaction does not become tainted b/c
certain parties to the transaction may have unclean hands.
Stewart v. Ambrosina et al: Hardship: If undue hardship would be
inflicted upon a D in an action for SP, then a Court may exercise its discretion
and refuse a decree of SP. It turns on a provision of s. 6 of the Dower Act and
in light of that, I dont think that it can be taken as an authority for the
proposition that undue hardship alone is a ground upon which the Court can
refuse to grant SP. Event if this wasnt so, hardship must have existed at the
time the contract was made and cannot be hardship that has arisen
subsequently from a change of circumstances. SP was awarded.
11110049 v. Exclusive Diamonds : Hardship: Hardship which would
result from an order of SP is a factor to be taken into consideration in
determining what remedy to grant. They found that there would be
substantial hardship. Agreement to sell jewelry business; agreement entered
after owners wife was murdered. Argued by appellant hat the sale was
unconscionable b/c at the time it was made, owner was suffering from deep
depression. Found that his state of mind cannot alone render the agreement
unconscionable.
61
62
law of contract, that acceptance of a repudiatory breach does not bring about
'rescission ab initio' This follows from the fact that, P having repudiated the K
and his repudiation having been accepted, both parties are discharged from
further performance.
Sail Labrador: SCC gets rescission/repudiation mixed up: calling a
repudiation a rescission. Involved racing sale boat leased out with an option
to purchase. There was a default. Ct had to decide whether K was over.
Bilateral contract where you have mutual promises. Cts will not strictly
enforce these promises. Unilateral contract, where one person has a right i.e.
an option to purchase P doesnt have to purchase but V has to sell. When you
exercise the option, then it becomes bilateral. Unilateral contracts will be
strictly enforced i.e. they have to be strictly performed.
Guarantee of North America v. Gordon Capital: K can specify a Right
to Rescission for breach of a Promise where no Equitable right
exists: SCC clarifies rescission/repudiation Distinction. The parties can say in
K that a failure to perform a big promise does give a right to rescind. What
the court is saying is that it will honour K where it provides the remedy of
rescission or specifically provides no remedy.
Carter: Doesnt agree with this; he thinks in such a case, the big promise is
actually treated as a misrepresentation. This mucks up the distinctions
between promises and misrepresentations. He says we can choose to
understand this either way.
Carter: On the same topic, if in the K you say no matter how big this breach
is you must close and sue for damages, we will say parties have decided
that this is a warranty and not a condition b/c in case of warranty
you must close and sue for damages. He really likes this intellectual approach
to this issue. Keep things straight.
Material Misrepresentation
Panzer vs. Zeifman: Material Misrepresentation give rise to the Right
to Rescind, however that right can be lost if Fresh Steps are taken:
Pur thinks he will be getting a private drive, but it was a mutual drive. The
contract was silent on the issue. Pur wants out of the deal. Pur says in was a
misrepresentation, whereas seller called it a title issue (title clause says it
must be requisitioned by the req date, and Mr. Panzer missed the req date.
Argument became weather it went to the root of title). Trial court sided with
seller. COA treated it as a misrepresentation, because when he was viewing
the house someone pointed to the drive and said this is where you park.
However, after you knew you had the right to rescind, you took fresh steps
as if you had a binding contract, so you lost your right to rescission.
Carter: This case can be argued from several points of view: Can say 1)
Mutual right of way look at title clause, didnt get what I was supposed to 2)
Promise issue: Didnt get what I bargained for. If its a condition I can accept
repudiation of K or take what vendor has w/ abatement 3) Misrepresentation
represented to me that I would get a private driveway
Here it wasnt in the K so court said they misled you into thinking it was a
private driveway, therefore we will find misrepresentation by silence, it was
63
Returning Property
Wandinger v. Lake et al.: Right of Rescission Post-Closing for a
Fraudulent Misrepresentation: P purchased a property after being led to
believe it returned more profit than had been disclosed. The right to rescind is
a right which a party to a transaction sometimes has to set that transaction
aside and be restored to his or her former position. It is the equitable right to
annul the legal effect of K and to re-establish the parties to the position they
were in before the making of K. This remedy is available when a person has
been induced into making a K by material, false, fraudulent
misrepresentations. The wronged party may rescind and also claim damages
for deceit.
Carter v. Golland: Where Rescissions is exercised post-closing due to
Fraudulent Misrepresentation, the expenses of P while owning
property, any benefits they received, or any depreciation in the
value of the property, will be considered: The parties must be put in
status quo. It would be unjust that a person who has been in possession of
property under K which he seeks to repudiate should be allowed to throw that
back on the other partys hands without accounting for any benefit he may
have derived from the use of the property, or if the property, through not
destroyed, has been in the interval deteriorated without making
compensation for that deterioration. There must here be rescission. It must
be referred to the Master to take an account of the moneys paid, and to
ascertain the amount of stock on hand as compared with the stock on hand
at the date of the conveyance, and to ascertain what should be allowed to
the plaintiffs for expenses in carrying on the business and what should be
charged against them for any benefit they have in the meantime received.
The balance due to the plaintiffs will constitute a charge upon the land and
assets of the business. A reconveyance subject to the charge will be settled
by the Master
Beer v. Townsgate: When Puff becomes Fraudulent Misrepresentation
given rise to right of Rescission (unsophisticated P): The sales agents
repeated statements to both P that the investment was risk-free and
guaranteed and to P that the V would buy back the unit at any time are in the
64
65
Land Titles: the government says here is the owner, and you get to rely
on it. Mirror (real title mirrors the title search), Curtain (you dont have to
look behind it; draw a curtain at the page you get), and Insurance (if
somebody looses a valid interest in property by reason of the system,
then the government is insured to compensate them). In a real title
system, actual notice is irrelevant, bc people would be forced to register.
However, if you have actual knowledge of an interest, your title can be
defeased (? Trust Case). This might apply to a tenant who has not
registered their lease.
o Exceptions to the Mirror: s. 44(1) of the Land Titles Act: claims by the
government (taxes), easement that is in use but not registered, fraud
(could lose your title if there was a fraud). Title insurance covers
fraud.
When is your title Defeasible?: Fraud Clause: You never get title if you
are a crook lose it under the fraud provisions
Is title indefeasible?: Is an innocent purchasers title indefeasible?
1.
Immediate indefeasibility (not the law in Ontario) says that if you
are on title and you are innocent, your title is protected. There is a COA
decision (Chan) where they said immediate indefeasibility was the law in
Ontario. Then formed a 5 panel COA to say it was wrong.
2.
Deferred Indefeasibility: Indefeasibility of your title is deferred one
round. If you have dealt w/ the forger, you cannot get good title. If you
have dealt w/ a fraudster, who in turn had title transferred to him by a
forger, you have good title. Durrani Case said this was the system in
Ontario. This was the law up until 5 years ago, where the 5 panel COA in
Lawrence changed the rule and the statue land titles said Ontario is a
Deferred Indefeasibility system, but then mislead the court to create a
new system, which is called Double Deferred Indefeasibility. Used United
Trust in order to rationalize their decision.
3.
Double Deferred Indefeasibility: Can only get title from an innocent
person. If you have title transferred to you by a forger or a fraudster you
do not have good title. There has to be two innocent parties for title to be
protected after a fraud i.e. an innocent person buys a house from a
fraudster and sells it to another innocent party their title is protected.
However, Rabbie says in order to rely on this, you have to have done
due diligence. Then Ratvinsky said that if you are a bank, you never
win (DDI plus) in order to rely on DDI, it must be clear that you could
not have avoided the fraud by doing something more. In this case, said
that banks can always do more.
Lawyers Responsibility (indefeasibility of title systems): Lawyers give
an opinion about title - this is not a guarantee. Lawyer acts prudently they
are not liable if title is bad. We do not give an opinion on whether the title is
indefeasible bc of fraud. Lawyer also has to take reasonable steps to prevent
fraud.
Title Insurers: They do guarantee there has been no fraud.
66
67
68
69
70
71
of redemption that states that once the promise to pay is fulfilled, they get
the property back by automatic defeasance. This is a mrtg concept it is
not a conveyance back, it means that as a matter of law the contract
automatically ends. It deems the conveyance to the lender had conceptually
not occurred as a matter of law. The lender is in law the owner, but the
owner is the beneficial owner with the right to redeem the right to tender
the amount owing to the lender and have the conveyance defeased and get
the property back. You only need this equitable right to redeem if you loose
the contractual right to redeem.
Foreclosure (and redemption): Used less than power of sale in modern
Canada (1% or 2% of the cases). The concept of foreclosure is central to the
mortgage it is a matter of law, not contract. When a foreclosure takes
place, the lender becomes the owner of the property. Historically, foreclosure
was a catastrophic remedy, not only did the lender get the land; the debt was
not whipped out. Because foreclosure is an equitable remedy, the courts
have the power to undue it as long as no third parties are prejudiced (there is
only a handful of cases where this has occurred). A lender would exercise
this option if they want the property the law is set up generally so the
lender does not get the property, and if the lender is going to make a profit
the courts will generally stop it convert to judicial sale. A lender may want
the property if they believe the market will recover and they were get the
money back in the future, or maybe if the property is a trophy property and
they just want it.
o Action taken in the courts is a claim for foreclosure the borrower can
give notice to defend, a notice desiring the opportunity to redeem where
they can get 60 days to come up with the money, or a notice desiring the
opportunity to sell (judicial sale). You may get a summary judgment on
the defense, or be granted the 60 days or the right to sell.
o What are the arguments for the lender and foreclose: Positive: you
become the owner, if the land is worth more than the debt you get the
profit (not really, probs wont get it if borrower/other lender are paying
attention), you can fix it up and make a property, you cant get sued once
you finish a foreclosure bc it is court supervised. Negative: you pay land
transfer tax, you lose all other security for the debt, there may be a
shortfall bn the property and the covenant to pay, if the cottage is worth
more you will not likely get it, it takes a long time to foreclose (6 months
to years), which can also make it very expensive time and expense, and
the risk of judicial sale, are why this is not the most exercised remedy.
Sale: Power of Sale: It is the right of sale of mortgaged lands that, in end,
is often mechanism that winds up being used to obtain money due under a
mortgage in default. In ON a K power of sale is implied under statute.
mortgagee may sell property as is; no obligation to improve it to make land
more attractive on market. The law states that when the 1 st position lender
sells the property by power of sale, everything behind the mortgage in
priority is removed from title. If the 1st position lender recovers more than
that which they are entitled to, the excess goes to the lender in second
position. There is also a statutory pos in the mrtg act that can be granted
and exercised. The lender can sell their legal title, but the borrower would
retain their equity of redemption, so the power of sale system fixes that in
the law as soon as the lender enters into an agreement of P&S, but the
72
borrower will likely out in a contractual clause saying that if the borrower
shows up with the money before closing, they dont have to sell. Lagozo
this does not give the borrower the equity of redemption, but rather gives the
lender the right to terminate. However, if a conditional agreement gets
terminated, the EoR returns to the borrower until a new agreement is signed
and ultimately executed.
Pros: Cheap contractual remedy in the mrtg which does not require and
action in court, fast can be through the process in 90-100 days, dont
give up the covenant if you suffer a short fall, you dont give up your
other security, you dont pay land transfer, other parties cannot get an
injunction to stop a power of sale can only sue after the fact once they
have the money
Cons: Must follow all the rules or you can be sued for improvident sale:
1) send a notice to everyone with an interest to wipe out their EoR, 2) you
must wait 15 days from the default, and you must give interested parties
35 days to give them a change to redeem you, 3) you must get fair
market value to attempt to take care of subsequent encumbrances, if you
sell for less than its worth you are liable unless you can prove you took
reasonable steps (get appraisals, list it for sale with an agent, cant take
first offer without negotiation) however, someone has to have money to
sue you for an improvident sale. You dont make a profit, this did not go
through the courts so there may be litigation, you may have to go to
court to get possession, cant fix the property unless you can increase the
value dollar for dollar.
Judicial Sale: The court gives you a judgment for sale, he says sell the
property, come back, and I will make all the decision. Judicial sale may also
be involved in family fights over real estate. Pros: No land transfer bc you
dont become the owner, gets adjudicated in court so the process resolves
disputes, if there is a shortfall you havent given up your covenant so you still
have remedies, you dont lose your security in other assets; Cons: its time
consuming and expensive (power of sale is quicker and cheaper), you cannot
get a profit (but you probs wouldnt be able to anyway),
The interrelationship of remedies: There is no obstacle to mortgagee
relying on any or all possible remedies contemporaneously. While all of
remedies may be pursued, following 1 course of action can wind up
precluding others.
Relief from acceleration: As a general matter ability of mortgagee to
continue on a campaign of enforcement is predicted on ongoing default of
mortgagor. Mortgages frequently provide that on default entire indebtedness
becomes due, or is accelerated. With full debt thundering down on
mortgagor ability to rectify deficiency is obviously going to be impeded.
The Interest Act: Act is designed mainly to promote full disclosure of
liability for interest assumed by a borrower. Under what is called a closed
mortgage, borrower is not entitled to pay off principle sum totally before
maturity date of mortgage has arrived.
Lien: general kind of security interest, it can attach to either chattels or to
real property and essentially it is a response to typically work done. Lien
attaches to real property when there is work done on real property. It
provided for a K in which the transfer of property was deferred to some future
73
time when payment was made (a sale on condition of payment). The buyer
could have possession in the mean time.
Right to Redeem: I you are late one day on your mrtg payment, you have
lost your contractual right to redeem. However, they retain the equity of
redemptions, which is an equitable remedy so that people dont loose their
houses for being late a day. The right of redemption is a property right, so it
can be protected in equity. This is a forever system equity will always
allow you to pay off the debt and get the property back. But, bc equity is a
fairness system, this was unfair to borrower bc they cannot be expected to
wait around forever. So, equity created foreclosure, which in time, terminates
their equity of redemption. A mortgagee in second position does not get
legal title to the real estate, but instead gets the first mrtg of redemption.
That means it has the right to pay out the first mortgage steps in the shoes
of the owner. However, the owner still have the equity of redemption interest
in the second mrtg, so they can pay off mrtg 2, then get the eor on mrtg 1
back and pay that off (although its more confusing bc they can really still deal
with mortgagee 1). If the first mortgagee forecloses, the 2 nd mortgagee loses
their RtR, and the owner loses their RtR on the 2 nd mtrg. If the 2nd mortgagee
forecloses on the property, they become the owner subject to the 1 st mrtg.
Basically, foreclosure affects the equities of redemption. The government
had to come up with a mechanism to let the world know automatic
defeasance has occurred = discharge of mrtg.
Charge: New term. Used in the land titles act.
Battle between borrowers and lenders.
Amortization: if you make you payments every month for the amortization
period you will owe nothing at the end. Result of this is that in first 60% of
amortization you are paying off more interest than principle and at end you
are paying off more principle than interest.
Mortgage: is a promise to pay a debt (the borrower) and secondly it is
security against the land of the borrower.
Borrower at any time can show up with cheque and equity would force lendor
to defease the mortgage. If the contract doesnt permit to pay ahead of time
then equity wont step in.
How to get security in the land:
Mortgage (Fixed Charge)
Debentures (Floating Charge): Mrtg. + security against personal assets;
usually when it is a business. The key to a floating charge is that it does no
become fixed to physical objects until default. That way, the owner can deal
with their inventory freely unless they default. Since the personal security
act, GSAs have effectively replaced this, but you have diff remedy systems
bn land an personal property.
Assignment of Leases: A lease is an interest in land, and when you are a
lender you want to be able to sell that income stream should the borrower
default. That is complex bc the rental stream is a personal property.
74
***If you get security in two items (land and/or personal property), once your
loan is satisfied you lose all other interest under the personal security act.
How to get security in the personal property (chattels or rights
associated w/ the business):
General Security Agreement
Assignment of leases, contract, rents
Pledges (i.e. shares in the company)
Guarantee: promise to pay by someone other than the borrower i.e.
parents. They are treated as a protected person in the law, and they
get better defenses than the primary borrower.
***Lenders often want to secure their loan more than one way. Lenders also
want the ability to take over all valuable assets that compliment the property
i.e. hotel reservation system w/ hotel. When the lender wants to take
remedies, they have to decide which guarantee to action.
Planning Act
***Dont bring the Planning Act unless you are specifically asked
How to approach a Planning Act Question:
1. Is land in a registered plan of subdivision (has an M-####)?
a. Yes 50(5); Go to Q. 2
b. No 50(3); Go to Q. 3
2. Is it the whole of the lot or block (lot is where you build your
house, and blocks are everything else)?
a. Yes you are out of the Planning Act (the municipality has already
vetted it)
b. No go to Q. 3
3. Is it a prohibited transaction?
a. Will the transaction involve a conveyance of land?
b. Will the transaction involve mortgaging land?
c. Will the parties enter into an agreement of purchase and sale?
d. Will there be a use of land for more than 21 years (add in options to
extend)?
e. Is it an easement for more than 21 years?
f. If the answer is YES to any of these, they cannot be done unless they
comply with the Planning Act, so the Planning Act applies.
g. If the answer is NO, you are out of the Planning Act.
h. Assigning a mrtg is not a prohibited transaction, so the vendor can
take a mrtg on the land and assign it to the bank if they are seling
land to their neighbor that will merge.
4. Are there abutting lands (does not apply to
easements/lease/mortgage lending over abutting lands)?
a. Does the person conveying the land, giving the mrtg, granting the
use of the land for more than 21 years, own any abutting land not
including in the transaction? (do no care if the purchaser, lessor,
mortgagee, owns any abutting land). Trying to figure out if the land is
being subdivided illegally.
b. What are abutting lands? Lands that abut vertically abut on the plan
view, lands that abut horizontally include land you sell under the
75
plan view (i.e. subway tunnel) to not breach the Planning Act. The
horizontal rule was developed for mining claims.
c. Say specifically what you think are the abutting lands
5. Are there exemptions (see s. 50: 50(3), 50(5), 50(2), 50(9),
50(22), 50(21), 50(14))?
a. Government
b. Consent (applies to small subdivision of land, larger subdivisions need
a plan of subdivision)
c. In a subdivision, if your abutting lands are the whole of one or more
lots or blocks within the plan of subdivision or another plan of
subdivision, you do not breach the planning act
d. In a subdivision, if the only reason you dont own the whole of the
lot is bc the municipality took part of it from you, you have an
exemption
e. Horizontal abutting exemption
f. Mining rights
g. There is exemptions for leasing floors in your building, which
technically breaches the Planning Act (if there is anything outside of
the building like surface parking, you do not get the benefit of this
exemption).
h. Prescribed statements - If you breach the planning act by selling part
of what you own, if you put a statement in the agreement saying you
will comply with the planning act before the transaction, thats ok.
Every agreement has this clause just in case, except if oral
agreements, which would be unenforceable wo this clause if there is a
subdivision
i. Once a consent, always a consent once you get a consent for a
parcel of land, it continues to be conveyable, as long as it is the
identical parcel of land. Unless, the consent says this is a one time
consent.
j. A condo projects, subdivision, or consent cures historical breaches.
k. If there is a breach of the planning act there can be no conveyance,
so if there was a historical breach, it would affect title until it is
corrected. However, it can be hard to cure title to land you do not
technically own. If there is a plan of sub, a consent, a condo, the
breach was pre-1967 or 1970 and there was no bylaw, then the prior
breach is cured. If the vendor and lawyer, and pur lawyer sign
statements saying they were not aware/did not discover a breach of
the planning act then prior breaches are cured (50(2)?) - once you see
the statements on a transfer, you dont have to look behind it.
l. 50(6) subdividing, you get a consent for what you are conveying. If
you are conveying the remaining lands, the consent for the first
parcel makes it possible to convey the subdivided lands. Consents
only last a year, but you can convey your land o yourself in order to
extend it.
Important Dates:
July 15, 1967 if a breach occurred before this date, they were
automatically cured by statue. Before 1970, municipalities had to opt-in an
apply the planning act to their jurisdiction. In 1970, Ontario said it applies
everywhere despite whether they have passed a bylawUp to 1968, there was
76
a 10 acre exemption if the lands retained were more than 10 acres, the
planning act did not apply.
If you are out of the Planning Act at any point, the answer is that
there is no breach of the Planning Act.***A whole of a lot on a
concession (not a subdivision) is irrelevant from the Planning Act***If you
breach the Planning Act, you get nothing
77