Legal Blog

Encroachments

What happens when purchasers discover that the property that they are buying encroaches on the lands of another? Can the purchasers have the agreement rescinded? This question was answered in Royt v. Goldenberg [2006] O.J. 3489 (SCJ).

Dispute 

Purchasers entered into an agreement of purchase and sale of a Toronto house for $1,470,000. The vendors had signed a Seller Property Information Statement (“SPIS”), which stated that there were no encroachments. Before closing, the purchasers obtained a new survey that showed that concrete steps, a concrete landing, and stone retaining walls encroached on the municipal road allowance by eight feet. The purchasers requisitioned the rescission of the agreement.

The vendors offered the following:

a)   An encroachment agreement from the city;

b)   Title insurance for the problem; or

c)   An abatement of $14,000, representing the cost to remove and replace the steps, landing, and retaining wall.

The purchasers refused all suggestions and brought a V & P application for rescission.

The vendors retained an expert who opined that the road allowance encroachments would not have an impact on the value or marketability of the house.

Root of Title

The judge agreed that the encroachments went to the root of title and that the requisition to remove them could be made after the requisition period. However, she felt that the structures were so minor and so commonplace that they would have little or no impact upon the purchasers’ use and enjoyment of the property. Since the encroachments were minor, she held that the requisition could be answered with a modest abatement: LeMesurier v. Andrus, (1986), 54 O.R. (2d) 1 (C.A.).

The judge felt that any of the three alternatives that the vendors gave, satisfied the requisition.

Misrepresentation

The SPIS contained a notation that the information provided in it was for information purposes only and was not a warranty even if attached to an agreement.

Further, before there can be a misrepresentation, the representation must be material to the making of the agreement or an inducement to enter into the agreement. The judge noted that, notwithstanding the purchasers’ statement that they would not have signed the agreement if they had known of the encroachments, the only pre-agreement evidence indicated that they had plans to redevelop the property and remove the stairs and retaining walls.

Finally, even if there was a misrepresentation based on the SPIS form, rescission is appropriate only if the purchasers would be receiving something substantially different from what they had bargained for. Given that the encroachments were trivial, this was not the case.

Result

The judge dismissed the purchasers’ application and granted the vendors’ cross application that their proposed alternatives satisfactorily answered the purchasers’ requisition.