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Legal Blog: Real Estate

Jul
20
2021

Specific Performance

Lucas v. 1858793 Ontario Inc. (Howard Park) 2021 Ont CA

The Supreme Court of Canada in Semelhago ruled that specific performance is not automatically granted for real property. The property had to be unique. The Court of Appeal recognised that, for a purchaser seeking specific performance, uniqueness means that the property cannot be easily duplicated, for example in a rising real estate market (particularly when a deposit is tied up in the aborted purchase).

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Jul
13
2021

Interest on Damages

Madison Homes v. Shi 2020 Ont SCJ

Purchaser did not close, vendor re-sold, and vendor sued for damages. Aside from a discussion of damages and mitigation, the judge had to decide whether to enforce a clause in the agreement that gave interest on all money that the purchaser was to have paid at 20% per year compounded monthly. The judge noted that even the vendor realised that this clause was onerous, given that it claimed the interest only on the shortfall and not on the full sale price. The judge held that the clause was unreasonable and unenforceable because the clause was not drawn to the purchaser’s attention when he signed the agreement.

Burkshire Holdings Inc. Ngadi 2021 Ont SCJ

Same situation as in Madison; indeed, same interest rate of 20%. The judge realised that the agreement was not in the same category as signing a rental car agreement; there was time to reflect and legal advice involved. However, the judge still held that the clause was “surprisingly onerous,” not brought to the purchaser’s attention, and therefore unenforceable.

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Jun
17
2021

Assessment of Damages

Akelius Canada Inc. v 2436196 Ontario Inc. 2020 Ont SCJ

The vendor improperly refused to close a transaction involving seven residential apartment buildings and, two years later, sold the properties at a substantially higher price. The judge granted judgment for $775,000 for the purchaser’s costs thrown away on the aborted transaction. However, the judge ordered nothing for the increase in the value of the land. The evidence indicated that, as of the day of closing, there was no difference between the purchase price and the value of the properties. The judge also refused to grant damages based on lost profit because the money that was to have been used to purchase the properties was used by the purchaser to purchase other properties and the purchaser was unable to provide evidence to set out the return that the purchaser had received from the purchase of the new properties. Accordingly, the purchaser had either not mitigated or had fully mitigated its damages in that regard.

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Jun
09
2021

Fraudulent Mortgage

Mohammed v. Makhlouta 2020 Ont SCJ

A vendor gave and had registered a mortgage in favour of his brother after the purchaser’s requisition letter had been received and before closing. That mortgage was registered to secure prior loans from the brother. Although not stated in the reasons, it was apparent that the lawyer for the purchaser did not update the search of title before the transaction closed; no one knew about the mortgage until after the brother died and five years after closing when the purchaser was refinancing his existing mortgage. Brother’s estate took the position that the mortgage was valid. The judge held that the mortgage was fraudulent – because it was not for new consideration, but rather to gain an advantage against other creditors – and set it aside under the Fraudulent Conveyances Act.

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Apr
27
2021

Lawyer’s Duty of Care

Nieuwenhuis v. FRP Inc. cob Rico Tech 2020 Ont SCJ

A vendor sued the purchaser for the deposit of $175,000 on an aborted real estate transaction, Because the vendor’s lawyers were holding the deposit, the vendor added its lawyers as party defendants – only to ensure that the money would be paid. The purchaser crossclaimed against the lawyers, claiming that deal did not close because the lawyers improperly inserted conditions in the contract. The judge held that there was no duty of care owed by the vendor’s lawyers to the purchaser and dismissed the crossclaim as showing no reasonable cause of action. Query: why would the vendor have sued its own lawyers? Presumably, a simple undertaking to hold the money in trust pending a decision of the court should have been satisfactory.

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Feb
01
2021

Real Estate Misrep

The headline to the Toronto Star story started with: “A century of Canadian legal precedents dealing with listings describing homes for sale were reversed late last year by an Ontario Court of Appeal decision that is being seen as one of the year’s most significant real estate law rulings.” The case is Issa v. Wilson 2020 ONCA 756. Aside from the bad grammar (can you spot it?), the problem with the headline is that its main premise is not correct; further, we doubt that the decision is overly significant, much less the most significant. The article’s other problem was a lack of depth of analysis (485 words, probably all that the editor allowed).

A folded newspaper on a table.

What Happened

The purchaser retained a real estate agent to find him a suitable house in which he could live with his parents and three sisters. The agent showed many houses to the purchaser and all were larger than 2,000 square feet, the minimum size that the purchaser felt could accommodate his family. Finally, the agent showed the purchaser a house (the “House“), for which the agent was also the listing agent. The agent told him that the House was 2,100 square feet and, in doing so, the agent relied on information from the vendor and information contained in a previous listing for the House. The listing agreement that the agent drafted for the House noted that its size was between 2,000 square feet and 2,500 square feet. The agent did not conduct his own measurements and admitted that he was negligent in failing to measure or verify the size of the House.

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Jan
15
2021

Exclusion or Exculpatory Clause

Ritchie v. Castlepoint Greybrook Sterling Inc. 2020 Ont SCJ

Disappointed purchasers were suing the developer for terminating their agreements and cancelling a condominium project. The developer had determined that costs increased significantly so that it was not worthwhile to continue with the development. It did not attempt to complete the process necessary to meet conditions and obtain financing necessary to continue with the project. For purposes of the summary judgment motion, the developer agreed that it had not terminated in accordance with the agreement. However, it relied on a section of the agreement that disallowed the purchasers’ right to damages regardless whether the agreements had been properly terminated or not. The judge agreed with the developer and dismissed the actions. He held that, as a matter of contract interpretation, the exculpatory clause excluded the claimed damages, was not unconscionable, and was not subject to an overriding public policy.

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Jan
15
2021

Misrepresentation of Square Footage

Issa v. Wilson 2020 Ont CA

The purchaser had been told by the real estate agent and the vendor that the property was 2000 ft.² or more. The purchaser had been ready to close the real estate transaction, but when obtaining financing was informed by the appraiser that the house was only 1450 ft.². Even though the purchaser had attended at the property, the court still allowed the purchaser to terminate the agreement and receive his deposit. As a general proposition, a purchaser who inspects a property cannot complain of reliance on a misrepresentation as to its size. However, this is not an absolute proposition depending upon the circumstances. A material, false statement inducing the plaintiff to enter into a contract can result in its termination. In this case, the purchaser had been told of the false square footage, the differential was significant, the purchaser was not using the difference in size simply to get out of a contract that he had no intention to complete, and the purchaser was young and inexperienced in homebuying.

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Jan
04
2021

Frustration & Specific Performance

FSC (Annex) LP v. Adi 64 Prince Arthur LP 2020 Ont SCJ

Applicant and respondent were partners in a joint venture to develop a property. The applicant held 80% of the joint venture and the respondent held 20% of the joint venture. The parties were unable to work together so that the applicant triggered a shotgun buy-sell provision (i.e. the applicant set the price of the development and the respondent had the option either to sell for its proportionate share of that price or buy the applicant’s proportionate share of that price). The respondent chose to purchase the applicant’s interest, but then refused to close because, it said, the pandemic frustrated its ability to obtain financing. The judge disagreed. Frustration is available only when the obligations change radically and a decline in the value of real estate is not a frustration of those obligations. The judge ordered specific performance of the agreement; damages would not have been a viable remedy. There would have been more litigation over the sale price and, more importantly, the applicant would not have been able to sell its interest without the respondent’s consent. The judge noted that a specific performance award meant that the respondent would be forced to make more meaningful efforts to obtain financing and afforded the court the opportunity to provide flexible and appropriate relief if the respondent were unable to do so.

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Nov
24
2020

Condominium Collection Costs

Amlani v. YYC 473 2020 Ont SCJ (Div Ct)

Section 85 of the Condominium Act allows a condominium to register a lien in respect of common expense arrears and the legal costs in connection with their collection. Section 144 of the Act allows for a condominium corporation to apply to the Superior Court to enforce compliance with the Act, declaration, bylaws etc. and, once it has a compliance order, may then add the amount of damages in that order and the costs to obtain the order to the common expenses for the unit. Section 144 does not allow the condominium to add compliance legal fees to common expenses without a compliance order.

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