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Legal Blog: Real Estate

Oct
24
2022

Off Title Objections – Contract Interpretation

2651171 Ontario Inc. v. Brey 2022 Ont CA

The clause allowing the purchaser to search for, and object to, work orders and building and zoning use stated that the purchaser had from the earlier of:  alternative (1) (a) the later of 30 days from the requisition date (Oct 16) and (b) 30 days from the date on which the conditions in the agreement were waived (Aug 26), and alternative (2) 5 days before closing (Sep 26) . Closing was scheduled for Oct 1 and the purchaser objected to a zoning problem on Sept 26. The motion judge ignored the (1a) Oct 16 date because, she said, this would yield an absurd result; Oct 16 was after the closing date. She therefore used Aug 26 as the alternative 1 date. Finally she chose Aug 26 as the objection date because it was earlier than the alternative 2 date. The Court of Appeal reversed. Alternative 1 gave a choice of the later of two dates, one of which and the later of which would be Oct 16. This date would then be compared to the alternative 2 Sep 26 date and the earlier date would be chosen. This date for objections was therefore Sep 26 and the purchaser’s objection was timely.

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Oct
24
2022

Accelerated Mortgage Interest

First National Financial GP Corporation v. Golden Dragon Ho 10 Inc. 2022 Ont CA

There is no common law right to an acceleration of interest on a debt default. That right is either in the mortgage or it is not. In this case, the court interpreted the mortgage to limit the acceleration clause to situations in which the mortgagor wanted to redeem rather than a situation of default and a mortgage sale of the property.

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Jun
01
2022

Real Estate Damages

Akelius Canada Ltd. V. 2436196 Ontario Inc. 2022 Ont CA

Vendor defaulted on an agreement. Purchasers sued for damages; in particular, it claimed the capital gain that the vendor obtained when it re-sold the property two years later. The court held that, in the normal course, the starting point for the assessment of damages for breach of contract is the date of the breach. Unfortunately, that is just starting point and, depending upon the market at the time and other factors, the courts have set other dates for the assessment of damages. In this case, the court held that the assessment of damages should take place as of the breach and not two years later when vendor re-sold the property.

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May
26
2022

Limitations – Claim Appropriate

Georgian Properties Corporation v. Robins Appleby LLP 2022 Ont CA

A condo had executed debt instruments in favour of the developer. When the debts were due, the condo failed to pay, ultimately attacking the debt instruments as unenforceable. The condo ultimately was successful in its attack. After the decision, the developer commenced an action against its lawyers who drafted the debt instruments. The court held that the condo suffered damages as set out in s.5(1)(a)(i) of the Limitations Act, not when the condo failed to pay the developer according to the debt instruments, but when the judge decided that the debt instruments were invalid. Similarly, commencement of an action was “appropriate” (ss. a(iv)) after the decision was rendered, not when the allegations of invalidity were made.

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Dec
22
2021

Non Est Factum

Spiridakis v. Li 2021 Ont CA

Vendor terminated agreement before closing when purchasers admitted that they did not have funds to close the purchase. Time of the essence clause meant that the parties agreed that the time limit manifested by the fixed closing date was an essential term, such that breach of it would permit the innocent party to terminate the agreement. The notification of purchasers’ inability to close was an anticipatory breach and had been accepted. The motion judge properly granted summary judgment for its damages. Purchasers were not mistaken, as a result of a misrepresentation or otherwise, as to the nature or character of the transaction. The only assertion of a mistake related to the consequences of the breach. It was not a partial summary judgment; it was a complete summary judgment. The judge did consider whether the issues in the main action and the third party action against purchasers’ lawyer and real estate agent were so intertwined that there was potential for inconsistent findings and concluded there were not. The Court of Appeal agreed.

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Dec
17
2021

Interest Act & Increased Interest Rate

Alleghe Mortgage Fund Ltd. v. 1988758 Ontario Inc.  2021 Ont SCJ

Section 8 of the Mortgages Act proscribes an increased interest rate on arrears beyond the rate set out when the mortgage is not in arrears. An interest rate that increases during the term (e.g. the 12th month of a one year mortgage) does not run afoul of this section. The interest rate is increasing solely as a result of the passage of time and while the mortgage is still in good standing.

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Dec
03
2021

Mortgage Statement

2544176 Ontario Inc. v. 2394762 Ontario Inc. 2021 Ont SCJ

A mortgagor, who was attempting to sell the mortgaged land at the same time as the mortgagee was attempting to do so under power of sale, requested a discharge statement pursuant to section 22(1)(a) of the Mortgages Act. The mortgagee refused to supply it for reasons of its own, which were not acceptable to the judge. The mortgagee then sold the land and the mortgagor moved to set aside the sale. Under section 22(3), if a mortgagee does not give the requested mortgage statement, its rights to enforce the mortgage are suspended until the mortgagee complies with its obligations. The real consideration for the trial judge was not whether the mortgagee would be prejudiced if the sale were set aside, but whether its unknowing purchaser should have its purchase taken from it through no fault of its own. Ultimately, the judge decided that the purchaser had to take title subject to the Mortgages Act and had to accept the risk of the breach that occurred.

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Oct
25
2021

Additional Mortgage Charges

NRD Management Services Ltd. v. Litwin 2021 Ont SCJ

The defendant had obtained financing to refinance a mortgage in default, but took issue with the additional charges that the mortgagee was demanding to discharge the mortgage. In this case, the mortgagee had charged a three-month termination bonus after issuing power of sale. By removing the option from the mortgagor to redeem the mortgage, that interest would be a penalty and was disallowed. The judge also reduced some of the legal fees, deciding they were excessive, and some of the other fees, deciding that they were not necessarily applicable to the actual administrative costs incurred even though they were allowed under the mortgage document. Given that the motion success was divided, the judge did not award any costs of the motion.

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Oct
15
2021

House Area

Lamba v. Mitchell 2021 Ont SCJ

An MLS listing stated that the interior of the house was approximately 2,500 to 3,000 ft.² The property brochure noted a main floor area of 2155 ft.² and a lower floor area of 665 ft.² The purchaser, who was a real estate agent, gave evidence that, on an MLS listing, only the above grade area of the house should be referenced and that, since he did not have the property brochure when he and his spouse signed the agreement of purchase and sale, he expected that he was buying a house that had a main floor area of at least 2,500 ft.² After the agreement, he was given the brochure. He then refused to close, stating that the area of the house was not as advertised. The judge agreed that the error in the listing exceeded a fair and reasonable approximation of the proper main floor area, but, in this case, he decided that the purchasers, who had inspected the house and were sophisticated, were well aware of the actual size and layout of the house and were not misled about the area. Accordingly, he decided that the discrepancy between the actual and the misstated area did not constitute a material misrepresentation that would have affected the purchasers’ decision to enter into the agreement. The purchasers’ $20,000 deposit was forfeited.

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Oct
01
2021

Overreach

Over the years, agreements to purchase new homes and condos have become far lengthier than they used to be. Every additional provision usually shifts risk to and hurts the purchaser and protects and benefits the builder. The latest provision that has popped up deals with interest. It says, for example: “Any monies owing by the Purchaser not paid when due, shall accrue interest at the rate of x% per annum compounded monthly until paid.” x% was set at 20% in the two cases that we are about to discuss: Burkshire Holdings Inc. v. Ngadi 2021 ONSC 2550 and Madison Homes v. Shi 2020 ONSC 7810.

An open house sign on a lawn.

Breach

In each case, the purchasers did not close and the builder re-sold the property and sued for damages. In each case, the purchasers put up a spirited defence as to why they should not be held liable for the failures to close. As expected, given the track record of defaulting purchasers, these defences were unsuccessful; they were simply worn out defences that have been shot down in flames over recent years.

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