Toronto Real Estate and Neighbourhoods Blog | Move Smartly

Beware Sending a Real Estate Deal Off the Rails

Bob Aaron in Legal, Home Selling, Home Buying

An interesting decision from Toronto’s small claims court last December provides a useful lesson on the obligations of buyers, sellers and lawyers when a real estate transaction starts to go off the rails.

In his decision, Justice M. Donald Godfrey wrote that the case came to court because the parties and their lawyers were unable to work out a “reasonable compromise” on the closing of a transaction on Mould Ave., in Toronto.

Nuno Barbosa and Paula Boas agreed to buy the house for $516,000 from Helder and Maria Rodriguez, with a scheduled closing of October 30, 2009. Two days before closing, the buyers discovered that the property taxes were not $2,300 as indicated on the MLS listing but were in fact almost $4,600. The increase was the result of a re-assessment of taxes due to an addition to the property which was completed in early 2008.

The buyers requested a $10,000 price reduction. When the sellers declined the offer, the buyers refused to close even though their lawyer was holding enough trust funds to complete the transaction.

After receiving advice from another lawyer, the buyers changed their minds and told their lawyer that they were willing to close and sue later. But the request was not made until after the 6 p.m. closing deadline.

The sellers did not agree since they did not know what damages they were exposed to as a result of two “chain reaction” closings, which depended on the sale of their Mould Avenue house.

The buyers then sued the sellers for return of their $10,000 deposit, and the sellers sued the buyers for damages resulting from their refusal to close. 

After an unusually long three-day trial, Justice Godfrey ruled that the buyers should have closed the transaction on time since the breach of contract was “not material.” However, the judge also decided that the sellers were entitled to refuse to close 15 minutes after the 6 p.m. deadline because the contract stated that time was “of the essence.”

Problems With Land Titles Just Got Clearer

Bob Aaron in Legal

A decision of the Ontario Court of Appeal in February may have settled the thorny question of whether or not courts have the authority to correct erroneous descriptions of properties in the land registration system.

The origin of the dispute dates back to 1985, when Veikko Kivikangas subdivided a parcel of waterfront land he owned in the Sudbury area into three lots.

Kivikangas instructed his surveyor to prepare a reference plan of survey showing the registered right of way to be in the same location as an existing gravel road which ran from the main highway across the first parcel, then the second, and into the third.

On the ground, the path takes a detour around a large rock outcrop. Unfortunately, the surveyor prepared and registered the reference plan showing the gravel drive going directly through the outcrop rather than around it.

Effectively, it was impossible to access the two inner lots using the registered right of way.

For many years, the owners of the three lots peacefully used the actual roadway on the assumption that it was located as described on the reference plan.

In 2005, Kimberly MacIsaac, one of the current owners, became aware that the registered road went through the rock rather than around it. The other neighbours discovered the discrepancy two years later.

Condo Board Pays Personal Price for Clinging to Power

Bob Aaron in Legal

Five former board members of a London, Ont., condominium corporation have been personally ordered to pay costs totalling $36,300 as a result of two related lawsuits, after the old board ignored the wishes of a majority of unit owners. The old board had refused to recognize the results of a members’ meeting in which a new board was elected.

It all began when the board of Middlesex Condominium Corporation 232 obtained an engineering study to determine the remedial work necessary to prevent water leakage into the building. The board called a general meeting of owners to approve the borrowing of $600,000 to fund the repairs, which would have cost a total of $755,000.

The meeting was eventually held and authorization for the borrowing was defeated.

Unhappy with the high cost of the proposed repairs, a group of owners got together and requested a members’ meeting to replace the board of directors. Instead of calling the general meeting as they were required to do under the Condominium Act, the old board brought an injunction application to prevent the meeting from being held, as well as a second court application to appoint an outside administrator to assume management of the building.

Last August, Justice Alan Bryant ruled that the board’s application for an injunction was “for the sole purpose of preventing the owners from exercising their rights to hold a requisition meeting to remove the board members from office and preventing their right to elect a new board.”

In a separate hearing, Justice Thomas J. Carey turned down the board’s request to appoint an administrator. A members’ meeting was subsequently held and the old board was turfed out.

Real Estate Lawyers Do Not ‘Waste’ Client’s Money

Bob Aaron in Legal, Home Buying

Last week I received an email from a Star reader who had just bought a $588,000 home in Scarborough and wanted to know if I could refer him to a real estate lawyer “with the lowest fee in the business.”

“I’m seeking the least expensive legal representation I can find,” Richard wrote. “Now burdened with a large mortgage, I do not have the spare finances to spend on bloated real estate lawyer fees.”

Richard told me that he contacted a number of real estate lawyers to obtain competitive quotes, and then sent me the details of the lowest quote he received. The quote included the lawyer’s base legal fees, plus out-of-pocket expenses, title insurance and HST.

But Richard was still not happy and wanted something cheaper.

“I feel the disbursement and title insurance amounts should not exist as charges at all, nor should they be chargeable amounts to a potential client like myself,” he wrote. “I told the lawyer in our first meeting that I chose to decline the title insurance.

“I’ve read your article on title insurance,” Richard wrote to me, “and the brochures provided on the topic by the real estate lawyer, and I still reach the conclusion that the coverage is not necessary nor worth it.”

HomeVerified Will Be Valuable New Tool for Home Buyers

Bob Aaron in Legal, Home Buying

Resale home’s history now available through HomeVerified and it has the potential to become an industry standard in every residential house purchase.

A new type of home history report is now available on the market, and it has the potential to become an industry standard in every residential house transaction.

The report, compiled by HomeVerified (homeverified.ca), a company based in London, is available for homes in every major municipality in Canada. Distribution and sales of the reports are being handled by Teranet, the company which owns and operates Ontario’s electronic land registration and title search services on behalf of the province of Ontario.

A typical home history report will include the following information:

The home’s insurance claims history for current and prior owners.

The insurance claims record for the neighbourhood.

Local school rankings.

Local demographics and amenities, such as banks, coffee shops, transit and shopping.

Contact information for politicians, including the mayor, MPs, MPPs, and municipal councillors.

Any history of a grow-op in the house or condominium unit, showing results from a Canada-wide search for marijuana grow-ops.

The grow-op registry may be the most valuable component of the home history report for home buyers. HomeVerified’s comprehensive database has been assembled from countless Freedom of Information requests made to police forces across the country. (Disclosure by some police forces has not been as complete as hoped for, but the database includes all addresses that are currently available.)

I can also foresee the HomeVerified report eventually being used for every Canadian mortgage and refinance application by those lenders who do not compile their own database of grow-op properties.

Landowners Responsible for Environmental Cleanup, Court Rules

Bob Aaron in Legal

In one of the scariest court decisions of recent years, the Ontario Divisional Court has ruled that innocent landowners can be held responsible to remedy contamination caused to their properties by a neighbour.

Back in December, 2008, Thompson Fuels filled the fuel oil tanks at the Hazel St. home of Wayne and Liana Gendron in the city of Kawartha Lakes (Lindsey). Subsequently, several hundred litres of the oil leaked from the basement of the house onto city property.

After noticing the leak, Wayne Gendron informed his insurance company. They hired D.L. Services to remediate the contamination. D.L. soon discovered that the oil had travelled into the storm sewers and was winding up in Sturgeon Lake.

When the Ministry of the Environment (MOE) heard about the spill, they sent a provincial officer to visit the site. The officer formally ordered Gendron to assess the extent of the spill, eliminate any adverse effects, and restore the natural environment.

Environmental remediation is hugely expensive. Three months later, Gendron’s insurance coverage ran out, and the ministry was notified. Since Gendron did not have the financial resources to continue the remediation work, cleanup efforts were discontinued. By this point, the Gendron property itself had been remediated, but contamination on the adjoining city property still had the potential to adversely impact Sturgeon Lake.

Disclosure Statement Meant Buyers Recovered Damages, but Listing Agent Escaped Liability

Bob Aaron in Legal, Home Selling

A Saskatoon real estate agent and his brokerage have escaped liability to the purchasers of a home with a wet basement in a misrepresentation lawsuit. Although they recovered their damages from the sellers, the unhappy buyers were ordered to pay the agent’s costs out of their own pocket.

Back in 2007, Carol and Donald Jacobucci bought a house in an upscale Saskatoon neighbourhood from Marleen and Patrick Prediger. The agreement of purchase and sale made it a condition of the deal that the sellers complete and deliver a Property Condition Disclosure Statement (PCDS), known in Ontario as a Seller Property Information Statement (SPIS).

The Predigers purchased the house in 2000 and lived in it until its sale to the Jacobuccis in 2007. The Saskatoon real estate market was very active when the property was listed for sale; the sellers’ real estate agent described it as “chaotic,” and one where offers above asking price were common.

At the time the house was listed, the Predigers signed a PCDS at the request of their agent. It was a standard form in use at the time, although it was revised the following year. Unlike in Ontario, the form was mandatory for real estate agents to use.

Who has Authority to Correct Land Registry Errors?

Bob Aaron in Legal

Perhaps the most fundamental principle of property ownership in Ontario is that users of the land registration system can rely on it for an accurate reflection of title. If an error occurs in the registry, the courts, or the Director of Titles should have the authority and even the obligation to correct it.

Those principles were turned upside down by a court decision in January, and stakeholders are anxiously waiting to see if the Court of Appeal will reverse the decision.

Some years ago, the owner of a large tract of land in Northern Ontario legally divided it into three parcels. At the time of the severance, a gravel road ran from the main highway across the first parcel, then the second parcel, and into the third.

In order to convert this gravel road into a registered right-of-way, the owner instructed his surveyor to prepare a reference plan of survey showing that the registered access was in the same location as the existing gravel path.

On the ground, the path takes a detour around a large rock outcrop. Unfortunately, the surveyor prepared and registered a plan describing the gravel drive with two straight lines going directly through the outcrop rather than around it.

Title Insurance Really isn’t Optional

Bob Aaron in Legal, Home Buying, Condo Buying

Despite the fact that residential title insurance has been commonplace in Ontario for the last 15 years, many of my clients still ask me what it covers just as we are about to sign the closing papers for their home purchase.

Even though I provide them in advance with an electronic or paper copy of the excellent Ontario Bar Association brochure “Working With a Lawyer When You Buy a Home” (find it at oba.org/en/pdf/lawyer1.pdf), examining the brochure often gets moved to the B list of priorities in the frantic rush before closing.

The Financial Services Commission of Ontario also has an excellent brochure called “Understanding Title Insurance” on its website (fsco.gov.on.ca). It explains that for a one-time fee, or premium, a title insurance policy may provide protection from such losses as:

 • Unknown title defects that would affect clear ownership.

 • Existing liens against title.

 • Encroachment issues, such as a structure on the land that needs to be removed because it sits partly on a neighbour’s property.

 • Title fraud, before or after closing.

 • Errors in surveys or public records.

 • Any other title-related issues that would affect the ability to sell, finance, or lease the property in the future.

Although title insurance is never a substitute for a current land survey, it provides coverage for losses suffered as a result of failing to have an up-to-date survey.

Court Rules Real Estate Agent isn’t Responsible for Home Inspection

Bob Aaron in Legal, Home Buying

An Ontario real estate agent has escaped responsibility for failing to review the results of a professional home inspection with his purchaser client, according to a decision of the Ontario Court of Appeal earlier this year.

In a 2011 case, which sent shock waves through the real estate community, a real estate agent was ruled 25 per cent responsible for the buyer’s damages for taking a “hands-off approach” with respect to the home inspection, and because he failed to warn his client about the implications of the home inspector’s report.

It all began in 2006, when Glenda Halliwell wanted to buy a home on Dufferin St. in Toronto. She made it clear to her real estate agent, Joel Lazarus, and to the home inspector, that she was allergic to mould and wanted a dry house.

Lazarus ensured that a condition was inserted in the purchase offer allowing Halliwell to terminate the transaction if she was not satisfied with the report from the home inspector.